Written by Shereefat Balogun, Regulatory Compliance Counsel
The Fair Credit Reporting Act and its requirements relating to reporting to credit reporting agencies seem to be of concern and interest to many of our members. So, we thought we’d offer a primer to assist with compliance in this area.
Generally speaking, there is no federal requirement that compels credit unions to provide information to credit reporting agencies (CRAs). However, credit unions that do furnish information are subjected to various duties under the Fair Credit Reporting Act (FCRA) and it implementing regulation, Regulation V (12 C.F.R. Part 1022), including:
- The Duty to Provide Accurate Information. A credit union that furnishes information to a CRA about a member, must not provide information that it knows or has reasonable cause to believe that the information is inaccurate. The FCRA defines the phrase knows or has reasonable cause to believe that the information is inaccurate as “having specific knowledge, other than solely allegations by the consumer, that would cause a reasonable person to have substantial doubts about the accuracy of the information.” See, §623(a)(1)(D). Some violations may include:
- Misstating the balance due
- Listing member as a debtor on an account when he/she is only the authorized user
- Reporting debt as charged off when member settled it or paid it in full
*Safe harbor alert (YES!): The FCRA provides a safe harbor if the credit union clearly and conspicuously specifies an address where members can send disputes concerning the accuracy of information about them. See, §623(a)(1)(C).
Additionally, if the credit union determines that the information it has furnished is not complete or accurate, the FCRA requires it to promptly notify the CRA of the determination and provide updated correct information. See, §623(a)(2).
- The Duty to Provide Notice of Dispute. If the information that is being furnished to a CRA is being disputed by the member, the credit union may not provide that information to the CRA without a notice that the information is being disputed. See, §623(a)(3).
- The Duty to Provide Notice of Delinquency of Accounts. A credit union that furnishes information to a CRA about a delinquent account being placed for collection or charged to profit or loss, is required to notify the CRA of the date of the delinquency no later than 90 days after furnishing the information. The date of delinquency is the month and year the first payment was missed. See, §623(a)(5).
- The Duty to Provide Notice of Negative Information to Member. The FCRA requires that a notice of negative information be provided to a member when a credit union furnishes negative information to a CRA regarding the extension of credit to a member. See, §623(a)(7). “Negative information” means information relating to a member’s delinquencies, late payments, insolvency, or any form of default. See, §623(a)(7)(G)(i). The FCRA requires the credit union to provide the notice either: (i) before furnishing the negative information to the CRA; or (ii) 30 days after furnishing the information. The notice may be included on or with other disclosures such as a notice of default, a billing statement, or any other materials provided to the member, and must be clear and conspicuous. Notwithstanding the general ability to provide the notice with other disclosures, if the credit union opts to provide the notice before it furnishes the information to a CRA, it may not include the notice with the initial disclosures provided under TILA AND Regulation Z. See, §623(a)(7)(B). Regulation V contains a model notice.
- The Duty to Investigate and Report after Receiving Notice of Dispute from a Member. The FCRA provides that a credit union must take certain actions after receiving a notice of dispute from a member, including the duty to: (i) investigate the disputed information; (ii) review all relevant information provided by the member in the notice of dispute; (iii) timely complete the investigation and report the results to the member; and (iv) if it is determined that the information was inaccurate, promptly notify each CRA the information was furnished to and provide any corrections to make the information accurate. See, §623(a)(8)(E). Section 1022.43 of the regulation sets forth the types of disputes that are subject to the duty to investigate, as well as the exceptions.
- The Duty to Investigate and Report after Receiving Notice of Dispute from a CRA. Sometimes members send a notice of dispute the CRA(s). If this happens, the FCRA requires the CRA to promptly notify the credit union. Once the credit union receives the notice of dispute from a CRA, it is required under the FCRA to: (i) investigate the disputed information; (ii) review all relevant information provided by the CRA; (iii) report the results to the CRA; and (iv) if it is determined that the information was inaccurate, report those results to all other CRAs the information was furnished to; and if the disputed information is found to be inaccurate or incomplete, promptly modify the information, delete the information, or block the reporting of that information. The duty to investigate in this instance is triggered once the notice is received from a CRA. See, §623(b)(1)(E).
- Duty to Establish and Implement Reasonable Policies to Ensure the Accuracy and Integrity of the Information Furnished. Under the FCRA and Regulation V, a credit union that reports information to a consumer reporting agency is required to have policies and procedures in place to ensure the accuracy and integrity of the information furnished. See, 12 C.F.R. §1022.42. The policies and procedures should be designed to promote certain objectives, as spelled out in Appendix E, such as: (i) to furnish information about accounts or other relationships with a member that is accurate; (ii) to conduct investigations of member disputes and take appropriate actions based on the results of the investigations; and (iii) to update the information it furnishes when necessary, to reflect the current status of the member account or other relationship, including a transfer of an account by sale or assignment for collection to a third party. See, 12 C.F.R. Part 1022, App. E.
This is not an exhaustive list, please refer to §623 of the FCRA for a comprehensive list of duties imposed on credit unions that decide to furnish information to a CRA.
It makes sense that credit unions want to ensure compliance here. The CFPB has stated that it “will continue to monitor furnishers’ compliance with the FCRA regarding consumer disputes of information they have furnished to CRAs. Furnishers should take immediate steps to ensure they are fulfilling their obligations under the law.” CFPB Bulletin 2014-01.
If you have any questions relating to this article or any other FCRA issues, please contact NAFCU’s regulatory compliance team. We’re here for you!
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