Credit Reporting Issues Highlighted in the FTC's and CFPB's Workshop

On Tuesday, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) held a workshop titled Accuracy in Consumer Reporting. The workshop consisted of four different panel discussions as well as individual remarks from several speakers. Below is a summary of the discussions relevant to the ARM industry.

Panel 1: Furnisher Practices and Compliance with Accuracy Requirements

The first panel discussed the different issues related to furnishing data to credit bureaus. The panel was moderated by two CFPB representatives: Susan Stocks (Office of Enforcement) and David Wake (Office of Supervision Policy). Panelists included:

• Leslie Bender (Chief Strategy Officer and General Counsel, BCA Financial Services)
• Francis Creighton (President and Chief Executive Officer, Consumer Data Industry Association)
• Syed Ejaz (Policy Analyst, Consumer Reports)
• Nessa Feddis (Senior Counsel and Vice President, American Bankers Association)
• Elisabeth Johnson-Crawford (Chief Technical Officer, Credit Builders Alliance)

The panel discussed how credit reports are used: decisions regarding extending credit, rental agreements, employment, and other uses. It was noted that this list is expected to expand as time goes on. Due to this, accuracy in furnishing practices is paramount, done through policies and procedures related to accurate furnishing of data and the ability to monitor for disputes and anomalies.

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The issue of mass credit report disputes from credit repair organizations, which are both mailed directly to data furnishers and filed as complaints in the CFPB’s online portal, was brought up by Creighton. The flood of disputes and the sharp rise in Fair Credit Reporting Act (FCRA) litigation—most of which is on minuscule technicalities—harms the credit reporting process. Ejaz responded to this by saying when he worked in a Congress mailroom, they likewise received a lot of form letters and were able to sift through those to pick out the letters that pointed out legitimate concerns.

The use of alternative data in credit reporting was discussed related to both its benefits and risks. Alternative data can be a way to bring those who are currently unbanked or underbanked into the fold, especially considering the increased uses of consumer credit reports for different stages of a consumer’s life. On the other hand, alternative data needs to be closely analyzed and considered before it is included because of risks of inaccuracy and unintended consequences, such as data that allows for disparate impact for certain groups of consumers.

Panel 2: Current Accuracy Topics for Traditional Credit Reporting

The second panel focused on issues related to accuracy in credit reporting. The panel was moderated by Tony Rodriguez and Kiren Gopal, both from the CFPB’s Office of Supervision Policy. Panelists included:

• Roberto Cera (Senior Manager, Data Acquisitions, TransUnion)
• E. Michelle Drake (Shareholder, BergerMontague, PC)
• Troy Kubes (Vice President and Deputy Chief Compliance Officer, Equifax)
• Ed Mierzwinski (Senior Director, Federal Consumer Programs, U.S. Public Interest Research Group)
• Donna Smith (Chief Data Officer, Consumer Information Services, Experian North America)
• Michael A. Turner (President and Chief Executive Officer, Policy and Economic Research Council)

All speakers on the second panel agreed that accuracy in credit reporting is important to both consumers and industry. However, there was a contentious discussion about how serious this is for consumers, industry, and regulators. 

The biggest critics were Drake and Mierzwinski. Drake presented a need for regulators and private attorneys who work on consumer protection issues. She mentioned that currently there is a conflict of interest between industry and the credit reporting bureaus, where the data furnishers are the primary customers of the bureaus. She says, “the credit bureaus only do as little as possible to keep their business partners happy.” She further stated that consumers act as a “canary in a coal mine,” where the onus is on them to spot errors, rather than on the furnishers and credit bureaus.

This position was countered by Smith, who pointed out that the profitability of the credit bureaus’ customers is based on the accuracy of the data. It’s in everyone’s interest, says Smith, to minimize inaccuracy in credit reports. Turner concurred, stating that banks primarily deal with credit reports for the purpose of extending credit, so inaccurate data would harm the bottom line. Drake replied that if such economic incentives were sufficient, then there wouldn’t be a need for regulators and consumer advocates, which is not the case. 

Editor’s Note: Panel 3, related to background screening, is omitted from this article.

Panel 4: Navigating the Dispute Process

Credit report disputes and dispute investigation procedures are a hot button issue for the industry, so this discussion is timely. This panel was moderated by representatives from the FTC: Amanda Koulousias, (Division of Privacy and Identity Protection) and Beth Freeborn (Bureau of Economics, FTC). Panelists include:

• LaDonna Bohling (Chief Compliance Officer, Receivable Solutions)
• Eric J. Ellman (Senior Vice President, Public Policy and Legal Affairs, Consumer Data Industry Association)
• Stephanie Froelich (Chief Executive Officer, True Hire)
• Kristi C. Kelly (Attorney, Kelly & Guzzo)
• Rebecca Kuehn (Partner, Hudson Cook) 
• Chi Chi Wu (Staff Attorney, National Consumer Law Center)

The threshold issue brought up here is that in order to be able to dispute an incorrect item on a credit report, the consumer must first be able to access his or her credit report. Ellman mentioned that today, consumers have more access to their credit reports than they ever did before. The consumer advocates countered that the rise in credit reporting agencies—or even data gathering companies who may not consider themselves credit reporting agencies—also increases the difficulty of eliminating inaccurate information. The consumer might dispute and get deleted an inaccurate item with one credit reporting agency, only to find out that this agency got their information from a different company that continues to report the inaccurate information.

The different types of disputes were discussed. Bohling shared that while consumers have the ability to submit credit report disputes with the credit reporting bureaus, a direct dispute with the data furnisher can usually be resolved more efficiently since the data furnisher possesses a lot more information related to the situation than the bureau does. Wu, however, mentioned that there is a lot of variability in how data furnishers handle disputes. The credit reporting agency, according to Wu, is supposed to be the check that balances out this variability, and the credit reporting agency is supposed to be the check to balance out this variability. Wu cited the most recent CFPB Supervisory Highlights, which states that the credit reporting agencies are not doing that, and instead are relying solely on what the furnisher states.

The consumer advocates mentioned that the larger data furnishers require their representatives to complete a certain amount of disputes within a specific amount of time, which can lead to investigations of disputes being done in haste. Bohling, however, countered that some of the key performance indicators for these representatives are quality and accuracy.

insideARM Perspective

All in all, the workshop presented a robust discussion about credit reporting issues. Leslie Bender, who appeared on the first panel, provided the following comment to insideARM:

We are grateful that the FTC and CFPB hosted this group of stakeholders all dedicated to defending the integrity of consumers’ credit files. The workshop confirms that common ground among all the participants is that it is critical for information in consumers’ credit files to provide an accurate, complete and portable economic picture.