Furnishers’ Obligation to Have Policy & Procedures Relating to Credit Reporting

One of the more challenging areas of the Fair Credit Reporting Act (“FCRA”) relates to properly furnishing information to credit reporting agencies.  In that regard, as a reminder, each furnisher must have policies and procedures implemented to ensure accurate information is reported.

The regulations require that “[e]ach furnisher must establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information relating to consumers that it furnishes to a consumer reporting agency.”

Furnishers must review their policies and procedures periodically and update them when necessary to ensure “continued effectiveness.” The regulations establish specific components to include in the policies and procedures. For example, a furnisher should:

• Delete, update, and correct information in the furnisher’s records as needed to avoid furnishing inaccurate information
• Conduct reasonable investigation of disputes
• Develop IT programs to communicate information to credit reporting agencies to avoid duplicative reporting of accounts or reporting of erroneous information
• Train staff that participate in activities related to furnishing information
• Conduct periodic evaluation of procedures

Additionally, the FCRA prohibits reporting information with actual knowledge of errors, or information that the furnisher knows or has reasonable cause to believe is inaccurate. A furnisher must not report information after notice and confirmation of errors. In furtherance of the obligations to provide accurate information, furnishers have the following obligations:

• Duty to correct and update information
• Duty to provide notice of dispute relating to accuracy of information furnished
• Duty to provide notice of closed or delinquent accounts
• Duty to respond to notification from credit reporting agency relating to customer identity theft
• Provide notice of negative reporting to customer for initial reporting

The Consumer Financial Protection Bureau’s (“CFPB”) regulators recently issued its Supervisory Highlights for supervision work completed between July and October 2013, and highlighted a few areas of concern and unfair practice in this area.¹

One example from the CFPB Highlights is the improper coding of short sales as foreclosures. Similarly, another example is misreporting borrowers in a trial loan modification as being in the foreclosure process and inaccurately reporting whether the loan modifications were made under governmental or proprietary programs.

¹ The CFPB regulates financial institutions with assets greater than $10 billion but the CFPB, a member of the Federal Financial Institutions Examination Council, has influence with regulators of institutions with less than $10 billion in assets. It is our opinion that subjects of examination that are the focus of the CFPB will become areas of focus for other smaller institutions.

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