The CFPB recently released a “Special Edition” of its Supervisory Highlights that focuses exclusively on data accuracy issues in consumer credit reporting and the handling and resolution of consumer disputes. The report describes the observations of CFPB examiners during examinations of both consumer reporting agencies and the creditors and other companies that furnish information to consumer reporting agencies.

The CFPB acknowledges that consumer reporting agencies have made significant advances in promoting the accuracy of data reported to them by overseeing data furnishers and enhancing the dispute resolution process, but the CFPB believes that continued improvements are still necessary in these areas. In their examinations of furnishers, the CFPB examiners found “CMS weaknesses and numerous violations of the FCRA and Regulation V that required corrective action by furnisher(s).”

The CFPB’s “supervisory observations” include the following:

  • Data governance. CFPB examiners found that one or more consumer reporting agencies had decentralized data governance functions and undefined data governance responsibilities, a lack of quality control policies and procedures, and inconsistent practices for vetting furnishers and providing data quality feedback to them. CFPB examiners also found that one or more furnishers had weaknesses in its compliance management system, including weak oversight by management over data furnishing practices and no formal data governance program.
  • Reinvestigation of disputes. CFPB examiners found that one or more consumer reporting agencies did not comply with its obligation to conduct a reasonable reinvestigation when consumers dispute the completeness or accuracy of items in their consumer files. CFPB examiners also found that one or more consumer reporting agencies did not review and consider certain categories of documentary evidence in support of a dispute submitted by consumers. Furthermore, CFPB examiners found that one or more furnishers’ policies and procedures failed to promote reasonable investigations of disputes.
  • Required dispute notices. One or more consumer reporting agencies examined by the CFPB failed to provide notification of a consumer dispute within five business days to the furnisher who provided the information because the furnishers’ contact information was no longer valid at the time of the consumer’s dispute. CFPB examiners also found that one or more consumer reporting agencies sent dispute notices to consumers that failed to clearly articulate the results of the dispute investigation as required by the FCRA. In cases where furnishers decided to not investigate disputed information, the CFPB found that one or more furnishers failed to provide consumers with proper notice of a reasonable determination that a dispute was frivolous or irrelevant.
  • Quality control. One or more furnishers examined by the CFPB failed to perform quality checks on the data furnished to consumer reporting agencies, failed to conduct ongoing periodic evaluations or audits of furnishing practices, and failed to conduct audits of disputed information to identify and correct root causes of any inaccurate furnishing.
  • Data accuracy requirements. CFPB examiners found that one or more furnishers provided consumer information to consumer reporting agencies while knowing or having reasonable cause to believe that the information was inaccurate, including information that consumers were delinquent, had no payment history, or had an unpaid charged-off balance when they had settled the account in full.

The report indicates that the consumer reporting market is a “high priority” for the CFPB. Notably, the report states that the CFPB has “targeted substantial resources” to improving the accuracy of consumer information and will continue to do so.

The CFPB recently released a “Special Edition” of its Supervisory Highlights that focuses exclusively on data accuracy issues in consumer credit reporting and the handling and resolution of consumer disputes. The report describes the observations of CFPB examiners during examinations of both consumer reporting agencies and the creditors and other companies that furnish information to consumer reporting agencies.

The CFPB acknowledges that consumer reporting agencies have made significant advances in promoting the accuracy of data reported to them by overseeing data furnishers and enhancing the dispute resolution process, but the CFPB believes that continued improvements are still necessary in these areas. In their examinations of furnishers, the CFPB examiners found “CMS weaknesses and numerous violations of the FCRA and Regulation V that required corrective action by furnisher(s).”

The CFPB’s “supervisory observations” include the following:

  • Data governance. CFPB examiners found that one or more consumer reporting agencies had decentralized data governance functions and undefined data governance responsibilities, a lack of quality control policies and procedures, and inconsistent practices for vetting furnishers and providing data quality feedback to them. CFPB examiners also found that one or more furnishers had weaknesses in its compliance management system, including weak oversight by management over data furnishing practices and no formal data governance program.
  • Reinvestigation of disputes. CFPB examiners found that one or more consumer reporting agencies did not comply with its obligation to conduct a reasonable reinvestigation when consumers dispute the completeness or accuracy of items in their consumer files. CFPB examiners also found that one or more consumer reporting agencies did not review and consider certain categories of documentary evidence in support of a dispute submitted by consumers. Furthermore, CFPB examiners found that one or more furnishers’ policies and procedures failed to promote reasonable investigations of disputes.
  • Required dispute notices. One or more consumer reporting agencies examined by the CFPB failed to provide notification of a consumer dispute within five business days to the furnisher who provided the information because the furnishers’ contact information was no longer valid at the time of the consumer’s dispute. CFPB examiners also found that one or more consumer reporting agencies sent dispute notices to consumers that failed to clearly articulate the results of the dispute investigation as required by the FCRA. In cases where furnishers decided to not investigate disputed information, the CFPB found that one or more furnishers failed to provide consumers with proper notice of a reasonable determination that a dispute was frivolous or irrelevant.
  • Quality control. One or more furnishers examined by the CFPB failed to perform quality checks on the data furnished to consumer reporting agencies, failed to conduct ongoing periodic evaluations or audits of furnishing practices, and failed to conduct audits of disputed information to identify and correct root causes of any inaccurate furnishing.
  • Data accuracy requirements. CFPB examiners found that one or more furnishers provided consumer information to consumer reporting agencies while knowing or having reasonable cause to believe that the information was inaccurate, including information that consumers were delinquent, had no payment history, or had an unpaid charged-off balance when they had settled the account in full.

The report indicates that the consumer reporting market is a “high priority” for the CFPB. Notably, the report states that the CFPB has “targeted substantial resources” to improving the accuracy of consumer information and will continue to do so.

The CFPB is extending the comment period on its proposed policy statement that would expand the complaint data that it publicly discloses in its Consumer Complaint Database to include “unstructured” complaint narratives.  In a statement released on July 29, 2014, the CFPB states that it is extending the deadline for comments to be filed from August 22, 2014 to September 22, 2014, 60 days from the date the proposed policy was published in the Federal Register.

As we previously reported in depth, under the proposal, the CFPB would publish consumer complaint narratives if the consumer provided informed consent, which they could withdraw at any time.   In addition, according to the CFPB, companies would be able to submit a narrative response that would appear next to the consumer’s narrative.  The CFPB would take “robust” steps to remove all personal information from both the complaint narrative and company’s public response.

The CFPB’s announcement to extend the deadline for comments by 30 days follows a letter sent to the CFPB by five prominent industry trade groups requesting at least 90 days to comment.  As reported, the trade groups pointed out that a longer comment period is consistent with Executive Order 13563, dated January 18, 2011, which states that agencies are expected to promote public participation by affording at least 60 days for public comment.

Given the significant risks of disclosing unverified consumer information there is a clear need to allow stakeholders ample time to analyze and respond to the CFPB’s proposal.

On January 30, 2012, the American Bankers Association delivered a comment letter  to the CFPB in which it expressed strong disagreement with the CFPB’s proposed policy statement on “Disclosure of Certain Credit Card Complaint Data“. The ABA expressed concern that the complaint data will not help and may actually mislead consumers because it is “incomplete, unrepresentative, and unverified.” The ABA also argued that the proposed policy “undermines a core mission of the Bureau and impugns its supervisory responsibilities.”

We agree with many of the ABA’s concerns. The data in question are drawn from complaints consumers have made directly to the CFPB, and include such information as the credit card issuer’s name, the subject of the complaint, the consumer’s zip code, the date of the complaint and whether and how the issuer responded. The CFPB argues that releasing this data to the public will give third parties the opportunity to analyze it and “identify trends and patterns that they believe may help inform consumer decisions about credit cards,” and that the work that these third parties may or may not do would help provide consumers with “timely and understandable information to make responsible decisions about financial transactions.”

There are several problems with the CFPB’s position. First, the CFPB has admitted that the data, alone, is not the type of “timely and understandable” information it is authorized to produce, but will only become so if third parties such as “academics and groups dedicated to empowering consumers” happen to analyze and synthesize it to make it useful. Dodd-Frank authorizes the CFPB to release data that will help consumers, not data that may become useful if third parties take it upon themselves to make it so.

Second, the proposed policy fails to address the fact that third parties may take the data and do the opposite of what the CFPB assumes they will do, and produce information that misleads consumers and hurts individual issuers.

Finally, even those unfamiliar with the principles of statistics understand that data generated by a self-selected group of individuals is not reliable, particularly for the purposes that the CFPB assumes third parties such as “academics” will want to use it. Data drawn solely from a self-selected group of complaining consumers will create a skewed perception of consumer satisfaction.

As an alternative to the proposed policy, the ABA urged the Bureau to “obtain analytically sound, fair, accurate, and meaningful data that can withstand peer review, consistent with its pledge to be data-driven.” In the interim, the ABA suggested that releasing data such as that reflected by the “Consumer Response interim report on CFPB’s credit card complaint data” can both help consumers and also prevent issuers from being harmed unnecessarily. The ABA explained that the interim report “provided market-aggregated data based on the complaints filed or referred to the Bureau,” including “a summary of the complaints received, including the number and percentage of complaints based on the type of complaint, as identified by the consumer, and the percentage of complaints resolved.” The ABA commended the CFPB on the interim report and pointed out that releasing market-aggregated data, as opposed to issuer-specific data, is a better choice until the CFPB can obtain the kind of reliable data that will not unfairly affect issuers. We agree with the ABA.