CFPB Spring Supervision Highlights Report Strengthens Focus on Consumer Reporting and Vendor Activities // Cooley // Global Law Firm

On April 8, 2024, the Consumer Financial Protection Bureau (CFPB) released the 32nd edition of its Supervision Highlights report. As discussed in more detail below, the report highlights consumer reporting issues identified during reviews conducted between April 2023 and December 2023. It also outlines recent monitoring programs and enforcement developments regarding suppliers and consumer information agencies (CRA).

Supervisory Highlights' focus on consumer reporting issues is not surprising in light of recent CFPB publications. Annual Consumer Response Reportshowing that consumer reports, including credit reports, were once again the most complained about financial product or service in 2023 – accounting for more than 81% of all consumer complaints sent by the CFPB to companies for review.

To this end, in the Surveillance Highlights, the CFPB emphasizes that “[i]”Inaccuracy in the credit reporting system is a long-standing problem that remains a problem today” and that the CFPB would continue to “prioritize reviews of consumer reporting companies…and providers” over the years. 'future.

The main observations of the CFPB

The CFPB has identified deficiencies in credit rating agencies' and vendors' compliance with the Fair Credit Reporting Act (FCRA) and Regulation V.

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The CFPB has identified certain problems in the practices of rating agencies, as discussed below.

Credit rating agencies failed to block information after consumers submitted required identity theft documents.

The CFPB observed that credit rating agencies failed to block reporting after consumers provided them with the documents required in cases of identity theft, and without otherwise reasonably determining that it there was a legal basis for refusing the blocking.

Furthermore, the CFPB observed that the rating agencies failed to:

1. Notify consumers, as required by the FCRA, within five business days after refusing to block information or reversing an information block that consumers had identified as resulting from identity theft.
2. Provide consumers who have contacted the CRAs to express the feeling of having been the victim of fraud or identity theft, a summary of rights containing all the information required by the CFPB in its rights summary form template.

Problems with credit rating agencies' handling of identity theft claims were also recently highlighted in the CFPB's annual Consumer Response Report, in which the CFPB noted that consumers appeared to have many difficulties correcting commercial lines' inaccuracies in their consumer reporting due to suspected identity theft.

Credit rating agencies have failed to block negative information resulting from human trafficking.

In 2022, the CFPB issued a rule under Regulation V, requiring credit rating agencies to block adverse information identified by consumers or their representatives as resulting from a serious form of human trafficking. In its reviews, the CFPB observed that the credit rating agencies failed to block this information in response to a qualifying consumer request, whether in whole or in part, or within four business days of receipt of consumer demand, as generally required by rule.

Credit rating agencies have failed to follow reasonable procedures to ensure maximum accuracy when accepting information from unreliable providers.

The CFPB found that credit rating agencies failed to follow procedures to ensure the maximum accuracy of information in consumer reports when they failed to adequately monitor dispute metrics, such as those showing that, for several months, a supplier had not responded to all or almost all of them. all disputes or, failing that, had responded to all disputes in the same manner and continued to include information from these providers in their consumer reports.

This is not the first time that the CFPB has challenged the CRAs' monitoring of litigation developments. In his Summer 2021 Supervision Highlights and one Advisory opinion 2022The CFPB explained that the rating agencies failed to follow reasonable procedures to ensure maximum accuracy of consumer reports when they “continued to include information in consumer reports provided by unreliable providers” , that is, providers whose dispute response behavior suggested that they “were no longer sources of reliable and verifiable consumer information.”

Furniture

The report also focuses on key findings from the CFPB's examination of information providers to rating agencies, including the issues described below.

Vendors failed to promptly update inaccurate or incomplete information.

The CFPB says providers continue to violate the FCRA by failing to promptly correct and update information reported to rating agencies after finding it to be incomplete or inaccurate.

To underscore this point, the CFPB points out that providers failed to update dates of first delinquency (DOFD) for several months after determining that they were inaccurately reported. Importantly, DOFD's unresolved issues were also the 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 of several supplier enforcement actions brought by the CFPB.

In monitoring highlights, the CFPB also highlights specific inaccuracies in bankruptcy, auto leasing, and deposit accounts that the CFPB says were not corrected by providers. The CFPB said that in response to these findings, providers were updating their internal controls and/or “performing retrospective analyses” to ensure corrections or updates were made to affected accounts.

Suppliers have not provided required notifications/information to CRAs.

The FCRA requires providers to notify CRAs when an item of information provided to CRAs by the provider is the subject of a direct dispute and, also, requires providers to notify CRAs of the DOFD associated with the applicable accounts. The CFPB observed that the providers failed to report this information to the rating agencies, consistent with their obligations under the FCRA.

In particular, the CFPB highlighted problems with auto lenders' reporting of DOFD, including that they inaccurately reported DOFD as the first day of a statement cycle following a missed payment, rather than 30 days after the missed payment, and, also, that they changed the DOFD for accounts that continued to be past due month after month, when they should remain unchanged.

Suppliers failed to reasonably investigate direct disputes.

A recurring theme in several editions of the CFPB's Supervisory Highlights, including the latest edition, is that providers are failing to meet their obligation to conduct reasonable investigations into direct disputes.

In particular, the CFPB asserts that providers asked consumers to provide additional information, beyond what is required by Regulation V, in order to initiate a direct investigation into the disputes. This observation follows a CFPB Circular 2022 warning providers that they “are liable under the FCRA if they fail to investigate any dispute that meets legal and regulatory requirements.”

Additionally, the Supervision Highlights report highlights that debt collection providers were automatically deleting business lines upon receipt of a dispute, rather than conducting a reasonable investigation – a practice that the The CFPB has already said it could harm consumers.

Providers have failed to prevent information from being provided upon receipt of an identity theft report.

Finally, the CFPB explained that providers continued to report information after receiving an identity theft report, indicating that the information was the result of identity theft, at the address provided by the provider for receipt of these documents. Although the FCRA allows providers to resume reporting this information if the provider later knows or is informed by the consumer that the information is in fact accurate, the CFPB asserted that this knowledge or information was not obtained by the suppliers in the scenarios it has identified. .

Looking forward

The Supervisory Highlights report reflects the CFPB's ongoing 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 the CFPB's expectations. It may be particularly prudent to conduct such a review in advance of the proposed FCRA regulations expected by the CFPB, which, as the CFPB recently indicated, is expected by the end of this year and it will likely add to the obligations of credit rating agencies and providers under the FCRA.

Cooley associate Demisse Selassie also contributed to this alert.

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