This article is the second installment in a two-part series focusing on duties and obligations under the Fair Credit Reporting Act. In the first installment, Credit Reporting and You: How to Resolve Errors in your Report, we focused on what consumers might do to resolve errors found in their credit reports. Here, we review what business owners must do when furnishing consumer information to credit reporting agencies.
Does your business provide consumer financial information to consumer credit reporting agencies (“CRAs”)? If so, your business is probably an “information furnisher,” and you should read on to learn about some of your obligations under the Fair Credit Reporting Act (“FCRA”).[1]
Are you subject to the FCRA?
Information furnishers provide consumer credit information to CRAs, either directly or through an intermediary. Typical information furnishers include businesses providing financial services, such as banks, credit card companies, debt collection agencies, or other companies that process consumers’ financial information, among others. Businesses should not assume that they are not subject to the FCRA (or other statutes, beyond the scope of this article, that also impose obligations upon information furnishers), simply because their business activities don’t primarily revolve around consumer financial information; car dealerships, for example, will be subject to the FCRA depending on the extent to which they furnish consumer credit information to CRAs.
Information furnishers must establish reasonable policies and procedures to ensure that their operations comply with the FCRA, specifically, the FCRA’s aptly named “Furnisher Rule.”[2] “The Federal Trade Commission, the Consumer Financial Protection Bureau, and the federal banking agencies have each published a Furnisher Rule.”[3] Interestingly, these agencies’ furnisher rules are each “identical in substance.”[4]
Information accuracy
Of course, furnishers are prohibited from providing information to CRAs that they “know[] or ha[ve] reasonable cause to believe” is inaccurate.[5] For purposes of the FCRA, “reasonable cause to believe” means having “specific knowledge, other than solely allegations by the consumer, that would cause a reasonable person to have substantial doubts about the accuracy of the information.”[6] Information furnishers are required to establish policies and procedures to ensure the accuracy and integrity of the information that they furnish to CRAs. According to the FTC, policies and procedures:
- Must be appropriate to the nature, size, complexity, and scope of your activities;
- Must be reviewed periodically and updated, as necessary;
- Should ensure that information provided to a CRA is for the right person, and reflects the terms of the account and the consumer’s performance on the account;
- Require maintenance of records for a reasonable amount of time;
- Prevent re-aging (inaccurately changing the date of first delinquency on a consumer’s account to a later date) and duplicative reporting, particularly following portfolio acquisitions or sales, mergers, and other transfers; and
- Require updating of furnished information where necessary.
Information should:
- Be substantiated by your records when it is furnished;
- Include consumer identifiers, like name(s), date of birth, Social Security number, telephone number(s), or address(es); and
- Be furnished in a standardized form and specify the time period it pertains to.[7]
The above guidelines are just a sample. Additional guidelines can be found at Appendix A to Furnisher Rule Part 660.
Additional obligations
In addition to record keeping requirements, furnishers must also ensure that they are equipped to discharge a number of specific duties set forth under the FCRA (among other statutes that are beyond the scope of this article). For example:
“Duty to correct and update information.” Furnishers providing information to CRAs who later determine that the information provided was incorrect have a duty to notify both the affected consumers and the CRAs of the errors, and they must also provide any corrections to the information together with any additional or supplemental information required to ensure the completeness and accuracy of the information provided.[8]
“Duty to provide notice of dispute.” Whenever a consumer disputes any information that a furnisher has or will provide to a CRA, the furnisher has a duty to notify the CRA that the consumer disputes the information.[9]
“Duty to provide notice of closed accounts.” When consumers have credit accounts with furnishers, and when consumers voluntarily elect to close those accounts, furnishers must notify CRAs of the closure.[10] In terms of timing, the notice of account closure should be provided together with information regularly furnished for the period in which the account is closed.[11]
“Duty to provide notice of delinquency of accounts.” Whenever a furnisher reports that a “delinquent account [is] being placed for collection, charged to profit or loss, or subjected to any similar action,” that furnisher is required—within 90 days of furnishing that information—to notify the CRA of the date on which that action was taken.[12] For example, if an account becomes delinquent, the date on which the account became delinquent, rather than the date on which the account was referred to a collections agency, would the date that the furnisher reports to the CRA.[13]
“Duties of furnishers upon notice of identity theft-related information.” Furnishers must have procedures in place for responding to notifications from CRAs “relating to information resulting from identity theft, to prevent that person from refurnishing such blocked information.”[14] Furthermore, when a consumer notifies a furnisher that information resulted from or relates to identity theft, such information may not be furnished until the furnisher determines or is informed by the consumer that the information is in fact accurate.[15]
“Duties related to “negative information.” Whenever a furnisher, specifically “any financial institution that regularly extends credit and regularly and in the ordinary course of business furnishes information to a [CRA],” furnishes negative information regarding a consumer, the furnisher must provide the consumer with a written notification that negative information was furnished.[16] These notifications can be provided before the information is furnished, although they must be provided within thirty (30) days of the information being furnished.[17]
The foregoing list contains just a few examples of the duties of information furnishers. Some of these requirements, as well as others not referenced above, may only apply to different types of information furnishers. Understanding which duties and requirements apply to your business therefore requires not only attention to detail, but also a thorough understanding of the applicable laws, rules and regulations.
When to contact an attorney
If you have questions about whether and the extent to which your business is subject to the rules and regulations applicable to information furnishers under the FCRA or other statutes, then you should contact an attorney licensed to practice in your jurisdiction. Failing to adequately discharge the duties imposed upon information furnishers could result in disputes and/or penalties with consumers and/or regulators. You should contact an attorney licensed to practice in your jurisdiction for additional information about this area of the law.
Max Julian is a partner at Gertsburg Licata in the litigation practice group. He may be reached at (216) 573-6000 or at [email protected].
Gertsburg Licata is a full-service, strategic growth firm, specializing in business law, M&A advisory and executive talent solutions for entrepreneurs and executives of start-up and middle-market enterprises. Contact us today to discuss how we can help you secure your next competitive advantage. We are also home to CoverMySix®, our unique, anti-litigation audit service for middle-market companies.
This article is for informational purposes only. It is merely intended to provide a very general overview of a certain area of the law. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney licensed to practice in your jurisdiction. If you have specific questions about your matter, please contact an attorney licensed to practice in your jurisdiction.
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[1] Codified at 15 U.S.C. § 1681, et seq.
[2] 16 C.F.R. § 660.1, et seq. (duties of furnishers of information to consumer reporting agencies), available at https://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=89d50ede6e4072bde4d4a944a89bd200&rgn=div5&view=text&node=16:1.0.1.6.77&idno=16 (last visited Sept. 13, 2019).
[3] See Fed. Trade Comm’n, Consumer Reports: What Information Furnishers Need to Know, Introduction, https://www.ftc.gov/tips-advice/business-center/guidance/consumer-reports-what-information-furnishers-need-know#Non-Compliance (last visited Sept. 13, 2019).
[4] Id.
[5] See 15 U.S.C. § 1681s-2(a)(1)(A).
[6] 15 U.S.C. § 1681s-2(a)(D).
[7] Fed. Trade Comm’n, Consumer Reports: What Information Furnishers Need to Know, Guidelines for Policies and Procedures, https://www.ftc.gov/tips-advice/business-center/guidance/consumer-reports-what-information-furnishers-need-know#Non-Compliance (last visited Sept. 13, 2019).
[8] 15 U.S.C. § 1681s-2(a)(1)(D).
[9] 15 U.S.C. § 1681s-2(a)(3).
[10] 15 U.S.C. § 1681s-2(a)(4).
[11] Id.
[12] 15 U.S.C. § 1681s-2(a)(5)
[13] Id.
[14] 15 U.S.C. § 1681s-2(a)(6)(A).
[15] 15 U.S.C. § 1681s-2(a)(6)(B).
[16] 15 U.S.C. § 1681s-2(a)(7)(A).
[17] 15 U.S.C. § 1681s-2(a)(7)(B).
