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Fair Credit Reporting Act (FCRA) and reporting to credit bureaus, is your data accurate?
Fair Credit Reporting Act (FCRA) and reporting to credit bureaus, is your data accurate?
Brief Overview of the Fair Credit Reporting Act (FCRA)
• Purpose: Created to help ensure the fairness, accuracy and privacy of personal information for consumer reports.
• 1971 ‐ Effective Date (15 USC 1681)
• 1996 –Amended by The Consumer Credit Reporting Reform Act of 1996
• 2003 – Fair and Accurate Credit Transactions Act (FACT Act) was passed which amended FCRA .
• 2010 ‐Congress passed Dodd‐Frank Wall Street Reform which granted rule making authority to the CFPB (except Sections 615(e) and 628)
• 2011 –CFPB restated FCRA regulation under its authority at 12 CFR Part 1022
§ 602. Congressional findings and statement of purpose[15 U.S.C. § 1681]
(a) Accuracy and fairness of credit reporting. The Congress makes the followingfindings:
(1) The banking system is dependent upon fair and accurate credit reporting.Inaccurate credit reports directly impair the efficiency of thebanking system, and unfair credit reporting methods undermine thepublic confidence which is essential to the continued functioning ofthe banking system.
(2) An elaborate mechanism has been developed for investigating andevaluating the credit worthiness, credit standing, credit capacity,character, and general reputation of consumers.
(3) Consumer reporting agencies have assumed a vital role in assemblingand evaluating consumer credit and other information on consumers.
(4) There is a need to insure that consumer reporting agencies exercisetheir grave responsibilities with fairness, impartiality, and a respectfor the consumer’s right to privacy.
(b) Reasonable procedures. It is the purpose of this title to require that consumerreporting agencies adopt reasonable procedures for meeting theneeds of commerce for consumer credit, personnel, insurance, and otherinformation in a manner which is fair and equitable to the consumer, withregard to the confidentiality, accuracy, relevancy, and proper utilization ofsuch information in accordance with the requirements of this title.
Key Definitions:Consumer an individual
Consumer Report means any written, oral or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for
(a) credit or insurance to be used primarily for personal, family or household purposes;(b) employment purposes; or(c ) any other purpose authorized under section 604 (15 USC 1681b).
Consumer Reporting Agency (CRA) means any person which, for monetary fees, dues or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.
Furnisher creditor or third party who provides information about a consumer to a credit reporting agency (CRA).
How Does FCRA Affect You?• As a Consumer ?
• As a User of Data?
• As a Furnisher of Data?
• As a Credit Reporting Agency (CRA)?
• As an Examiner/Auditor?
Overview of FCRA Examination Modules• Module 1 –Obtaining Consumer Reports
• Module 2 –Obtaining Information and SharingAmong Affiliates
• Module 3 – Disclosures to Consumers and Miscellaneous Requirements
• Module 4 ‐ Furnishers of Information
• Module 5 –Consumer Alerts and Identity Theft Protections
Banks could be subject to FCRA as
• Employers
• Issuers of Credit Cards
• Credit Grantors
• Purchasers of Dealer Paper
FOCUSON ACCURACY AND INTEGRITY
Accuracymeans that information that a furnisher provides to a consumer reporting agency about an account or other relationship with the consumer correctly:
• Reflects the terms of and liability for the account or other relationship;
• Reflects the consumer’s performance and other conduct with respect to the account or other relationship; and
• Identifies the appropriate consumer.
Integritymeans that information that a furnisher provides to a consumer reporting agency about an account or other relationship with the consumer:
• Is substantiated by the furnisher’s records at the time it is furnished;
• Is furnished in a form and manner that is designed to minimize the likelihood that the information may be incorrectly reflected in a consumer report; and
• Includes credit limit, if applicable and in the furnisher’s possession.
As a rule, it’s illegal to report information thatyou know or believe is inaccurate. You have “reasonable cause to believe” that information is inaccurate if you have knowledge, other than allegations from the consumer, that would lead a reasonable person to doubt the accuracyof the information. FCRA Section 623(a)(1)(A)
Federal Trade Commission, Consumer Reports: What Information Furnishers Need to Knowhttps://www.ftc.gov/system/files/documents/plain‐language/bus33‐consumer‐reports‐
what‐information‐furnishers‐need‐know_0_0.pdf
10 Practical Ways to Ensure
your Data is Accurate!
#1 Policies, Procedures, and Training
• Reasonable written policies and procedures concerning the accuracy and integrity of the furnished information that it furnishes to a consumer reporting information. (12 CFR 1022.42(a))
• Consider Interagency Guidelines (Appendix E) when writing FCRA policies and procedures. (12 CFR 1022.42 (b))
• Policies and procedures must be appropriate to the nature, size, complexity, and scope of each furnisher’s activities.
• Train Employees on Policies and Procedures! FCRA Certificate Training Program available at https://cdiaes.cdiaonline.org/?page_id=52.
• Review policies and procedure periodically and update them as necessary to ensure their effectiveness. (12 CFR 1022.42(c))
• Be able to defend your policies and procedures! What could go wrong? How could the policies and procedures affect consumers? Are there things lacking from your procedures that could effect the accuracy or integrity of the information reported?
#2 Use Standard Industry Formats and Report Timely to Credit Reporting Agencies
• Use standard data reporting formats (i.e. Metro2). Questions?: [email protected]
• Use standard procedures for compiling and furnishing data (i.e. 2017 Credit Reporting Resource Guide – Consumer Data Industry Association (CDIA)) Ensure you are updating your procedures as new guidance is released. www.cdiaonline.org
• Ensure employees involved in submitting credit bureau tape and investigating disputes are knowledgeable of standard formats and procedures. Metro2 Training available at https://cdiaes.cdiaonline.org/?page_id=14.
• Ensure proper technology is in place for electronic submissions of information to CRAs.
• Are you a Monthly or Cycle Reporter (why is this important?)
• How are you validating your credit reporting formatting?
# 3 Positively Identify Customers
• Best practice is to use a consumer’s social security number in combination with other legal identification sources to confirm identity. (i.e. common names, address discrepancies, suffixes, duplicate CI records, etc.)
• Take special caution to confirm identity of consumers with active duty or fraud alerts on file.
• Unless the user of the consumer report uses reasonable polices and procedures to form a reasonable belief that it knows the identity of the person making the request the user may not:
• Establish a new credit plan or extension of credit in the name of the customer
• Issue an additional card on an existing account; or• Increase a credit limit
• If consumer report contains an extended alert, furnisher should contact the consumer in person or by the method the consumer lists in the alert prior to performing any of three actions noted above.
#4Verify Integrity of Core Data
• Periodic reviews/audits/examinations of core data should be performed to ensure integrity of data being reported to the CRAs.
• Accurate Terms• Accurate Performance • Current Status• File Maintenance
• Correct Customer Input begins at Account Opening! Importance of strong onboarding controls.
• Avoid Duplication of Customer Records• Any change in Account Number, Identification Number, Portfolio Type
and/or Date Opened may cause duplication if the consumer reporting agencies are not notified prior to the change (FAQ #12 Credit Reporting Resource Guide)
***Pay close attention to Consumer Information FAQs in Credit Reporting Resource Guide.***
#5 Work Disputes Timely, Accurately and Completely
• Dispute from CRA (e-Oscar Dispute) Section 623(b) • Conduct an investigation regarding the disputed information;• Review all relevant information the consumer reporting agency
provided along with the notice;• Report the results of the investigation to the consumer reporting
agency;• If the investigation finds the information is incomplete or inaccurate,
report those results to all nationwide consumer reporting agencies to which the financial institution previously provided the information; and
• If the disputed information is incomplete, inaccurate, or not verifiable by the person it must promptly, for purposes of reporting to the consumer reporting agency do one of the following:
• Modify the item of information• Delete the item of information• Permanently block the reporting of that item of information.
• Direct Disputes (from consumer) – 5 Business Days to Notify Consumer when Frivolous or Irrelevant. Complete Dispute Investigation within 30 Calendar days and notify the CRA of results of the investigation.
• Conduct a reasonable investigation of a direct dispute unless the direct dispute relates to:
• The consumer’s identifying information • The identity of past or present employers• Inquiries or request for a consumer report• Information derived from public records• Information related to fraud alerts or active duty alerts• Information provided to a consumer reporting agency by another furnisher• If furnisher has reasonable belief that the direct dispute is submitted by a credit
repair organization, is prepared on behalf of the consumer by a credit repair organization; or is submitted on a form supplied to the consumer by a credit repair organization.
For completeness, investigations must be substantiated by the Furnisher’s records. If information cannot be substantiated, it should not be reported to CRA.
Utilize glance reports from CRAs when working disputes:Experian: Bullseye ReportEquifax: Automated Data ViewTransUnion: Account Reporting Review
E-Oscar Help Desk:866-MY-OSCAR (866-696-7227)
E-Oscar Offers Training available at: http://www.e-oscar.org/training-information.aspx
E-Oscar Training email address: [email protected]
#6 Handle Special Conditions Cautiously
• Natural Disaster (i.e. Hurricane Harvey & Hurricane Irma, Credit Reporting Resource Guide, FAQ #58). Special Comment “AW” (Affected by natural or declared disaster)
• Identity Theft (i.e. Equifax Data breach) Fraud Alert versus Credit Freeze
• Mergers & Acquisitions (Credit Reporting Resource Guide, FAQs #46 – 48)
• Bankruptcy (Credit Reporting Resource Guide, FAQs #23 - #32)
• Accounts in Dispute (Credit Reporting Resource Guide, FAQ #35)
• Lost or Stolen Credit Cards (Credit Reporting Resource Guide, FAQ #43)
• Charge Offs (Credit Reporting Resource Guide, FAQ #34)
#7 Maintain Proper Oversight of Service Providers
• Determine how and if your Service Providers could impact your FCRA Compliance…• Do you share information with affiliates? How do they
use that information?
• Who performs your data extract to the CRAs?
• Does your Core Provider understand the Metro2 Formatting requirements and is the coding accurate and up to date within your system?
• How do data breaches such as the recent Equifax data breach affect you?
#8 Trend and Monitor Data
• Trend and monitor number of FCRA Complaints (Is there a pattern?)
• Trend and monitor number of e-Oscar and Direct Disputes (for all product types i.e. Loans, Credit Cards, Collection/Bankruptcy Accounts, etc)
• Review monthly Error Reports from CRAs (fatal errors, overrides, anomalies, patterns). Who is reviewing these for your organization? How are errors being corrected? Are they being corrected prior to the next data extract to CRAs?
• Audit/Exam Findings - Are you experiencing repeat findings?
• Are you periodically mapping data from core system to the extract file sent to CRAs (Is it accurate?) Cross compare select fields from the extract to verify accuracy and Metro2 formatting.
#9 Prevent Re‐Pollution of Data
• Promptly notify the CRAs of any inaccurate or incomplete data
• Upon receiving notice of Block of Information Resulting from Identity Theft, the furnisher should follow reasonable procedures to ensure that it does not re-report the information to the consumer reporting agency, causing a “re-pollution” to the consumer’s report.
• Prohibition on Sale or Transfer of Debt Caused by Identity Theft
• Report voluntary closures of accounts
• Date of First Delinquency (DOFD) is very important! (Exhibit #9 Credit Reporting Resource Guide)
#10 Maintain Proper Data Retention & Properly Dispose of Consumer Information
• Maintain records for a reasonable period of time, not less than any applicable recordkeeping requirement, in order to substantiate the accuracy of any information about consumers it furnishes that is subject to a direct dispute.
• Comply with Gramm-Leach-Bliley Act (GLBA) requirements for disposal of consumer information that is a consumer report or derived from a consumer report.
RECAP• Adopt Reasonable Policies and Procedures to ensure Accuracy and Integrity.
• Ensure input to Core System is Accurate (Garbage In = Garbage Out)
• Monitor and Test
Core Data Accuracy and Integrity
• Ensure formatting of Credit Tape is in accordance with METRO 2 Formatting
• Timely submission to CRAs• Ensure output of the Credit Tape information is accurate
• Monitor and Test
Validate Extract to CRAs (Credit Tape) for Accuracy and Integrity
• Ensure disputes (direct and via e‐Oscar) and complaints are investigated properly and timely.
• Monitor Error Reports from CRAs.• Take action to correct audit/exam findings, if any.
• Take appropriate steps to correct and report inaccurate information immediately upon identification.
• Monitor Trends and Test
Monitor and Control Accuracy and
Integrity of Data
Questions???
