A recent Federal Trade Commission settlement with an auto lender highlights two basic requirements under the Fair Credit Reporting Act for companies that furnish consumer information to consumer reporting agencies (CRAs): (1) furnishers are required by federal law to have written policies aimed to ensure the accuracy and integrity of the information supplied, and (2) furnishers must investigate and respond to consumer disputes of the accuracy of the information.
On September 16, the FTC hit Texas auto dealer Tricolor Auto Group’s loan servicing arm, Tricolor Auto Acceptance, LLC, with $82,777 in civil penalties for violation of the Furnisher Rule. The rule imposes obligations under the FCRA on any entity that reports information to CRAs. Such entities must “maintain policies and procedures designed to ensure that the information they report to CRAs is accurate and to allow consumers to dispute information they believe is inaccurate directly with the company that furnished the information.”
The FTC charged that Tricolor “failed to have written policies and procedures regarding the accuracy of reported credit information, and failed to properly investigate disputed consumer credit information,” despite Tricolor providing credit reporting information on thousands of consumers. Although the Furnisher Rule requires an investigation by the entity whenever a consumer disputes the accuracy of information reported to CRAs, Tricolor allegedly just referred consumers back to the CRA instead.
Following a 5-0 vote of the FTC’s Commissioners, the FTC’s Complaint was referred to the Department of Justice, which filed the Complaint in the United States District Court for the Northern District of Texas on September 15, along with a proposed judgment and order. The proposed judgment and order are subject to court approval. Under the terms of the settlement, in addition to the civil penalty, Tricolor “will be permanently barred from any further violations of the Furnisher Rule.”
The FTC enforcement action against Tricolor comes in the context of repeated and clear signals from the FTC, other federal agencies such as the Consumer Financial Protection Bureau, and state attorneys general that FCRA compliance is a high enforcement priority in the consumer law protection area.
Troutman Sanders advises auto lenders and furnishers of all types on development of written policies under the Furnisher Rule, as well as proper handling of consumer disputes.