On April 8, 2024, the Consumer Financial Protection Bureau (CFPB) published the 32nd edition of its Supervisory Highlights report. As discussed in more detail below, the report highlights consumer reporting issues identified in reviews conducted from April 2023 to December 2023. It also sets out recent oversight program and enforcement developments related to providers and consumer reporting agencies (CRA).
The Supervision Highlights' focus on consumer reporting issues is not surprising in light of the CFPB's recently published publication. Annual Consumer Response Reportreflecting that consumer reports, including credit reports, were again the most complained about financial product or service in 2023: they accounted for more than 81% of all consumer complaints submitted by the CFPB to the companies for review.
In that sense, within the Supervision Highlights, the CFPB highlights that “[i]The lack of accuracy in the credit reporting system is a long-standing problem that remains a problem today” and that the CFPB would continue to “prioritize examinations of consumer reporting companies… and providers.” in the future.
Key observations from the CFPB
The CFPB identified deficiencies in CRAs' and providers' compliance with the Fair Credit Reporting Act (FCRA) and Regulation V.
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The CFPB identified certain problems with CRA practices, as described below.
The CRAs did not block the information after consumers submitted required identity theft documentation.
The CFPB noted that CRAs failed to block the submission of information after consumers provided them with required identity theft documentation and without making a reasonable determination that a legal basis existed to deny the block.
Additionally, the CFPB noted that CRAs failed to:
- Notify consumers, as required by the FCRA, within five business days after refusing to block information or rescind a block on information that consumers had identified as a result of identity theft.
- Provide consumers who contacted the CRAs to express their belief that they were victims of fraud or identity theft with a summary of rights containing all information required by the CFPB in its rights summary form model.
Problems with CRAs' handling of identity theft claims were also recently highlighted in the CFPB's Annual Consumer Response Report, where the CFPB emphasized that consumers appeared to face many difficulties in addressing inaccuracies in the claims. commercial lines on your consumer report as a result of the alleged identity theft.
CRAs failed to block adverse information resulting from human trafficking.
In 2022, the CFPB issued a rule under Regulation V, which requires CRAs to block adverse information items identified by consumers or their representatives as resulting from a serious form of human trafficking. In its examinations, the CFPB noted that the CRAs did not block such information in response to a qualified consumer's request, either in whole or in part, or within four business days of receiving the consumer's request. as the rule generally requires.
CRAs did not follow reasonable procedures to ensure maximum accuracy when accepting information from unreliable providers.
The CFPB found that CRAs did not follow procedures to ensure the highest possible accuracy of information included in consumer reports when they did not sufficiently monitor dispute metrics, such as those showing that, for several months, a provider had not responded to all or almost all the questions. all disputes or, alternatively, they had responded to all disputes in the same way and still continued to include information from such suppliers in their consumer reports.
This is not the first time the CFPB has objected to CRAs' tracking of dispute trends. In its Summer 2021 Supervision Highlights and a advisory opinion 2022The CFPB explained that CRAs failed to follow reasonable procedures to ensure the highest possible accuracy of consumer reports when they "continued to include information in consumer reports provided by untrustworthy providers," that is, providers whose dispute response behavior suggested that they were "no longer sources of reliable and verifiable information about consumers."
Furniture
The report also highlights key observations in the CFPB's review of information providers to CRAs, including the issues described below.
Providers did not promptly update inaccurate or incomplete information.
The CFPB maintains that providers continue to violate the FCRA by failing to promptly correct and update information reported to the CRAs after discovering it to be incomplete or inaccurate.
To underscore this point, the CFPB notes that providers did not update dates of first delinquency (DOFD) for several months after determining that those dates were inaccurately reported. Importantly, DOFD's unaddressed issues were also a central focus of the CFPB's 2022 advisory opinion on the prevalence of what the CFPB called “apparently false data” in consumer reports, as well as several actions of supplier compliance measures initiated by the CFPB.
In supervisory highlights, the CFPB also highlights specific inaccuracies in bankruptcy, auto leasing, and escrow accounts that the CFPB says providers failed to address. The CFPB stated that in response to these findings, providers were updating internal controls and/or “conducting retrospective reviews” to ensure corrections or updates were made to affected accounts.
Providers did not provide required notifications/information to CRAs.
The FCRA requires providers to notify CRAs when an item of information provided to CRAs by the provider is subject to a direct dispute and also requires providers to inform CRAs of the DOFD associated with the applicable accounts. The CFPB noted that providers did not disclose this information to CRAs consistent with their obligation under the FCRA.
In particular, the CFPB emphasized problems with DOFD reporting by auto loan originators, including the fact that they incorrectly reported DOFD as the first day of a statement cycle after a late payment. , instead of 30 days after the late payment, and, in addition, that they changed the DOFD for accounts that remained delinquent month after month, where it should remain unchanged.
Suppliers did not reasonably investigate direct disputes.
A theme throughout several editions of the CFPB's Supervisory Highlights, including the latest edition, is that providers fail to meet their obligation to conduct reasonable investigations of direct disputes.
In particular, the CFPB claims that providers required consumers to provide additional information, beyond what is required by Regulation V, to initiate a direct dispute investigation. This observation follows a CFPB Circular 2022 warning providers that they "are liable under the FCRA if they fail to investigate any dispute to comply with legal and regulatory requirements."
Additionally, the Supervisory Highlights report states that debt collection providers automatically deleted business lines upon receipt of a dispute, rather than conducting a reasonable investigation, a practice that the The CFPB previously said it can harm consumers.
Providers did not prevent information from being provided upon receiving a report of identity theft.
Finally, the CFPB explained that providers continued to report information after receiving an identity theft report, reflecting that the information was the result of identity theft, at the address specified by the provider to receive such documentation. Although the FCRA allows providers to restart reporting such information if the provider later knows or is informed by the consumer that the information is, in fact, correct, the CFPB stated that the providers had not obtained such knowledge or information in the scenarios you identified. .
Looking to the future
The Supervisory Highlights report reflects the CFPB's continued concern about inaccuracies in consumer reporting. Several of the issues identified in the latest edition are issues that the CFPB has previously identified as problematic. CRAs and providers should take note and consider reviewing their consumer reporting policies and procedures to ensure they align with CFPB expectations. It may be particularly prudent to conduct such a review in advance of the CFPB's expected FCRA rulemaking proposal. which, as the CFPB recently indicated, is expected by the end of this year and will likely increase the obligations of CRAs and providers under the FCRA.
Cooley associate Demisse Selassie also contributed to this alert.
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