FCRA in the spotlight

The entire financial services sector relies on the accuracy and integrity of the information flowing throughout the consumer reporting system. Consumer reporting agencies include nationwide agencies such as Experian, Equifax and TransUnion as well as specialty agencies, such as employment screening agencies, check verification companies, and tenant screening services.

Credit unions as furnishers of information to credit reporting agencies play a vital role in the consumer reporting system. Therefore, it came as no surprise that NCUA’s list of 2020 supervisory priorities (Letter 20-CU-01) included reviewing credit unions’ consumer reporting policies and procedures.

Furnisher duties

Section 623 of the FCRA imposes specific responsibilities on credit unions as furnishers of information to consumer reporting agencies. Generally, these responsibilities include the duties to:

• Provide accurate and complete information to credit reporting agencies.
• Investigate consumer disputes regarding reported information. Disputes may be submitted to the agency or directly to the credit union.
• Correct and update inaccurate information.
• Notify consumers in writing within 30 days of reporting negative information (e.g., late payments, delinquencies) to a consumer reporting agency.
• Report the voluntary closing of credit accounts.
• Notify the agency when a consumer disputes the completeness or accuracy of furnished information.
• Report within 90 days the month and year that a delinquency resulted in a referral to collection.
• Address incidences of identity (ID) theft. That includes responding to notices of ID theft from consumer reporting agencies, correcting inaccurate information, and preventing that information from being refurnished in the future.
• Note that any debts resulting from ID theft may not be sold, transferred, or placed for collection except under certain limited circumstances.

The Consumer Financial Protection Bureau’s (CFPB’s) Regulation V primarily implements the FCRA with the exception of NCUA and Federal Trade Commission rules governing the proper disposal of consumer report information and the requirements that credit unions maintain a program to detect and address identity theft “red flags.”

Not all of the FCRA provisions have implementing regulations.

Policies and procedures

FCRA’s “furnisher” regulation (Regulation V, subpart E) requires credit unions to establish and implement reasonable written policies and procedures to ensure the accuracy and integrity of information it furnishes to consumer reporting agencies (“Accuracy defined”).

Regulation V, appendix E contains guidelines for developing these policies and procedures. In general, a credit union’s policies and procedures should:

• Be appropriate to the nature, size, complexity, and scope of your activities.
• Be reviewed periodically and updated as necessary.
• Ensure that information provided to a consumer reporting agency is for the right person and reflects the terms of the account and the consumer’s performance on the account.
• Require maintenance of records for a reasonable amount of time.
• Establish internal controls for the accuracy and integrity of information, such as through random sampling.
• Prevent re-aging (inaccurately changing the date of first delinquency on a consumer’s account to a later date) and duplicative reporting, particularly following portfolio acquisitions or sales, mergers, and other transfers.
• Require updating of furnished information where necessary.
• Train staff to implement the policies and procedures.

NEXT: Resolving consumer disputes

Resolving consumer disputes

Consumers may dispute information furnished by a credit union through the consumer reporting agency or directly with the credit union for investigation and resolution. Regulation V specifies the procedures furnishers must follow when responding to direct disputes from consumers.

Credit unions must investigate a direct dispute if it relates to an account, debt, or other relationship the institution has (or had) with a consumer (including accounts/debts resulting from ID theft).

A credit union is only required to investigate a direct dispute if a consumer submits a dispute notice to the credit union that contains sufficient information to identify the account or other relationship in dispute, an explanation of the basis for the dispute, and supporting documentation or other information reasonably required by the credit union to substantiate the basis of the dispute (e.g., account statements, police report, ID theft affidavit, etc.).

Credit unions generally have 30 days to complete an investigation and report the results to the consumer. If the investigation finds the information in the report was inaccurate, the credit union must correct the error and provide accurate information to the credit bureau.

A credit union is not required to investigate disputes that are determined to be “frivolous or irrelevant.” Those include cases with insufficient information to investigate or substantially similar disputes that were previously submitted to the credit union or reporting agency by or on behalf of the consumer (e.g., by a credit repair company).

If a dispute is found to be frivolous or irrelevant, a furnisher must notify the consumer within five business days of receiving the dispute. The notice must include the reason for the determination and, if relevant, any information the consumer needs to submit so the furnisher can investigate the disputed information.

Common violations

Five common violations identified by the CFPB’s Supervisory Highlights: Consumer Reporting Edition (Issue 20, Fall 2019):

1. Inaccurate reporting to specialty reporting agencies. CFPB found some furnishers did not have written policies and procedures for reporting information to “specialty deposit” agencies (e.g., check verification services).

Some institutions also failed to validate the furnished data, causing them to inaccurately provide consumers’ account status to the reporting agencies in violation of the FCRA. The furnishers were required to evaluate the effectiveness of existing polices and develop new written polices where appropriate.

2. Failure to investigate disputes consumers submitted. CFPB examiners found that some furnishers violated the FCRA when they failed to investigate disputes consumers submitted and instead treated the disputes as general account correspondence.

The agency even found backlogs of direct disputes accumulated in document processing queues that were not investigated or responded to at all. It required furnishers to develop proper dispute handling policies and procedures to ensure they conducted investigations in accordance with the requirements of the FCRA and Regulation V.

3. Reporting information with “actual knowledge” of errors. Examiners found that one or more institutions furnished information they knew or had reasonable cause to believe was inaccurate, in some cases reporting thousands of accounts to one or more reporting agencies with inaccurate derogatory status codes.

Furnishers were required to implement a program fix for the inaccurate coding issue and review all furnished accounts to identify and correct inaccurate reporting on all affected consumers.

4. Failure to correct inaccurate information. CFPB examiners found furnishers that failed to correct and update loan data that resulted from identity theft. In these cases, the furnishers recorded the results of their investigations internally but failed to correct the information furnished to the consumer reporting agency.

They were required to develop and implement policies and procedures to ensure prompt notification and correction of any inaccurate information furnished to reporting agencies going forward.

5. Failure to report the date of first delinquency within 90 days. CFPB noted that one or more furnishers reported the incorrect date of first delinquency. The date of first delinquency is important for reporting agencies, creditors, and consumers because it determines when information on a consumer report becomes obsolete and may no longer be reported.

Visit CFPB’s website for more examples.

CFPB has supervisory authority over banks, thrifts, and credit unions with more than $10 billion in assets, as well as their affiliates; nonbank mortgage originators and servicers, payday lenders, and private student lenders; and larger participants in these markets: consumer reporting, consumer debt collection, student loan servicing, international money transfer, and automobile financing.

Visit cuna.org/compliance for more information.

This article appeared in the summer issue of Credit Union Magazine. Interested in subscribing? Visit news.cuna.org/subscribe.