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Deep and Wide Focus on Consumer Credit Reporting Practices in 2020

January 16, 2020

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Michelle Macartney Blog Consumer Credit Reporting Practices

by Michelle Macartney, Managing Director, US Practice

You can count on one element in the financial services industry to remain steadfast—or even heightened—in 2020: regulatory scrutiny and litigation on consumer credit reporting practices.

Consumer credit reporting complaints to the CFPB have increased 134% over the past two years.

Despite the fact that the Consumer Financial Protection Bureau’s (CFPB) public enforcement actions have lessened, the CFPB and state Attorneys General will continue their laser focus on consumer reporting. Why? Consumer credit reporting complaints to the CFPB have increased 134% over the past two years.

Disputes to furnishers have also been steadily rising. 2020 promises to be no different—we expect these trends to continue as consumers become more savvy. That means that the commensurate CFPB and regulatory scrutiny will continue. And if the administration changes after the 2020 election, this scrutiny can be even greater.

Increased state-level regulation, Fair Credit Reporting Act (FCRA) civil litigation and a potential change in the administration creates urgency for action in 2020

Last fall’s  CFPB Supervisory Highlights showed continued observations of furnishers’ inadequate practices for dispute investigations and furnishing accuracy, with a pronounced focus on furnishing of deposit account information.

In 2020, you can expect to see a rise in FCRA litigation, with lawsuits focused on furnishing accuracy and permissible purpose. If your organization hasn’t examined the accuracy of its furnishing and effectiveness of disputes management, now is the time to act to stay ahead in 2020.

Will your consumer reporting practices need a boost in 2020?

If you answer “no” to any of these questions, take action now to avoid leaving yourself vulnerable in 2020.

1. Furnishing

  • Are you routinely conducting a comprehensive examination of your furnishing files (Metro 2® and deposits)?
  • Have you conducted a detailed review of the system code that produces furnishing files?
  • Are you including credit/deposit reporting as part of regression testing when you make changes to the systems that produce your furnishing files?
  • Have you examined upstream operational processes that can affect furnishing accuracy (e.g. bankruptcy, repossession, forbearance, charge-off)?

2. Disputes

  • Have you looked at the disputes process through the lens of your customers, including assessing the effectiveness of your communications to them?
  • Have you conducted root-cause analysis of the disputes that have led to corrections in order to examine if that cause is related to furnishing or operational issues?
  • Do you have a good process in place to ensure that your analysts are consistently conducting an all-inclusive reasonable investigation?
  • Do you have effective controls and control point monitoring?
  • Have you considered and/or implemented RPA (robotic process automation) to streamline your disputes investigations?

3. Usage of Consumer Reports

  • Do you have an inventory of every person, department and function for  buying and using consumer reports?
  • Do you understand how your institution is using consumer reporting data and derivatives of that data for modeling, pricing and other decisions that affect your customers?
  • Do you have sufficient controls implemented for granting access to consumer reports and ensuring that permissible purpose exists to acquire the reports?
  • Do your policies and procedures for consumer reports also include alternative data beyond the traditional credit bureaus?

4. Enterprise Governance and Oversight

  • Do you have enterprise-wide policy, standards and procedures to ensure consistent and controlled execution of furnishing, disputes and consumer reports usage?
  • Have you recently reviewed procedures and controls for consumer reporting practices?
  • Is consumer reporting a routine review in your change management process?
  • Do you have a process established to evaluate Consumer Data Industry Association (CDIA) and Credit Reporting Resource Guide (CRRG) updates, regulatory and state Attorneys General publications, and FCRA litigation outcomes to adapt your practices accordingly?

Furnishers and users of consumer reports must be proactive and implement proven practices

2020 will test the industry’s ability to successfully withstand the increased scrutiny that inevitably lies ahead. It’s time to ensure that your organization’s consumer reporting, disputes and usage practices can meet these challenges.

As you evaluate your practices, be sure to examine whether your risk assessment is thorough and tied to a strong plan for implementation. If you want to strengthen your ability to proactively self-identify areas of concern and develop an effective roadmap for improvement, consider bringing on a partner well-versed in both risk assessment as well as industry best practices.