Financial Institutions Must Respond Timely to Consumer Disputes

One of the significant obligations under the Fair Credit Reporting Act (FCRA) is the duty of financial institutions that provide information to consumer reporting agencies to respond timely upon notice of a dispute filed with the reporting agency by a consumer. This duty to respond carries with it a significant risk, if the financial institution is negligent in the way it responds!  

In general, after the financial institution receives notice from the reporting agency that a dispute regarding completeness or accuracy of information has been filed with the reporting agency by a consumer, the financial institution must do all of the following:

• conduct an investigation that includes a review of all the information provided to the financial institution by the consumer reporting agency;
• then the institution must report the results of its investigation to the consumer reporting agency that gave notice of the dispute;
• if the review finds that incomplete or inaccurate information was initially provided, then the results must also be reported to any other agencies to which the financial institution provided such information;
• finally, if the financial institution finds inaccuracy or incompleteness in the information initially provided, or if the disputed item of information cannot be verified in the course of its investigation, the institution must
• alter its reporting to consumer reporting agencies by promptly (1) modifying that item of information, (2) deleting that item, or (3) permanently blocking the reporting of the item. 

All of this must be done within 30 days of receipt of notification of the dispute from the consumer reporting agency. 

The FCRA emphasizes the significance of this obligation by imposing civil liability on a financial institution for negligent non-compliance with the steps outlined above.  A financial institution can be liable to the consumer in an amount equal to the sum of actual damages sustained by the consumer, as well as the costs of litigation, including reasonable attorney fees as determined by the court. Significantly, the individual consumer has the right to bring a lawsuit for recovery of these damages and costs.

There is a similar duty of the financial institution if the dispute about accuracy of reported information comes directly from the consumer, rather than through the consumer reporting agency. The financial institution must:

• conduct an investigation;
• review all relevant information provided by the consumer;
• report the results of the investigation to the consumer within 30 days; and
• if the investigation reveals that the reported information was inaccurate, report that inaccuracy to all agencies that received the information and also provide any correction to the information.

Unlike the first scenario when the notice of dispute comes from the credit reporting agency, in this case when the dispute comes directly from the consumer, the law does not give the consumer the right to file a lawsuit to force the financial institution to comply with its duty to investigate and correct. Instead, the right of enforcement in this instance is left to state and federal agencies and officials. 

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