The Importance of Investigating Consumer Disputes

It’s important for creditors to look into consumer disputes or complaints before furnishing credit history information to credit reporting agencies.

That’s the instruction from the Consumer Finance Protection Bureau according to a new supervisory bulletin published Feb. 27. The bulletin specifically warns creditors who later provide consumer information to credit reporting agencies, that they must investigate customer disputes, and not simply instruct a credit reporting agency to delete a disputed transaction from a credit record.

A CFPB spokesperson told The Center for Auto Finance Excellence that the bulletin applies to any person or company that furnishes credit information to a consumer reporting agency. The CFPB says the bulletin is also meant to remind furnishers of their existing responsibility under the Fair Credit Reporting Act.

Between Oct 22, 2012 and Feb. 1, 2014, the CFPB  handled around 31,000 complaints from consumers who say they had a bad experience with a credit reporting company.

The CFPB bulletin says that debt buyers, debt collectors, and players in the credit process—including lenders—have a variety of obligations under the Fair Credit Reporting Act, or FCRA- 1, and Regulation V2.

If a credit furnisher finds that a consumer dispute is valid and that data it provided to a credit reporting company is inaccurate, it should notify all companies that received that information. The CFPB says if the furnisher simply deletes the data without notifying those reporting agencies, they might not know that the information was wrong. Ultimately, that could lead to an inaccurate credit report on that consumer. In addition, investigations can uncover broader problems in the furnisher’s system or process, like software flaws, that sometimes impact the accuracy of the information provided to credit reporting companies.

For lenders and those who work them, it’s important to keep meticulous records on complaints and investigations and to be prepared for queries or investigation.

Ultimately, knowing where the greatest compliance risks exist in a company is essential.  From the top leadership on down the corporate ladder, it’s important for a company’s staff to participate in constant fair lending risk assessments according to Andy Barksdale, managing partner at Tru Point Partners.

That means analyzing all data and understanding the story behind it. “Data tells a story, and the institution needs to be in a position to explain the story,” says Barksdale. He said an institution does not want regulators interpreting and telling the story on the institution’s behalf.

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