It’s clear: the CFPB is using the FCRA to advance its agenda. The Bureau wants to create a consumer-friendly credit reporting precedent and it is using FCRA-related lawsuits and enforcement actions to get it.
It all started with the Bureau's recent instruction to remove some medical debts from consumer credit reports, argues Chris Capurso, Financial Services Associate, Troutman Pepper, in a recent episode of the Troutman Pepper podcast, Keeping up with the Bureau.
Medical debt is the largest reported trade line by third-party debt collectors, accounting for 58% of all tradelines. Removing medical debt means creditors and lenders are not getting a full picture of a consumer’s true credit capacity.
The CFPB is also focused on changing the data that is reported to the credit bureaus, telling credit card companies that they are “not reporting enough historical data,” says Ethan Ostroff, Partner, Troutman Pepper, adding that the consent order with Hyundai Capital America is also a clear indication of the CFPB’s intent.
All of this adds up to more liability. What can data furnishers do to prepare for increased scrutiny under the FCRA?
1. Train Your Staff on the Distinction between Legal and Factual Disputes
“Historically, there has been a distinction made by some courts between a legal dispute and a factual dispute,” says Derek Schwahn, Associate Attorney, Troutman Pepper. Furnishers were often able to rely on this distinction in order to get dismissals by categorizing a dispute as legal instead of factual. If a dispute is categorized as legal, Schwahn says, the furnisher can argue that they do not have liability under the FCRA to re-investigate the dispute.
The CFPB, through amicus briefs filed in the Second, Ninth, and Eleventh Circuits, has taken the position that “nowhere in the FCRA is a distinction made between a legal dispute and a factual dispute,” explains Schwahn. If the case law is overturned, furnishers will need to shore up their dispute review process even further, including training their staff to understand the legal issues involved in a credit bureau dispute, not just comparing documents.
2. Focus on Data Accuracy
As seen in the Hyundai consent order, the CFPB is focused on the accurate reporting of the first date of delinquency. The first date of delinquency is “one of the most important data points” when it comes to furnishing data to the credit bureaus, according to Alan Wingfield, Consumer Financial Services Partner, Troutman Pepper. The first date of delinquency is required to be reported under the FCRA, as it controls the age of the tradelines and when they age off consumer credit reports.
3. Study the CFPB's Exam Expectations
The FCRA module in the CFPB's examination manual specifically explains that the CFPB is assessing adequacy, accuracy, and integrity. Wingfield explains, if the CFPB visits and “you don’t have a policy procedure, or it hasn’t been updated recently,” that’s going to be an “aggravating factor,” if there are other findings.