The CFPB’s Circular on Consumer Disputes: What it Means for Creditors

The CFPB’s recent press release advising that they will be keeping a closer eye on the consumer dispute process with Credit Bureaus and their Furnishers will impact a wide range of companies. In the words of the CFPB, “When consumer reporting companies and furnishers fail to investigate disputed information, consumers are left paying higher interest rates and face greater difficulty finding housing, employment”.

The press release announced that the CFPB issued a Circular (Circular 2022-07) outlining how consumer protection enforcers (including regulators and attorneys general) can bring claims against companies that fail to investigate and resolve consumer report disputes.

Obviously, this will impact the “Big Three” credit bureaus or consumer reporting agencies (CRAs; Experian, TransUnion and Equifax), but it will also impact any company that furnishes data to the credit bureaus.

First, let’s quickly define a few things:

The Fair Credit Reporting Act (FCRA) outlines rules for engaging with consumers relating to financial matters. They also define the various types of consumer reporting agencies. Those definitions can be found in section 603 of the FCRA.

• 603(f): The term “consumer reporting agency” 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.
• 603(p): The term ‘consumer reporting agency that compiles and maintains files on a consumer on a nationwide basis” means a consumer reporting agency that regularly engages in the practice of assembling or evaluating, and maintaining, for the purpose of furnishing consumer reports to third parties bearing on a consumer’s credit worthiness, credit standing, or credit capacity, each of the following regarding consumers residing nationwide:
  • Public record information
  • Credit account information from persons who furnish that information regularly and in the ordinary course of business
• 603(x): The term “Nationwide specialty consumer reporting agency” means a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis relating to the following:
  • Medical records and/or payment;
  • Residential or tenant history;
  • Check writing history;
  • Employment history; or
  • Insurance claims
• 603(p) CRA’s are Experian, TransUnion, Equifax and Innovis.

Other companies that may fall under 603(f) or 603(x) are companies that provide consumer data to other companies, mortgage information companies, employment information companies and various other companies that collect, store, and provide consumer information as a business. The full List of Consumer Reporting Companies can be found on the CFPB’s web site.  

The FCRA also defines entities that furnish data to the 603(p) consumer reporting agencies. This information can be found in section 623 “Responsibilities of furnishers of information to consumer reporting agencies”.   A furnisher is defined as:

• An entity that furnishes information relating to consumers to one or more consumer reporting agencies for inclusion in a consumer report.

Furnishers include not only the companies that provide trade line data, such as banks, credit card companies, loan companies, mortgage companies, etc. but also those that provide collection items (collection agencies or debt buyers).

All furnishers must understand and have a process in place to address credit reporting disputes. A thorough understanding of the FCRA as it relates to the dispute process and the following reinvestigation process is also essential for all furnishers.

Duties to Investigate Disputes and Correct Information

The dispute process can be found in section 611 of the FCRA: “Procedure in case of disputed accuracy.”

The FCRA outlines not only the duties of credit reporting agencies but also furnishers to not only investigate any consumer disputes, but to also correct any information that is found to be incorrect.

Consumers have the right to dispute any item they feel is incorrect on their credit report. If these disputes are provided directly to a consumer reporting agency, the FCRA’s process must be followed.

Consumers may file disputes with any consumer reporting agency, not just the “Big Three.” The reinvestigation process must be followed by all CRA’s. While there are certain exceptions for “frivolous” disputes (i.e. the same dispute coming in over and over again once it has been proven to be correct,) in general, the reinvestigation process and timelines must be followed.

If a dispute is made directly to a collection agency or creditor, and the dispute is about an item on the consumer’s credit report, it is suggested that the agency or creditor direct the consumer to the CRA to dispute the information directly to them. That isn’t to say the agency or creditor should not address the dispute with the consumer, but in order for the proper process to be followed by the CRAs – the dispute must be made to them from the consumer.

It is important that furnishers of information to CRA’s know the process and the timeline, so they may assist in getting the disputed information verified and back to the CRA as quickly as possible. If a furnisher is not able to adequately provide verification of the disputed information to the CRA, that information may be removed.

Dispute Reinvestigation

• Once the dispute is received, the CRA must conduct a ‘reasonable’ reinvestigation to determine whether the disputed information is indeed inaccurate. This generally requires the CRA to not only review their own information, but if the disputed information was provided by a furnisher, the furnisher must be looped into the reinvestigation process.
• If the disputed item was provided by a furnisher, the furnisher must be notified within 5 days of receipt of the dispute.
• A timeline of 30 days from the date the dispute was received is imposed to have the reinvestigation complete. If the reinvestigation is not complete within 30 days, the disputed item must be removed.
• The 30-day period may be extended if the CRA receives additional information from the consumer which is relevant to the reinvestigation.
• An item in dispute must be noted as disputed on the consumer’s credit report.
• Any item that is found to be incorrect must either be corrected or removed.
• If the item cannot be verified, it must be removed.
• At the conclusion of the reinvestigation process – the consumer must be notified of the outcome:
  • Notification must be in writing, stating that the reinvestigation is complete.
  • Notification must be within 5 days of completion of the reinvestigation
  • Any information that has been deleted should be relayed to the consumer.
    1. NOTE: Before reinserting any removed information, the consumer must be notified in writing within 5 days after reinsertion.
  • If information has been deleted, at the request of the consumer, any entity that obtained a copy of the consumer’s report with the disputed information on it shall be notified of the disputed and deleted information (2 years for employment purposes, 6 months for all other purposes).
  • If the information will be retained, that should also be relayed to the consumer.
  • At the consumer’s request, a description of the reinvestigation process should be provided in writing.
  • If the consumer still disputes the information after the reinvestigation is complete, and the information is found to be correct, the consumer can put a statement on their file stating their dispute.

Have a Process in Place

The CFPB’s concerns laid out in their November 2022 Circular revolve around a consumer’s right to dispute, and the timeliness of CRA’s and furnishers in responding to those disputes. They are also concerned that the proper dispute reinvestigation process is followed.

eOscar is the electronic method the credit bureaus use to communicate disputes to furnishers. It is a browser-based Metro 2-compliant system that has been developed by Equifax, Experian, TransUnion and Innovis. It was primarily developed to provide furnishers with an online solution for responding to disputes. Most data furnishers subscribe to eOscar to quickly and efficiently respond to disputes.

By having a dispute response process in place, and ensuring the CRAs receive the reinvestigation results promptly, you will assist in keeping consumers’ credit bureau reports as up-to-date and correct as possible.

Working with a Partner that Understands the Regulations

NeuAnalytics fills the gap between helping you transfer information back and forth between creditors and agencies and facilitating all the required communication while maintaining regulatory compliance. When it comes to documentation, your best option is to keep all bad debt records within a single system, especially when using multiple agencies.

Our integrated platform tracks and stores historical collection information as records move from agency to agency. That includes disputes regarding the total balance of unpaid, overdue debt, even after it goes to collections, and does not include disputes of individual charges with the original creditors. Our product suite gives you tools to respond, manage, and monitor the dispute process, share records amongst internal teams as well as with third-party agencies, and automates VOD and communication processes to ensure timely responses with accurate information. This reduces the risk of violating regulations, mitigating risk of sanctions and fines, and keeps the 30-day clock from running out before the opportunity arises to collect on the debt or keep a legitimate delinquency on a consumer’s credit report.

Our platform helps you build automated workflows to pass information back and forth between internal teams and external agencies, build remediation plans, and document everything so you have that information ready and immediately accessible in the event of an audit. Creditors who use NeuAnalytics on average see a 90%+ reduction in the time it takes to close an open case. When combined with our comprehensive compliance management suite of solutions, you can achieve a 100% pass rate for OCC, CFPB, and FDIC audits.

Because of the ever-changing nature of regulations and the variations between Federal and State rules, we manage all regulation monitoring for creditors to help protect you from increased potential risk when interacting with your consumers and the costly vicarious liability lenders can be exposed to when working with a less-than-compliant third party.

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