CFPB circular details potential FCRA liability for consumer reporting agencies, information furnishers that shirk dispute investigation requirements

Inadequate investigatory practices of consumer credit reporting companies and information furnishers in dealing with consumer reporting disputes could draw state or federal law enforcement action under the Fair Credit Reporting Act (FCRA), the Consumer Financial Protection Bureau (CFPB) said in issuing a circular Thursday.

The circular (No. 2202-07), addressing “reasonable investigation of consumer reporting disputes,” outlines the types of situations in which federal and state consumer protection enforcers, including regulators and attorneys general, could bring FCRA claims against companies that fail to investigate and resolve consumer report disputes, the CFPB said.

The CFPB said findings from its supervisory exams suggest that consumer reporting companies do not always live up to their investigatory responsibilities. “In some cases, the CFPB found consumer reporting companies ignored the results of their investigations and simply deleted disputed tradelines instead of correcting inaccurate information,” it said. “Consumer complaints received by the CFPB highlight similar problems. In fact, inaccurate information and failures to investigate are the two most common consumer reporting complaints received by the CFPB.”

The bureau said that consumer reporting companies are required to investigate all disputes that are not frivolous or irrelevant. It said specific responsibilities for the investigations include:

  • Consumer reporting companies must promptly provide to the furnisher all relevant information regarding a person’s dispute: After a person disputes the accuracy or completeness of information in their file, the consumer reporting company must notify the entity that originally furnished the information within five business days. In addition, the consumer reporting company must give the furnisher all relevant information provided by the individual.
  • Consumer reporting companies and furnishers may not limit a person’s dispute rights: Consumer reporting companies and furnishers must reasonably investigate disputes received directly from individuals. For furnishers, they must reasonably investigate all indirect disputes received from consumer reporting companies. These requirements remain in place even if a person does not include or use the entity’s preferred format, intake forms, or documentation.

In its circular, the bureau said that consumer reporting agencies and furnishers “cannot avoid the obligation to conduct a reasonable investigation of disputes by making consumers satisfy demands other than those specified by statute or regulation.”

It said some consumer reporting agencies and furnishers have sought to evade the obligation to investigate disputes by requiring consumers to submit particular items of information or documentation with a dispute before the entity will conduct its investigation of the dispute. Examples include:

  • Consumer reporting agencies that require a consumer to provide a recent copy of the consumer’s report or file disclosure before investigating disputes despite the consumer providing sufficient information to investigate the disputed information;
  • Furnishers that require a consumer to provide additional specific documents even though the consumer has already provided the supporting documentation or other information reasonably required to substantiate the basis of a direct dispute; and
  • Consumer reporting agencies or furnishers that require a consumer to attach a completed proprietary form before investigating the consumer’s dispute.

“Enforcers may consider bringing an action under the FCRA when furnishers and consumer reporting agencies require consumers to provide documentation or proof documents, other than as described in the statute or regulation, as a precondition to investigation,” it stated. “For disputes received directly from a consumer, a consumer reporting agency or furnisher must reasonably investigate the dispute unless they have reasonably determined that the dispute is frivolous or irrelevant.”

CFPB Issues Guidance to Address Shoddy Investigation Practices by Consumer Reporting Companies

Consumer Financial Protection Circular 2022-07