The Consumer Financial Protection Bureau has continued to address FCRA-related compliance issues in its most recent Supervisory Highlights publications from March and June 2016. The Supervisory Highlights once again reiterate the importance of FCRA compliance for a broad spectrum of FCRA-regulated entities, including mortgage originators, furnishers of consumer information, and nationwide specialty consumer reporting agencies (NSCRAs).
June 2016 Highlights
The CFPB’s June Highlights focused on FCRA requirements in the mortgage origination context. Specifically, CFPB examiners found that one or more institutions took adverse action based on information in consumer reports but failed to provide the required FCRA disclosures. 15 U.S.C. § 1681m(a) requires a specific adverse action notice when adverse action is taken based on information contained in a consumer report. Specifically, the notice must include: (1) the name, address, and telephone number of the CRA furnishing the report; (2) a statement that the CRA did not make the decision to take the adverse action; (3) statement of the consumer’s right to obtain a free copy of a consumer report from that CRA; and (4) statement of the consumer’s right to dispute with the CRA the accuracy or completeness of information contained in the consumer report.
Examiners noted that the cause of the violations was linked to a lack of appropriate training and inadequate policies and procedures. The institutions were directed to revise their training policies and procedures to ensure that employees were providing FCRA-required information on the adverse action notices. A link to the June 2016 publication can be found here.
March 2016 Highlights
CFPB examiners conducted compliance reviews at certain depository institutions to determine whether the institutions were complying with their furnisher-specific obligations under the FCRA and its implementing Regulation V. The reviews focused on furnishers that provide consumer information to NSCRAs.
Furnishers of consumer information are required to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information they furnish and are also required to promptly update information that is determined to be incomplete or inaccurate.
Examiners found that certain furnishers had policies and procedures generally pertaining to FCRA furnishing obligations, but that they “failed to have policies and procedures addressing the furnishing of information related to deposit accounts.” Examiners also found that one or more of the furnishers “lacked processes or policies to verify data furnished through automated internal systems.” While certain furnishers had automated systems to inform the NSCRAs when an account was paid in full or when a balance reached zero, the furnishers did not have controls to check whether that information was actually furnished. Thus, CFPB supervision directed the furnishers to establish and implement policies and procedures to monitor the automated functions of its deposit furnishing process.
On a related-issue, examiners found that when consumers had paid charged off accounts in full, certain furnishers would update their systems of records to reflect the payment, but would not update the change in status from “charged off” to “paid-in-full” and send the update to the NSCRAs. The examiners concluded that “[n]ot updating an account to paid-in-full or settled-in-full status could adversely affect consumers’ attempts to establish new deposit or checking accounts.”
With respect to data quality, examiners found certain internal inconsistencies in linking identifying information to consumer records. These inconsistencies, in some instances, resulted in incorrect information being associated with a consumer’s files. Therefore, CFPB supervision directed further development and implementation of internal processes to “monitor, detect, and prevent the association of account closures to incorrect consumer profiles, and to notify affected consumers.”
Finally, the examiners reviewed certain NSCRAs and focused on their systems and processes used to oversee and approve furnishers. Examiners identified certain weaknesses in their systems for credentialing furnishers prior to allowing those furnishers to supply consumer information to the NSCRAs. The breakdown in processes included failing to follow their own policies and procedures for issuing credentials, failing to implement a timeframe for furnishers to submit required documentation, and failing to maintain adequate documentation in line with their applicable policies and procedures to demonstrate the steps taken to approve a furnisher during the credentialing process. A link to the March 2016 publication can be found here.
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These recent Supervisory Highlights show the CFPB’s continued interest and supervision over nuanced areas of FCRA compliance. Companies that are required to comply with the FCRA should review their written policies and procedures to ensure not only that the policies and procedures are up to date but also that the policies and procedures are being appropriately implemented and followed by employees. Troutman Sanders’ Financial Services Litigation team has substantial experience in providing FCRA compliance advice.