Credit Unions' Responsibility to Reasonably Investigate Disputes under the Fair Credit Reporting Act

While the Fair Credit Reporting Act (FCRA) is many decades old, originally passed in 1970, credit unions should give renewed focus to the Act to ensure its compliance. Under the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) was provided authority to enforce the terms of the FCRA.  The CFPB has made clear that the FCRA is one act it is targeting for enforcement.  This focus is evidenced by two bulletins put out by the CFPB in September 2013 and February 2014 addressing furnishers' (including credit unions) duties under the Act.  In its September 2013 bulletin, the CFPB noted the following:

The CFPB expects furnishers to have reasonable systems and technology in place to receive and process notices of disputes and information regarding disputes, including relevant documentation, forwarded to them by [credit reporting agencies (CRAs)].  The CFPB also expects every furnisher to review and consider "all relevant information" relating to the dispute, including documents that the CRA includes with the notice of dispute or transmits during the investigation and the furnisher's own information with respect to the dispute. 

In the bulletin, the CFPB further outlined what it expects furnishers' to do to comply with the FCRA's requirements for handling disputes received from CRAs.  The CFPB noted that furnishers must take certain steps to be compliant with the FCRA including:

• Maintaining a system reasonably capable of receiving from CRAs information regarding disputes, including supporting documentation;
• Conducting an investigation of the disputed information including reviewing: (a) "all relevant information" forwarded by the CRA and; (b) the furnisher's own information with respect to the dispute;
• Reporting the results of the investigation to the CRA that sent the dispute;
• Providing corrected information to every nationwide CRA that received the information if the information is inaccurate or incomplete; and
• Modifying or deleting the disputed information, or permanently blocking the reporting of the information if the information is incomplete or inaccurate, or cannot be verified.¹

The CFPB expounded upon its focus of the FCRA in its February 24, 2014 bulletin noting that furnishers must do more than directing consumers back to the credit reporting agency to file a dispute.  Moreover, the CFPB noted that simply deleting a disputed tradeline, without an investigation, is not sufficient to comply with the FCRA.  In this bulletin, the CFPB highlighted a furnisher's responsibility to conduct a reasonable investigation of the dispute.  A credit union furnisher's duties after receiving notice of a dispute are more specifically outlined within the FCRA, as they must facilitate the following:

(i) Conduct an investigation with respect to the disputed information;
(ii) Review all relevant information provided by the consumer with the notice;
(iii) Complete such person's investigation of the dispute and report the results of the investigation to the consumer before the expiration of the period under section 1681i(a)(1) of this title within which a consumer reporting agency would be required to complete its action if the consumer had elected to dispute the information under that section; and
(iv) If the investigation finds that the information reported was inaccurate, promptly notify each consumer reporting agency to which the person furnished the inaccurate information of that determination and provide to the agency any correction to that information that is necessary to make the information provided by the person accurate.²

Of course, many consumer disputes are nothing more than thinly veiled attempts to avoid paying a valid debt.  In cases where a dispute is clearly frivolous, a full investigation is not required as outlined above.  Under the Act, frivolous disputes include: Disputes failing to provide sufficient information to investigate the disputed information; or the submission of a substantially similar dispute to one submitted previously.

Given the recent focus on the FCRA, credit unions should develop or review FCRA policies with counsel to ensure compliance with the CFPB's requirements.  These policies should provide guidance on identifying and handling frivolous complaints which often times equal or exceed valid disputes to ensure proper resources can be directed to legitimate consumer complaints.
 

¹ See CFPB Bulletin 2013-09
² See 15 USC 1681s-2(a)(8)