Department News COMPLIANCE
Focus on the Fair Credit Reporting Act By Carol Barnett, Senior Vice President of Compliance Services
Credit bureaus, now commonly referred to as consumer reporting agencies, have been around in various forms since the 1800s. My first job aſter college was as a consumer credit interviewer at the credit bureau in Des Moines, Iowa, and involved meeting with individuals and explaining their credit reports to them, usually aſter they had been denied credit. Consumers were sometimes confused about tradelines on their reports, disputed items and amounts, and they were oſten unaware of the importance of having a good credit report.
Congress and the regulators have understood the importance of accurate credit reports through the passage of the Fair Credit Reporting Act in 1970, with amendments over the years and accompanying regulations. In today’s world of fast-paced and high-tech banking, the need for current and accurate reports is extremely important to banks, businesses and consumers.
As users of consumer reports and furnishers of information, banks are a vital part of the process. Ensuring that the bank has a permissible purpose before requesting a consumer report and clearly documenting the permissible purpose is important to avoid exam violations. Banks also must have compliant procedures in place to handle customer complaints and to investigate disputes of information that the bank has furnished to the reporting agencies. Deficiencies in those areas are commonly cited violations of FCRA rules, along with improper notices to customers related to adverse actions and credit scores and overcharging loan customers for reports.
Te Consumer Financial Protection Bureau has weighed in frequently on issues surrounding consumer reports throughout the past several months. Take a look at their reports and guidance and advisory opinions issued in 2022, and it is evident that they are paying close attention, with more to come. In the recent semiannual regulatory agenda, the CFPB projects pre-rule activity in November 2023 to amend Regulation V, which implements the FCRA. New requirements and restrictions on consumer reporting agencies ultimately will result in increased costs and potentially new restrictions on users and furnishers.
Because complaints about credit reports are the most frequent complaints submitted to the CFPB, it’s an area for banks to pay attention to and ensure all FCRA policies and procedures are current. Familiarity with the information on the CFPB’s consumer-facing web page on credit reports and scores (
consumerfinance.gov/consumer-tools/credit-reports-and-scores/) also will be helpful to bankers.
This article is for information purposes and does not contain or convey legal advice. The information should not be used or relied upon in regard to any particular situation without consultation with your bank attorney. MBA Compliance Services and its Compliance Force program offer various programs to aid banks with compliance needs. For more information, call 573-636-8151.
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