Reporting Requirements of the Fair Credit Reporting Act. Bankruptcy Lawyer, Bankruptcy Attorney, Bankruptcy Lawyer.

1. A Look At The Requirements
Imposed By The “Fair Credit
Reporting Act.”

2. If a furnisher makes “an accommodation with respect to 1 or
more payments on a credit obligation or account of a consumer,”
and the consumer “makes the payments or is not required to
make 1 or more payments pursuant to the accommodation,”
then the furnisher “shall report the credit obligation or account
as current.” 15 U.S.C. §1681s-2(a)(1)(F)(ii). If the credit obligation
or account was delinquent before the accommodation, the
furnisher must “maintain the delinquent status during the period
in which the accommodation is in effect; and, if the consumer
brings the credit obligation or account current during the period
described,” the furnisher must report the credit obligation or
account as current. Id.

3. Excepted from these new requirements is a “credit obligation or
account of a consumer that has been charged-off.” 15 U.S.C.
§1681s-2(a)(1)(F)(iii). The “covered period” began retroactively
on January 31, 2020, and lasts until the later of either 120 days
after March 27, 2020, the date of enactment of this provision, or
120 days after the cessation of the COVID-19 national emergency
declared by President Trump on March 13, 2020. 15 U.S.C.
§1681s-2(a)(1)(F)(i)(II).

4. Consumers’ lives can be seriously affected by the information
included on their credit reports: bad scores can mean higher
loan interest rates or denials of mortgage refinancing plans or
other loans altogether. The information on consumers’ credit
reports comes from “furnishers of information,” which
contribute information to consumer reporting agencies (CRAs),
who, in turn, compile the information into a consumer report
and distribute that report. If at any point in this process,
incorrect information is included on a consumer’s credit report,
the consumer’s life could be disrupted — and any furnishers of
the information who provided incorrect information or failed to
properly respond to a consumer’s dispute over the information
in their report could face liability under the Fair Credit Reporting
Act (FCRA).

5. The FCRA, which seeks to protect consumers from having their
lives disrupted by incorrect information, imposes duties on
furnishers of information (such as mortgage lenders, loan
servicers, and credit bureaus, among others) to ensure that
consumer information is being reported correctly and accurately
to CRAs. A furnisher’s obligations are found in the FCRA, 15
U.S.C. §1681s-2, and the associated regulations, known as the
“Furnisher Rule,” at 16 C.F.R. §660. Furnishers under the FCRA
must be aware of and comply with these duties not only so they
can avoid the hassle of litigation, but so they can also avoid
regulatory penalties.

6. Furnishers Must Report Accurate Consumer Information
A furnisher’s first duty is simple: A furnisher must report
accurate consumer information to CRAs. Although simple on its
face, this duty manifests itself in different ways. First, the FCRA
expressly prohibits a furnisher from sharing information if the
furnisher knows or has reasonable cause to believe that
information is inaccurate. A furnisher has “reasonable cause to
believe that the information is inaccurate” if it has “specific
knowledge, other than solely allegations by the consumer,” that
would give the furnisher “substantial doubts” about the
information’s accuracy.

7. Second, once a consumer notifies a furnisher that specific
information is inaccurate, the furnisher cannot provide that
information to a CRA if the information is, in fact, inaccurate.
Even if it’s accurate, the furnisher still may not report that
information to a CRA unless the furnisher also notifies the CRA
that the consumer has disputed the information.
Third, when a furnisher determines that information it
previously reported about a consumer is inaccurate or
incomplete, it must promptly notify the CRA of that
determination. It must also correct the information or provide
additional information to make the information it previously
reported accurate and complete — and it must refrain from
reporting the inaccurate or incomplete information in the future.

8. Fourth, financial institutions that extend credit and regularly
furnish information to CRAs in the ordinary course of business
should note that, if the institution reports negative information
(i.e., information concerning a customer’s delinquencies, late
payments, insolvency, or any form of default) to a CRA about
credit that the institution extended to a customer, the institution
must notify the customer that it shared the negative
information. The notice to the customer must be in writing and
must be given either before, or no later than 30 days after,
furnishing the negative information. The notice may be included
with other materials provided to the consumer, including a
notice of default or a billing statement, so long as the notice is
“clear and conspicuous.”

9. Once the furnisher provides this notice, the institution can
provide a CRA with other negative information related to the
same transaction, extension of credit, account, or customer
without having to provide the customer with notice again.
Importantly, the FCRA provides a safe harbor for financial
institutions that fail to comply with these requirements so long
as the financial institution either maintained reasonable policies
and procedures to ensure compliance or reasonably believed
that it was prohibited by law from contacting the consumer.

10. Fifth, a furnisher must “have in place reasonable procedures to
respond to any notification that it receives” from a CRA “relating
to information from identity theft so as to not re-report that
blocked information.” It is the CRA’s responsibility to notify the
furnisher that specific information may be the result of identity
theft; that a report has been filed; that the consumer has
requested a block of the information; and that the block will be
effective for specific dates. The consumer may also notify the
furnisher directly about a claim of identity theft. If the consumer
submits an identity theft report to a furnisher at the appropriate
address designated for such reports, the furnisher may not
report information that supposedly relates to the consumer
unless the furnisher later knows or is informed by the consumer
that the information is correct.

11. When a Consumer Disputes Reported Information
Because both CRAs and furnishers report information,
consumers can dispute inaccurate or incomplete information to
the CRA or directly to the furnisher. Regardless of whether the
furnisher receives notice of the dispute directly, it is still
obligated to investigate the information and report back to the
CRA.

12. Duties of Furnishers After Receiving a Direct Dispute — The
Furnisher Rule sets forth when a furnisher must investigate a
dispute that the consumer made directly to the furnisher. Under
16 C.F.R. §660.4, a furnisher must investigate a direct dispute if it
relates to 1) the consumer’s liability for a credit account or debt
with the furnisher; 2) the terms of a credit account or debt with
the furnisher; 3) the consumer’s performance or other conduct
concerning an account or other relationship with the furnisher;
or 4) any other information contained in a consumer report
relating to an account or other relationship with the furnisher
that bears on the consumer’s creditworthiness, credit standing,
credit capacity, character, general reputation, personal
characteristics, or mode of living.

13. But there are exceptions: A furnisher does not have to
investigate a direct dispute that relates only to the consumer’s
identifying information, the identity of past or present
employers; inquiries or requests for a consumer report;
information derived from public records; information related to
fraud alerts or active duty alerts; or information provided to a
CRA by another furnisher. Notably, to trigger a furnisher’s duty to
investigate under the FCRA, the onus is on the consumer to
provide proper notice of the dispute to the furnisher.

14. Specifically, a notice of the dispute must be sent to one of the
three following addresses: the address provided by the furnisher
and placed on the consumer’s credit report; an address “clearly
and conspicuously” specified by the furnisher for submitting
direct disputes that are communicated to the consumer; or to
any business address of the furnisher if the furnisher has not
specified an address for direct disputes. A notice of dispute must
contain sufficient detail to identify the information at issue, the
basis for the dispute, and any supporting documentation
required to substantiate the basis for the dispute. When a
furnisher receives notice from a consumer that complies with
the above requirements, it has several obligations it must comply
with.

15. For starters, the furnisher must reasonably investigate the
disputed information and review all the information that the
consumer provided within the dispute notice. Once it has
completed its investigation, the furnisher must then report the
results of the investigation back to the consumer. This must be
done “before the end of the 30-day period beginning on the date
on which the [furnisher] receives the notice of the dispute” from
the consumer. If, after completing its investigation, the furnisher
determines that the information was inaccurate, it must notify
each CRA of that determination and correct the information to
make it accurate.

16. There is no need to investigate a dispute if the furnisher has a
reasonable belief that the dispute was submitted or prepared by
a credit repair organization. Nor is there a duty to investigate a
dispute that is frivolous or irrelevant. A dispute is frivolous or
irrelevant under the Furnisher Rule if the consumer did not
provide sufficient information to investigate; the dispute is
substantially the same as a dispute that was previously
submitted by (or on behalf of) the consumer and the furnisher
has already satisfied its obligations under the FCRA and
Furnisher Rule, or the dispute is about the information listed in
section (b) of the Furnisher Rule. If the furnisher is not going to
investigate the dispute because it determines that the dispute is
frivolous or irrelevant, it must notify the consumer of this
decision no later than five days after making that decision.

17. Duties of Furnishers After Dispute Sent to CRA — Because
Congress created the FCRA with the intention of protecting
consumers, it also provides guidelines for steps a furnisher must
take when a consumer disputes information with a CRA. Once
the furnisher learns of the consumer’s dispute from the CRA, the
furnisher must investigate the disputed information; review the
information provided by the CRA, and report the results of the
investigation to the CRA. Thus, the FCRA “contemplates three
potential ending points” to a dispute: verification of the accuracy
of the information; a determination of the inaccuracy or
incompleteness of the information; or a determination that the
information “cannot be verified.”

18. If it is determined that the disputed information is incomplete or
inaccurate, the furnisher must report that determination to all
the CRAs it had previously reported the incomplete or inaccurate
information to. Additionally, if the disputed information is
determined to be incomplete or inaccurate, or if it cannot be
verified, the furnisher must promptly modify, delete, or
permanently block the reporting of that information.

19. These actions must all be completed before the end of the 30-
day period beginning on the date the consumer notifies the CRA
of the dispute. If the CRA receives information from the
consumer during that 30-day period that is relevant and
applicable to the dispute, the deadline may be extended by up to
15 days. No extension is allowed if the information being
investigated is found to be inaccurate or incomplete or if the CRA
finds that the information cannot be verified.

20. Reasonableness of the Investigation — Whether a furnisher has
complied with its obligations upon learning of a consumer
dispute is becoming a highly litigated issue. Although consumers
do not have a private cause of action against furnishers for
reporting inaccurate information to CRAs, there is a private
cause of action for noncompliance with the furnisher’s duties
after receiving notice of a dispute, particularly when a furnisher
fails to investigate a dispute.

21. Because neither the FCRA nor the Furnisher Rule defines what
constitutes an investigation, courts conduct their own inquiries
to determine whether a furnisher has complied with this
requirement. Historically, courts have evaluated a furnisher’s
investigation based on reasonableness.

22. In doing so, courts have explained that “the plain meaning of
‘investigation’ clearly requires some degree of careful inquiry by
creditors.” Because the purpose of the FCRA is to shield
consumers from inaccurate and incomplete credit reporting by
CRAs and furnishers, “[a] provision that required only a cursory
investigation would not provide such protection; instead, it
would allow furnishers to escape their obligations by merely
rubber-stamping their earlier submissions, even where
circumstances demanded a more thorough inquiry.” Whether an
investigation is reasonable is a fact-dependent inquiry that
considers the quality of the documentation available to the
furnisher in conducting its investigation.

23. For example, four years ago in Hinkle v. Midland Credit
Management, 827 F.3d 1295, 1305 (11th Cir. 2016), the 11th
Circuit held that a reasonable jury could conclude that the
furnisher’s investigation, in that case, was not reasonable.
According to the 11th Circuit, when a furnisher “does not already
possess evidence establishing that an item of disputed
information is true,” the FCRA “requires the furnisher to seek out
and obtain…evidence before reporting the information as
‘verified.’” Similarly, in Johnson v. MBNA Am. Bank, NA, 357 F.3d
426, 429-31 (4th Cir. 2004), the Fourth Circuit Court of Appeals
held that an investigation was unreasonable when the furnisher
had received notice that the consumer dispute that she was a
co-obligor on a specific account.

24. But the furnisher’s investigation only included confirming that
the name and address on the report belonged to the consumer.
The furnisher’s agents conceded they did not consult underlying
documents when investigating the consumer’s dispute, which
the court held was unreasonable given the specificity of the
consumer’s dispute notice. By contrast, in Westra v. Credit
Control of Pinellas, 409 F.3d 825, 827 (7th Cir. 2005), the Seventh
Circuit held that the furnisher’s limited investigation of a
consumer dispute was reasonable because the furnisher
received hardly any information (such as the nature of the
dispute or any supporting documentation) from the CRA.

25. So what is required of a furnisher who receives a consumer
dispute? In a situation in which the furnisher reports that the
information is accurate, “the question of whether the furnisher
behaved reasonably will turn on whether the furnisher acquired
sufficient evidence to support the conclusion that the
information was true.” Furnishers are, therefore, charged with
“uncovering documentary evidence that is sufficient to prove
that the information is true.” In doing so, the furnisher can rely
on personal knowledge to establish the truth of the information.

26. Of course, the furnisher can always determine that the
information was, in fact, wrong or incomplete, report as such to
the CRA, and modify, delete, or block future reporting of that
information. Or the furnisher could satisfy its obligations under
the FCRA by investigating the dispute and deciding that the
information is unverifiable. Indeed, part of the purpose behind
the act is to prevent CRAs from reporting information that
cannot be verified. Information is unverifiable if the evidence
needed to verify the disputed information is either nonexistent
or is far too burdensome to obtain.

27. If a furnisher determines that disputed information was
unverifiable, the furnisher’s liability will ultimately hinge on
“whether the furnisher reasonably determined that further
investigation would be fruitless or unduly burdensome.” It is
worth noting that ending an investigation with a finding that
information is unverifiable does not require a furnisher to stop
attempting to collect the debt from the consumer — the
furnisher is merely required to stop reporting that information to
the CRAs.

28. Penalties for Noncompliance
As noted above, a furnisher’s obligation to investigate disputed
information and report the findings to CRAs is what subjects
many furnishers to lawsuits. To avoid those lawsuits, furnishers
must implement reasonable procedures for consumer disputes
and must comply strictly with the requirements set forth in the
FCRA. The consequences of failing to do so can be time-
consuming and costly.

29. Consumers may bring suit for both willful and negligent failure to
investigate. To prevail on a cause of action under the FCRA for
such a violation, the plaintiff must show that 1) the investigation
was objectively unreasonable, and 2) the result of the furnisher’s
investigation would have been different had the furnisher
conducted a reasonable investigation. For lawsuits brought by
consumers directly against furnishers, a furnisher who is found
to have negligently failed to comply with its obligations under
the FCRA is liable to the consumer for actual damages caused by
the furnisher’s failure to comply with the FCRA, plus costs and
reasonable attorneys’ fees. Actual damages refer to “an amount
awarded to a complainant to compensate for a proven injury or
loss” or “damages that repay actual losses.”

30. The consequences for a furnisher who willfully fails to comply
with its obligations under FCRA are more severe. If a furnisher
willfully violates the FCRA, it is liable to the consumer for 1) the
consumer’s actual damages or damages of not less than $100
and not more than $1,000 (in the case of liability of a natural
person for obtaining a consumer report under false pretenses or
knowingly without a permissible purpose, the consumer is
entitled to actual damages or $1,000, whichever is greater); 2)
punitive damages; and 3) costs and reasonable attorneys’ fees.
“Willful” noncompliance, by the way, is not limited to knowing
noncompliance; the Supreme Court has held that reckless
disregard of a requirement under the FCRA also constitutes a
willful violation.

31. But furnishers must worry about more than consumer-brought
civil actions to hold them accountable for their obligations under
the FCRA. Congress has granted authority for administrative
enforcement through the Federal Trade Commission, including
granting the FTC the authority to bring a civil action to recover
civil penalties for knowing violations of the FCRA. Other
administrative agencies listed in the FCRA are also granted
authority to enforce specific violations. Not to mention state
governments are explicitly granted authority to bring civil actions
to enjoin violations and to recover damages when furnishers fail
to comply with the FCRA.

32. Conclusion
Any entity that reports consumer information to CRAs should
take note of the FCRA requirements for furnishers and
implement reasonable procedures to ensure that consumer
information is being reported accurately and that disputes are
adequately investigated. Consult with a knowledgeable attorney
for help creating and executing procedures that satisfy these
obligations and comply with the stringent requirements under
the FCRA and the Furnisher Rule.

33. Entities with investigation procedures already in place should
also review them with their attorneys to ensure they are
“reasonable” under the standards imposed by the courts. This
will help avoid complaints from consumers alleging that their
credit scores and reports are reflecting inaccurate or unverified
information and will prevent penalties imposed by the Federal
Trade Commission or your state for noncompliance. The
investment is worth the return; compliance with the Fair Credit
Reporting Act will save entities from an unnecessary
investigation by agencies, expenses, and litigation in the future.
When you’re looking for reporting requirements of the fair credit
reporting act. Contact us at Law Office of Tony Turner.