On December 11, 2014, the Consumer Financial Protection Bureau (CFPB) issued a report and announced that it will be requiring major credit reporting agencies (CRAs) to provide regular reports to the CFPB identifying, by name, potentially problematic furnishers of information. In other words, the CFPB will be co-opting the major CRAs into helping the CFPB monitor the activities of companies that provide credit reporting information – such as banks and other financial services companies.
Attorneys at Troutman Sanders LLP recently published an article summarizing the increased risks faced by furnishers of information as a result of the CFPB’s focus on the Fair Credit Reporting Act (FCRA) as a top regulatory concern. Now that the CFPB is enlisting the major CRAs into the enforcement realm, those risks are potentially being ratcheted up even higher.
The CFPB’s Plan to Obtain Information from CRAs About Furnishers
The December 11, 2014 announcement was part of a report that describes “the ways in which the system of collecting and reporting medical debt introduces multiple points at which error and consumer harm can occur. These errors can also be found in any information source furnished to the credit reporting agencies.” In issuing the report, the CFPB reiterated that it is a “top priority for the CFPB is to hold all players in the credit reporting market accountable for ensuring the accuracy of data in credit reports. This applies to the furnishers of the information, to the credit bureaus, and to the creditors which often both furnish information and use credit reports.”
As part of that effort, the CFPB will be obtaining information from the CRAs concerning key risk areas for consumers. Some of the metrics in the accuracy report will include:
- Furnishers with the most overall disputes: If a credit reporting company continuously experiences an outsized number of consumer disputes about information from a particular furnisher, the CFPB expects the credit reporting agency to investigate, identify if there is a problem, and take appropriate action.
- Industries with the most disputes: The credit reporting agencies will have to list the top industries they are reporting on, the volume of information received from those industries and the total number of disputes generated by those industries.
- Furnishers with particularly high disputes relative to their industry peers: For each industry named, the credit reporting agency must also name the top furnishers with the largest number of consumer disputes.
“Access to this required reporting information on a regular basis will help us prioritize our work, and it will help us protect consumers even more effectively in this field,” said CFPB Director Richard Cordray. “We expect it to investigate the source of the disputes, identify any problems, and take necessary action. This may include declining to accept information from the troubled furnisher where that step is justified.”
The Ongoing Focus of the CFPB on Credit Reporting Issues
This report is consistent with a number of bulletins issues by the CFPB over the past two years focusing on the area of credit card reporting and dispute resolution. For instance, in September 2013, the CFPB released a bulletin to “‘specifically address furnishers’ obligations to ‘review all relevant information’ they receive in connection with disputes forwarded by CRAs.” Those furnishers include debt collectors. In general, with respect to disputes received by furnishers from CRAs, the CFPB stated that it expects each furnisher to comply with the FCRA by undertaking and maintaining the following processes:
- Maintaining a system reasonably capable of receiving from CRAs information regarding disputes, including supporting documentation;
- Conducting an investigation of the disputed information, including reviewing: (a) “all relevant information” forwarded by the CRA; and (b) the furnisher’s own information with respect to the dispute;
- Reporting the results of the investigation to the CRA that sent the dispute;
- Providing corrected information to every nationwide CRA that received the information if the information is inaccurate or incomplete; and
- Modifying or deleting the disputed information, or permanently blocking the reporting of the information if the information is incomplete or inaccurate, or cannot be verified.
The CFPB also warned in 2013 that if the CFPB determines that a furnisher has engaged in any acts or practices that violate the FCRA or other federal consumer financial laws and regulations, “it will take appropriate supervisory and enforcement actions to address violations and seek all appropriate corrective measures, possibly including remediation of harm to consumers.” Indeed, in 2014, the CFPB obtained $2.75 million and $8 million settlements with furnishers for alleged inaccurate credit reporting activities. These settlements are described more fully here. Given the language of the 2014 report, it appears that the CFPB will be actively monitoring for compliance with these directives through the use of data from the CRAs, which could result in more enforcement actions.
The December 2014 report was issued simultaneously with an additional CFPB report on alleged problems that exist within the medical debt collection industry, which was the subject of a recent CFPB conference that was held in Oklahoma City. That report also highlighted the use of credit reporting by debt collectors as a means to encourage collections.
Given the evident focus of the CFPB, companies that engage in credit reporting are advised to read this guidance carefully and take steps to ensure compliance. Troutman Sanders LLP will continue to monitor CFPB reports and enforcement actions in this regard.