We’ve all seen the ads that say, “We’ll help you get better credit by reporting your on-time payments to the credit bureaus.” These ads may accurately tout your customers’ advantage when you furnish their payment histories to the credit bureaus. This furnishing may help you, too, by lowering your cost of credit reports and credit scores. Your customers’ knowledge that you report their payments to the credit bureaus may also encourage them to pay on time or to catch up late payments.
Unless you tell consumers that you do report to credit bureaus, the law doesn’t require you to report.
But — and here’s the catch — once you begin reporting to credit bureaus, the law imposes certain requirements on you and limits what you should do going forward. You’ll need to have procedures designed to assure the accuracy of the information you report, and you’ll need to correct inaccuracies. The Fair Credit Reporting Act and its rules spell out these requirements. Here are some of the basics.
Under the FCRA’s rules, furnishers must adopt written reasonable policies and procedures regarding the “accuracy and integrity” of the information they furnish to consumer reporting agencies. These written policies and procedures must match the scope, size and complexity of the business. They should cover topics such as data-reporting format; recordkeeping; internal controls concerning accuracy and integrity of the information; training appropriate staff; deleting, updating, and correcting records; and designing technological means of communicating with CRAs.
If a consumer disputes the accuracy of information furnished to a CRA, the furnisher must include a notice of the dispute to any CRA to which the information has been furnished. If a furnisher reports an account as delinquent, the furnisher must also give the CRA the date of first delinquency by month and year. This is because the law prohibits CRAs from reporting most adverse information in a consumer’s credit report history for more than seven years.
Furnishers also need policies and procedures for handling consumer disputes about the accuracy or completeness of information furnished to a CRA. There are certain procedures for handling disputes that come to the furnisher directly, and there are similar requirements when disputes come to the furnisher through the automated “e-OSCAR” system by which the nationwide CRAs send information about consumers’ accuracy disputes to their furnishers.
When a furnisher receives a dispute from a CRA, the furnisher must conduct a reasonable investigation of the disputed information. There are several steps to this investigation:
The furnisher must review “all relevant information” forwarded by the CRA and the furnisher’s own information with respect to the dispute. The CRAs have upgraded the e-OSCAR system to enable them to transmit “all relevant information” received from the consumer, including supporting documents. The Consumer Financial Protection Bureau has warned furnishers that they must maintain systems reasonably capable of receiving information from CRAs regarding disputes, including supporting documentation.
The CFPB said, “Any furnisher not currently maintaining a process that meets these requirements should take immediate steps to comply with the requirements of the law.”
The furnisher must verify the information (e.g., the consumer’s payment was, in fact, late), correct the inaccuracy (e.g., the consumer’s payment was not late), or delete the inaccuracy (e.g., delete that the consumer’s payment was late). The CFPB has indicated that when deleting an inaccuracy, the furnisher must only delete the inaccurate information; it cannot simply delete the entire tradeline (account) at the CRA.
The furnisher must also report the results of the investigation to the CRA that sent the dispute and, if the information is inaccurate or incomplete, must provide corrected information to every nationwide CRA that received the information.
There are similar requirements when a consumer tells a furnisher directly that he or she disputes account information that the furnisher has reported to a CRA. The furnisher must conduct a reasonable investigation of a direct dispute that pertains to the furnisher’s account relationship with the consumer (such as the consumer’s liability for the account, the account terms or the consumer’s performance on the account). As in the case of disputes received from CRAs through e-OCSAR, the furnisher must (1) review all relevant information from the consumer about the dispute, (2) complete the investigation in the same time as a CRA would be required to complete the investigation, (3) notify the consumer of the results, and (4) if the furnisher finds that the information was inaccurate, notify each CRA to which the furnisher reported the information and provide the correct information.
To summarize, furnishers must institute and maintain reasonable policies and procedures for furnishing to CRAs. They must have adequate technology and systems for furnishing accurate information to CRAs and for receiving all relevant information from CRAs about consumer disputes. They must have systems and procedures in place for conducting reasonable investigations of accuracy disputes and for resolving and notifying CRAs of the results of the investigations. Furnishers with these systems and procedures can avail themselves of the benefits of reporting credit account information to CRAs.
Anne Fortney is a partner in the Washington, D.C., office of Hudson Cook. She can be reached at (202) 327-9709 or by email at firstname.lastname@example.org. Allen Denson is an associate in the Washington, D.C., office of Hudson Cook. He can be reached at (202) 327.9718 or by email at email@example.com.