On January 5, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a report detailing the shortcomings of consumer complaints by National Credit Reporting Agencies (NCRA). Specifically, the CFPB found that in 2021, the NCRA together reported relief in response to less than 2% of covered complaints, compared to nearly 25% of covered complaints in 2019. The CFPB noted three patterns of likely facts. lead to inaccurate consumer credit. reporting and therefore potentially the refusal of credit or the offer of credit on less favorable terms.
The Fair Credit Reporting Act (FCRA) requires the NCRA to conduct a review of complaints sent to them through the CFPB when the consumer claims their consumer report contains incomplete or inaccurate information and appears to have already attempted to resolve the problem with the business. Companies must then report their decisions and actions for these covered complaints to the CFPB.
First, the CFPB noted that consumers repeatedly report being stuck in “automated systems” that do not allow them to adequately address concerns they have about alleged facts in their credit reports. The report found that the NCRA relied heavily on complaint response templates instead of providing meaningful and in-depth responses to consumers, despite having a 60 calendar day deadline to respond. This, the Bureau noted, can be particularly important to consumers in connection with large financial transactions such as paying off medical debt, buying a home, or, alternatively, applying for housing or housing. use.
Second, the Bureau found that consumers regularly paid off debts they did not have in order to “wipe out” their credit report before a major financial transaction, simply because the process of contesting and correcting their report took time. too time consuming and heavy. The report found that the NCRA often promised to investigate disputes but did not provide the results of their investigations to the CFPB and instead stated that they would forward complaints to their “dispute resolution channel.”
Third, the CFPB has determined that consumers are often caught in what it describes as a “finger-pointing exercise” between data providers to include lenders and other merchants as well as the NCRAs themselves, leaving little recourse to consumers, especially those who may have been victims of identity theft.
The report discussed specific alleged failures as well as Congressional testimony presented by some agencies that they were in compliance with the requirements of the FCRA dispute resolution process. He then noted that in light of these alleged shortcomings, the Bureau is of the view that the NCRA’s handling of consumer complaints “raises[s] serious questions about whether or not they are unable or unwilling to comply with the law. The Bureau then said that “it will use its powers to… ensure that consumers receive quality responses to their complaints.”
The concerns raised in this report may well trap others as witnesses and perhaps as subjects or targets of investigation under a theory of “help and facilitate” violations of the law. The Bureau’s main consumer protection authority to penalize “Allegedly Unfair, Deceptive, or Abusive Acts and Practices” (UDAAP), which can also be enforced by state attorneys general.
Lenders, especially those who rely on rapid decision-making algorithms, need to be sure that when making a decision based on an NCRA-derived credit score, there is a mechanism for the consumer to provide feedback. information to disprove any underlying algorithm that goes beyond simply referring the consumer to the NCRAs. This report also sends a warning to lenders whose automated inaccuracy correction processes aren’t working and to businesses whose automated processes aren’t addressing customer concerns.