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CFPB Issues Advisory Opinion on False Credit Reporting

Student Banking ProductsThe advisory opinion covers requirements under the Fair Credit Reporting Act and details procedures to prevent false information on credit reports as guidance to credit reporting agencies.

10/20/2022 12:00 P.M.

3 minute read

The Consumer Financial Protection Bureau  has issued an advisory opinion discussing Fair Credit Reporting Act  requirements related to procedures for ensuring the prevention of facially false information in credit reports, according to an Oct. 20 press release.

According to the advisory opinion, “a consumer reporting agency that does not implement reasonable internal controls to prevent the inclusion of facially false data, including logically inconsistent information, in consumer reports it prepares is not using reasonable procedures to assure maximum possible accuracy under section 607(b) of the FCRA.”

The CFPB is also issuing guidance to credit reporting agencies (CRAs) “about their obligation to screen for and eliminate obviously false ‘junk data’ from consumers’ credit reports, according to the news release from the bureau.

For example, the bureau explains that “junk data” left on many foster children’s credit reports can have a detrimental effect on their ability to enter into future contracts for credit.

“When a credit report accuses someone of defaulting on a loan before they were born, this is nonsensical, junk data that should have never shown up in the first place,” CFPB Director Rohit Chopra said in the news release. “Consumer reporting companies have a clear obligation to use better procedures to screen for and eliminate conflicting information, or information that cannot be true.”

Consumers may suffer negative real-world consequences if CRAs provide inaccurate or contradictory account information, information that does not make sense or cannot be true. A consumer may be denied credit, housing, or employment because of inaccurate information in reports, or they may have to pay more for credit.

Legally, CRAs must adhere to reasonable standards to guarantee the highest level of accuracy for the data they gather and report. Companies are required to have policies and procedures in place to identify and get rid of junk data as part of this requirement, according to the release. Specifically, the policies and processes should be able to find and remove inconsistent account information and information that cannot be accurate.

The advisory opinion is one in a series of actions by the CFPB to ensure CRAs comply with consumer financial protection law, according to the news release.

“Consumer complaints submitted to the CFPB continue to reflect significant concern about inaccuracies in consumer reports,” according to the CFPB. “Complaints about ‘incorrect information on your report’ have represented the largest share of credit or consumer reporting complaints submitted to the CFPB for at least the last six years, and the CFPB receives more complaints about credit reporting than any other subject.”

Access the advisory opinion here.

Congressional Request

U.S. Rep. James Clyburn, chairman of the Select Subcommittee on the Coronavirus Crisis, is asking the CFPB to investigate the three largest nationwide CRAs—Equifax, Experian, and TransUnion—for a reported reduction in responses to consumer complaints and disputes regarding errors in consumer credit reports during the pandemic, ACA International reported this week.

In May, Clyburn requested for the CRAs to provide documentation on their complaint responses during the pandemic, according to a news release from his office.

Clyburn followed the May letter to the CRAs with a letter to CFPB Director Rohit Chopra in October requesting the bureau use its supervisory authority to further investigate and address these issues.

ACA Insights

In line with its process with the bureau’s recent interpretive rules and advisory opinions, whether finding solutions to problems or creating new regulatory measures, the bureau’s actions need to be based on current data and results from working with all stakeholders.

Related Content from ACA International:

CFPB Interpretive Rule Issued for Financial Firms’ Digital Marketers

House Subcommittee in Congress Calls for Investigation into the Three Major Credit Reporting Agencies

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.

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