Rule2022-23264
Fair Credit Reporting; Facially False Data
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 26, 2022
Effective
October 26, 2022
Issuing agencies
Consumer Financial Protection Bureau
Abstract
The Consumer Financial Protection Bureau (Bureau) is issuing this advisory opinion to highlight that a consumer reporting agency that does not implement reasonable internal controls to prevent the inclusion of facially false data, including logically inconsistent information, in consumer reports it prepares is not using reasonable procedures to assure maximum possible accuracy under section 607(b) of the Fair Credit Reporting Act (FCRA).
Full Text
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<title>Federal Register, Volume 87 Issue 206 (Wednesday, October 26, 2022)</title>
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[Federal Register Volume 87, Number 206 (Wednesday, October 26, 2022)]
[Rules and Regulations]
[Pages 64689-64693]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-23264]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1022
Fair Credit Reporting; Facially False Data
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Advisory opinion.
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SUMMARY: The Consumer Financial Protection Bureau (Bureau) is issuing
this advisory opinion to highlight that a consumer reporting agency
that does not implement reasonable internal controls to prevent the
inclusion of facially false data, including logically inconsistent
information, in consumer reports it prepares is not using reasonable
procedures to assure maximum possible accuracy under section 607(b) of
the Fair Credit Reporting Act (FCRA).
DATES: This advisory opinion is effective on October 26, 2022.
FOR FURTHER INFORMATION CONTACT: Ilana Waxman, Senior Counsel, Tyler
Sines or Jason Grimes, Counsels, Office of Supervision Policy at (202)
435-7700 or <a href="https://reginquiries.consumerfinance.gov/">https://reginquiries.consumerfinance.gov/</a>. If you require
this document in an alternative electronic format, please contact
<a href="/cdn-cgi/l/email-protection#2a696c7a68756b49494f595943484346435e536a494c5a48044d455c"><span class="__cf_email__" data-cfemail="32717462706d7351515741415b505b5e5b464b72515442501c555d44">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: The Bureau is issuing this advisory opinion
through the procedures for its Advisory Opinions Policy.\1\ Refer to
those procedures for more information.
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\1\ 85 FR 77987 (Dec. 3, 2020).
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I. Advisory Opinion
A. Background
Accuracy in consumer reports is of vital importance to the consumer
reporting system, particularly as consumer reports play an increasingly
central role in the lives of American consumers. Consumer reporting
agencies collect and assemble credit, public record, and other consumer
information into consumer reports.\2\ Creditors, insurers, landlords,
employers, and others use the information in these reports to make
eligibility determinations and other decisions that can have a
significant impact on consumers. For example, creditors use information
in consumer reports to determine whether, and on what terms, to extend
credit to a particular consumer, while landlords and employers use
background screening reports in deciding whether to rent to prospective
tenants and hire employees, respectively.
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\2\ See 15 U.S.C. 1681a(d) (defining ``consumer report'').
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Inaccurate, derogatory information in consumer reports can have
significant adverse impacts on consumers. For example, inaccurate,
derogatory information in consumer reports can lead to higher interest
rates, ineligibility for promotional offers, or otherwise less
favorable credit terms for affected consumers. This in turn may cost
consumers hundreds or thousands of dollars in additional interest. Even
worse, inaccurate, derogatory information in consumer reports could
lead lenders to deny a consumer credit entirely, making it difficult or
impossible for that consumer to obtain a mortgage, auto loan, student
loan, or other credit. Any of these consequences can be devastating for
a consumer's financial well-being and life. Inaccurate, derogatory
information in consumer reports can also harm the businesses that use
such reports by leading them to make unsupported decisions.
Consumer report accuracy depends on the various parties to the
consumer reporting system, including: the three nationwide consumer
reporting agencies (Equifax, Experian, and TransUnion); other consumer
reporting agencies, such as background screening companies; entities
such as creditors who furnish information to consumer reporting
agencies (i.e., furnishers); and public record repositories. While any
of these parties may introduce inaccurate information into the consumer
reporting process, a consumer reporting agency is uniquely positioned
to identify certain obvious inaccuracies and implement policies,
procedures, and systems to keep them off of consumer reports. In some
cases, such as when certain account or other information fields on
consumer reports are logically inconsistent with other fields of
information, a consumer reporting agency can detect the logical
inconsistencies and prevent the inaccurate information from being
included in consumer reports it generates, thereby avoiding the
consumer harm to individual consumers that can result from reporting
such inaccurate information.
Inaccuracy in consumer reports is a long-standing issue that
remains a problem today. Pursuant to its obligations under the Fair and
Accurate Credit Transactions (FACT) Act \3\ to conduct a study of
consumer report accuracy and completeness, the Federal Trade Commission
in 2012 published a report finding, among other things, that one in
five consumers who participated in the study had an error on at least
one of their three nationwide credit reports.\4\ Another more recent
study, published in 2021, found that over 34% of consumers surveyed
were able to
[[Page 64690]]
identify at least one error in their credit reports.\5\
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\3\ Fair and Accurate Credit Transactions Act of 2003, Public
Law 108-159, sec. 319, 117 Stat. 1952 (2003).
\4\ See Fed. Trade Comm'n, Report to Congress Under Section 319
of the Fair and Accurate Credit Transactions Act of 2003, at 64
(Dec. 2012), <a href="https://www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-accurate-credit-transactions-act-2003-fifth-interim-federal-trade-commission/130211factareport.pdf">https://www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-accurate-credit-transactions-act-2003-fifth-interim-federal-trade-commission/130211factareport.pdf</a>.
\5\ See Syed Ejaz, Consumer Reports, A Broken System: How the
Credit Reporting System Fails Consumers and What to Do About It 4
(June 10, 2021), <a href="https://advocacy.consumerreports.org/wp-content/uploads/2021/06/A-Broken-System-How-the-Credit-Reporting-System-Fails-Consumers-and-What-to-Do-About-It.pdf">https://advocacy.consumerreports.org/wp-content/uploads/2021/06/A-Broken-System-How-the-Credit-Reporting-System-Fails-Consumers-and-What-to-Do-About-It.pdf</a>.
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Consumer complaints submitted to the Bureau continue to reflect
significant consumer concern about inaccuracies in consumer reports.
Complaints about ``incorrect information on your report'' have
represented the largest share of credit or consumer reporting
complaints submitted to the Bureau each year for at least the last six
years.\6\ In 2021 alone, companies responded to more than 157,000 such
complaints, representing a majority (53%) of credit or consumer
reporting complaint responses that year.\7\
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\6\ See Consumer Fin. Prot. Bureau, Consumer Response Annual
Report, at 20 (Mar. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf</a>;
Consumer Fin. Prot. Bureau, Consumer Response Annual Report, at 22
(Mar. 2021), <a href="https://files.consumerfinance.gov/f/documents/cfpb_2020-consumer-response-annual-report_03-2021.pdf">https://files.consumerfinance.gov/f/documents/cfpb_2020-consumer-response-annual-report_03-2021.pdf</a>; Consumer Fin.
Prot. Bureau, Consumer Response Annual Report, at 19 (Mar. 2020),
<a href="https://files.consumerfinance.gov/f/documents/cfpb_consumer-response-annual-report_2019.pdf">https://files.consumerfinance.gov/f/documents/cfpb_consumer-response-annual-report_2019.pdf</a>; Consumer Fin. Prot. Bureau,
Consumer Response Annual Report, at 19 (Mar. 2019), <a href="https://files.consumerfinance.gov/f/documents/cfpb_consumer-response-annual-report_2018.pdf">https://files.consumerfinance.gov/f/documents/cfpb_consumer-response-annual-report_2018.pdf</a>; Consumer Fin. Prot. Bureau, Consumer Response
Annual Report, at 13 (Mar. 2018), <a href="https://files.consumerfinance.gov/f/documents/cfpb_consumer-response-annual-report_2017.pdf">https://files.consumerfinance.gov/f/documents/cfpb_consumer-response-annual-report_2017.pdf</a>; Consumer
Fin. Prot. Bureau, Consumer Response Annual Report, at 18 (Mar.
2017), <a href="https://files.consumerfinance.gov/f/documents/201703_cfpb_Consumer-Response-Annual-Report-2016.PDF">https://files.consumerfinance.gov/f/documents/201703_cfpb_Consumer-Response-Annual-Report-2016.PDF</a>.
\7\ See Consumer Fin. Prot. Bureau, Consumer Response Annual
Report, at 20 (Mar. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf</a> for
more in-depth analyses.
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Moreover, the Bureau continues to see accuracy issues at furnishers
and consumer reporting agencies through its supervisory activities. For
example, the Bureau noted in its Spring 2022 Supervisory Highlights
that many furnishers lacked ``reasonable written policies and
procedures regarding the accuracy and integrity of the information
relating to consumers.'' \8\ In its Summer 2021 Supervisory Highlights,
the Bureau explained that some consumer reporting agencies lacked
adequate procedures for assuring maximum possible accuracy of consumer
reports when they ``continued to include information in consumer
reports that was provided by unreliable furnishers.'' \9\
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\8\ See Consumer Fin. Prot. Bureau, Spring 2022 Supervisory
Highlights, at 10 (May 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-26_2022-04.pdf">https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-26_2022-04.pdf</a>.
\9\ See Consumer Fin. Prot. Bureau, Summer 2021 Supervisory
Highlights, at 7 (Jun. 2021), <a href="https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-24_2021-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-24_2021-06.pdf</a>.
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The Bureau also continues to find accuracy issues in the consumer
reporting context through its enforcement activities. For example, the
Bureau has brought enforcement actions against consumer reporting
agencies whose inadequate ``name-only matching'' led to reports with
inaccurate derogatory criminal and public records information on
consumers.\10\ The Bureau also has brought enforcement actions against
furnishers who furnish information with inherent logical
inconsistencies, such as furnishing an increasing ``original loan
amount'' over time, where that field should not change.\11\
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\10\ Consent Order at ]] 8-29, In re Gen. Inf. Svcs. Inc., 2015-
0028 (Oct. 29, 2015), <a href="https://files.consumerfinance.gov/f/201510_cfpb_consent-order_general-information-service-inc.pdf">https://files.consumerfinance.gov/f/201510_cfpb_consent-order_general-information-service-inc.pdf</a>;
Complaint at ]] 5-11, Consumer Fin. Prot. Bureau v. Sterling
Infosys., Inc., No. 1:19-cv-10824 (S.D.N.Y. Nov. 22, 2019), <a href="https://www.consumerfinance.gov/enforcement/actions/sterling-infosystems-inc/">https://www.consumerfinance.gov/enforcement/actions/sterling-infosystems-inc/</a>.
\11\ Consent Order at ] 41, In re Hyundai Capital Am., 2022-
CFPB-0005 (July 26, 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_hyundai-capital-america_consent-order_2022-07.pdf">https://files.consumerfinance.gov/f/documents/cfpb_hyundai-capital-america_consent-order_2022-07.pdf</a>.
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The FCRA regulates consumer reporting.\12\ The statute was designed
to ensure that ``consumer reporting agencies adopt reasonable
procedures for meeting the needs of commerce for consumer credit,
personnel, insurance, and other information in a manner which is fair
and equitable to the consumer, with regard to the confidentiality,
accuracy, relevancy, and proper utilization of such information.'' \13\
In interpreting the statute, Federal courts likewise highlight the
importance of data accuracy. The FCRA was enacted ``to protect
consumers from the transmission of inaccurate information about them
and to establish credit reporting practices that utilize accurate,
relevant, and current information in a confidential and responsible
manner.'' \14\ Because of the importance of consumer report accuracy to
businesses and consumers, the structure of the FCRA creates
interrelated legal standards and requirements to support the policy
goal of accurate credit reporting. Among these is the requirement that,
when preparing a consumer report, consumer reporting agencies ``shall
follow reasonable procedures to assure maximum possible accuracy of the
information concerning the individual about whom the report relates.''
\15\
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\12\ See 15 U.S.C. 1681-1681x.
\13\ 15 U.S.C. 1681(b).
\14\ Guimond v. Trans Union Credit Info., 45 F.3d 1329, 1333
(9th Cir.1995) (citations omitted); see also S. Rep. No. 91-517, at
1 (1969) (explaining that the FCRA was intended to ``prevent
consumers from being unjustly damaged because of inaccurate or
arbitrary information in a credit report'').
\15\ 15 U.S.C. 1681e(b).
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Inaccuracies in consumer reports can, in part, be attributed to
consumer reporting agencies failing to maintain reasonable procedures,
such as business rules, to prevent the inclusion of facially false
data, including logical inconsistencies relating to consumer data and/
or the status or other information associated with consumer accounts,
when preparing consumer reports. Courts have recognized that in
``certain instances, inaccurate credit reports by themselves can fairly
be read as evidencing unreasonable procedures[.]'' \16\ The Bureau is
issuing this advisory opinion to highlight that the legal requirement
to follow reasonable procedures to assure maximum possible accuracy of
the information concerning the individuals about whom the reports
relate includes, but is not limited to, procedures to screen for and
eliminate logical inconsistencies to avoid including facially false
data in consumer reports.
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\16\ Stewart v. Credit Bureau, Inc., 734 F.2d 47, 52 (D.C. Cir.
1984).
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There are many logical inconsistencies that could result in
inaccurate, facially false data being included on consumer reports in
violation of section 607(b). The following is a non-exhaustive list of
examples of some of the types of logical inconsistencies that
reasonable procedures to assure maximum possible accuracy would screen
for and eliminate:
Inconsistent Account Information or Statuses
A consumer reporting agency's policies and procedures should be
sufficient to detect tradelines with account statuses or codes that are
plainly inconsistent with other information reported for that same
account, such that, if included in a consumer report, at least one item
of information therein would necessarily be inaccurate. Such
inconsistencies may include:
<bullet> An account whose status is paid in full, and thus has no
balance due but nevertheless reflects a balance due; \17\
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\17\ Cf. Consent Order at ] 20, In re Santander Consumer USA
Inc., 2022-BCFP-0027 (Dec. 20, 2020) (``Respondent also reported in
approximately 250,000 instances that accounts had a current balance
and simultaneously furnished contradictory information, such as also
furnishing information indicating that the accounts were paid in
full.''), <a href="https://files.consumerfinance.gov/f/documents/cfpb_santander-consumer-usa-inc_consent-order_2020-12.pdf">https://files.consumerfinance.gov/f/documents/cfpb_santander-consumer-usa-inc_consent-order_2020-12.pdf</a>. The
Santander consent order, along with other CFPB consent orders cited
herein, relate to furnisher obligations under section 623 of the
FCRA, but the underlying logical inconsistencies involved, as
described herein, are illustrative examples of the types of
inconsistencies that a credit reporting agency's reasonable policies
and procedures to assure maximum possible accuracy should be
designed to detect.
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[[Page 64691]]
<bullet> An account that reflects an ``Original Loan Amount'' that
increases over time, an impossibility by definition; \18\ and
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\18\ Cf. Consent Order at ] 41, In re Hyundai Capital Am., 2022-
CFPB-0005 (July 26, 2022) (``After furnishing the correct original
loan amount (a field that should not change), Respondent furnished
increased amounts for the ``original loan amount,'' making it appear
that a consumer had taken out a larger loan than they had actually
taken out.''), <a href="https://files.consumerfinance.gov/f/documents/cfpb_hyundai-capital-america_consent-order_2022-07.pdf">https://files.consumerfinance.gov/f/documents/cfpb_hyundai-capital-america_consent-order_2022-07.pdf</a>.
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<bullet> Derogatory information being reported on an account,
although that derogatory information predates an earlier report that
did not include the derogatory information.\19\
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\19\ Bryant v. TRW, Inc., 487 F. Supp. 1234, 1242 (E.D. Mich.
1980) (refusing to set aside a jury verdict finding that a consumer
reporting agency failed to follow reasonable procedures under FCRA
section 607(b) for failing to detect inconsistencies between a
September report containing derogatory information and an earlier
May report on which such information did not appear even though at
least one of the derogatory items predated the May report).
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A consumer reporting agency's policies and procedures should
further identify and prevent illogical reporting of a Date of First
Delinquency in connection with an account.\20\ Section 605(a) of the
FCRA identifies categories of information that cannot be included in a
consumer report after a certain amount of time.\21\ For example, a
consumer reporting agency may not include on a consumer report accounts
placed for collection or charged to profit and loss that antedate the
report by more than seven years and 180 days.\22\ This provision
enables consumers to move beyond their past and rebuild their credit
following a delinquency. The Date of First Delinquency provided by a
furnisher must reflect the month and year on which the delinquency
being reported commenced.\23\ When accurate, that date corresponds with
the start of the time period that, once elapsed, precludes the
delinquency from remaining on a consumer report under FCRA section
605(a). A Date of First Delinquency that is more recent than the start
of a delinquency may lead a report user to believe a consumer had
financial difficulty more recently than is the case. Similarly, a Date
of First Delinquency reflected on a report where a consumer is not in
fact delinquent could cause a user to inaccurately believe that the
consumer is delinquent. Examples of an illogical Date of First
Delinquency may include:
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\20\ The Date of First Delinquency herein refers to the date
furnished to a credit reporting agency by a furnisher that
purportedly reflects the month and year on which the delinquency
being reported in connection with a consumer's account commenced.
\21\ 15 U.S.C. 1681c(a).
\22\ 15 U.S.C. 1681c(a)(4), (c).
\23\ 15 U.S.C. 1681s-2(a)(5)(A). Under the FCRA, furnishers must
report a Date of First Delinquency within 90 days of furnishing
information regarding delinquent accounts being placed for
collection, charged to profit or loss, or subjected to any similar
action. Id.
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<bullet> A Date of First Delinquency reported for an account whose
records reflect no delinquency, such as through activity reflecting a
current account (complete history of timely payments, $0 amount
overdue) or through a current account status code; \24\
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\24\ Cf. Consent Order at ] 36, In re Hyundai Capital Am., 2022-
CFPB-0005 (July 26, 2022) (``Respondent furnished account data
showing that the consumer account was current, such as reporting $0
amount overdue or full payments made timely each month, but then
also furnished a [Date of First Delinquency], a field that
inaccurately indicated that the account was in an ongoing
delinquency.''); Consent Order at ] 17, In re Santander Consumer USA
Inc., 2020-BCFP-0027 (Dec. 20, 2020) (alleging Santander violated
FCRA Sec. 623(a)(1)(A) by inaccurately furnishing ``internally
inconsistent'' data, including reporting ``[Date of First
Delinquencies] for accounts that were current, paid in full (and not
delinquent immediately beforehand), or previously delinquent but
subsequently became current'').
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<bullet> A Date of First Delinquency that post-dates a charge-off
date; and
<bullet> A Date of First Delinquency, or date of last payment, that
predates the account open date (for non-collection accounts).
Illogical Information Relating to Consumers
A consumer reporting agency's policies and procedures should also
identify logical inconsistencies in consumer information, such that, if
included in a consumer report, some of the information therein would
necessarily be inaccurate. Such inconsistencies may include:
<bullet> Impossible information about consumers--for example, a
tradeline that includes a relevant date, such as a date of account
opening, account closing, date of last payment, or date of first
delinquency, for an account that is in the future--an obvious
impossibility--or for an individual account that either predates that
consumer's listed date of birth or that is so far in the past (e.g.,
January 1, 1800) that it must predate every living consumers' date of
birth, as individuals cannot open an account before they are born; \25\
and
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\25\ See, e.g., Sheffer v. Experian Information Solutions, Inc.,
2003 WL 21710573, at *2 (E.D. Pa. 2003) (referencing a consumer
report that ``indicated both that Plaintiff was born in 1969 and
that the account was opened in 1965'' as one of two
``inconsistencies'' that ``provide[d] a basis from which a jury
could infer that the procedures were unreasonable'').
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<bullet> Information about consumer accounts that is plainly
inconsistent with other reported information, such that one piece of
information must be inaccurate--for example, if every other tradeline
is reporting ongoing payment activity, while one tradeline contains a
``deceased'' indicator, reasonable policies and procedures should
identify the inconsistency and the consumer reporting agency should
prevent the inclusion of the inaccurate information in consumer reports
it generates.\26\
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\26\ Gohman v. Equifax Information Services, LLC, 395 F. Supp.
2d 822, 827 (D. Minn. 2005); see also Sheffer, 2003 WL 21710573, at
*2 (referencing the fact that only one account of approximately two
dozen on a consumer's report included the ``deceased'' notation as
one of two ``inconsistencies'' that ``provide[d] a basis from which
a jury could infer that the procedures were unreasonable'').
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A consumer reporting agency's policies, procedures and internal
controls should further identify and prevent reporting of illegitimate
credit transactions for a minor. Minors generally cannot legally enter
into contracts for credit except in certain limited circumstances. It
is logically inconsistent when a credit transaction is reported for a
person who lacks capacity to enter into a contract because they are a
minor, unless there are indicia that the credit transaction is
legitimate, such as in the context of student loans, credit card
authorized users, or emancipated minors.\27\ The Bureau is aware of
evidence showing that instances of identity theft are especially
prevalent for minors, suggesting that identity thieves may target
minors due to the value of unused Social Security numbers and a belief
that there is a lower probability of discovery of the
[[Page 64692]]
fraud.\28\ This risk may be even more acute for minors in the United
States foster care system, who often lack a permanent address and
frequently have their personal information shared among numerous adults
and agency databases, making them particularly susceptible to identity
theft and inaccurate credit history information.\29\ This heightened
risk faced by minors underscores the importance for consumer reporting
agencies to maintain procedures designed to identify illegitimate
credit transactions reported for minors and prevent inclusion thereof
when preparing consumer reports.
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\27\ This example is consistent with prior Federal Trade
Commission (FTC)'s 40 Years Report. See FTC, 40 Years of Experience
with the Fair Credit Reporting Act (July 2011) [hereinafter, the
``FTC 40 Years Report''], available at <a href="https://www.ftc.gov/sites/default/files/documents/reports/40-years-experience-fair-credit-reporting-act-ftc-staff-report-summary-interpretations/110720fcrareport.pdf">https://www.ftc.gov/sites/default/files/documents/reports/40-years-experience-fair-credit-reporting-act-ftc-staff-report-summary-interpretations/110720fcrareport.pdf</a>, at 68, comment 8 (``A [consumer reporting
agency] must maintain procedures to avoid reporting information with
obvious logical inconsistencies, such as a credit account opened
when the consumer was known to be a minor.''). FTC staff published
the 40 Years Report, an updated compilation of past FTC
interpretations of the FCRA, to coincide with the transfer of
authority to the Bureau. Effective July 21, 2011, the Dodd-Frank Act
transferred rulemaking authority related to most of the FCRA to the
Bureau, giving the Bureau the primary regulatory and interpretive
roles under the FCRA.
\28\ See, e.g., Richard Power, Carnegie Mellon CyLab, Child
Identity Theft: New Evidence Indicates Identity Thieves are
Targeting Children for Unused Social Security Numbers (2011),
available at <a href="https://www.cylab.cmu.edu/_files/pdfs/reports/2011/child-identity-theft.pdf">https://www.cylab.cmu.edu/_files/pdfs/reports/2011/child-identity-theft.pdf</a>.
\29\ See Consumer Fin. Prot. Bureau, ``CFPB Releases Tools to
Protect Foster Care Children from Credit Reporting Problems'' (May
1, 2014), available at https://www.consumerfinance.gov/about-us/
newsroom/cfpb-releases-tools-to-protect-foster-care-children-from-
credit-reporting-errors/
#:~:text=To%20submit%20a%20complaint%2C%20consumers,1%2D855%2D237%2D2
392.
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The Bureau is issuing this advisory opinion to remind consumer
reporting agencies that the failure to maintain reasonable procedures
to screen for and eliminate logical inconsistencies, to prevent the
inclusion of facially false data in consumer reports, is a violation of
their FCRA obligation to ``follow reasonable procedures to assure
maximum possible accuracy'' under section 607(b) of the FCRA.
B. Coverage
This advisory opinion applies to all consumer reporting agencies as
defined in FCRA section 603(f).\30\
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\30\ 15 U.S.C. 1681a(f).
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C. Legal Analysis
Section 607(b) of the FCRA provides that ``[w]henever a consumer
reporting agency prepares a consumer report it shall follow reasonable
procedures to assure maximum possible accuracy of the information
concerning the individual about whom the report relates.'' \31\ The
Bureau has interpreted this requirement in section 607(b) to include as
an integral component that consumer reporting agencies implement and
maintain reasonable screening procedures, such as business rules,
designed to identify and prevent the inclusion of facially false data,
such as logical inconsistencies relating to consumer or account
information, in the consumer reports they prepare.
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\31\ 15 U.S.C. 1681e(b).
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Courts have spoken on this topic. For example, in Bryant v. TRW,
Inc., the court rejected a consumer reporting agency's assertion that
it had ``no obligation'' to compare facially inconsistent information
contained in two of plaintiff's consumer reports from different months
because such an interpretation would make the consumer reporting agency
``simply a conduit and eliminate from the [FCRA] its emphasis on the
reasonableness of the procedures followed in putting together a
consumer report,'' contrary to Congressional intent.\32\ Courts have
also indicated that the inclusion of facially false data inaccuracies
on a consumer report may, in certain circumstances, evidence the
unreasonableness of a consumer reporting agency's procedures.\33\
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\32\ See Bryant v. TRW, Inc., 487 F. Supp. at 1242. See also
McKeown v. Sears Roebuck & Co., 335 F. Supp. 2d 917, 930 (W.D. Wis.
2004) (``[R]eceiving apparently inconsistent credit reports may
trigger an obligation to investigate on the part of the credit
reporting agency . . . . [because] allowing credit reporting
agencies to act as nothing more than mere conduits of information
would eviscerate the act's emphasis on reasonable compilation
procedures.'') (citing Bryant, 487 F. Supp. at 1242); Wright v.
Experian Info. Sols., Inc., 805 F.3d 1232, 1239 (10th Cir. 2015)
(``Courts have held [consumer reporting agencies] must look beyond
information furnished to them when it is inconsistent with the
[consumer reporting agencies'] own records, contains a facial
inaccuracy, or comes from an unreliable source.'').
\33\ See Stewart v. Credit Bureau, Inc., 734 F.2d at 52;
Sheffer, 2003 WL 21710573, at *2.
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It continues to be the Bureau's interpretation as outlined in this
advisory opinion that such procedures are required, consistent with the
core purpose of the FCRA as described in FCRA section 602--i.e., to
require consumer reporting agencies to adopt reasonable procedures for
meeting the needs of commerce for consumer credit, personnel,
insurance, and other information in a manner that is fair and equitable
to the consumer with regard to accuracy, among other
responsibilities.\34\ This interpretation also aligns with the Federal
Trade Commission's 40 Years Report, which states that pursuant to
607(b), a consumer reporting agency ``must maintain procedures to avoid
reporting information with obvious logical inconsistencies, such as a
credit account opened when the consumer was known to be a minor.'' \35\
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\34\ 15 U.S.C. 1681(b); see also Guimond, 45 F.3d at 1333.
\35\ FTC 40 Years Report, at 68, comment 8.
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In addition to provisions authorizing Federal and State
enforcement,\36\ the FCRA contains two provisions relating to civil
liability to consumers for noncompliance. Section 617 provides that
``any person who is negligent in failing to comply with any requirement
imposed under this title with respect to any consumer is liable to that
consumer in an amount equal to'' the consumer's actual damages, and
costs and reasonable attorney's fees.\37\ Section 616 provides that
``any person who willfully fails to comply with any requirement imposed
under this title with respect to any consumer is liable to that
consumer in an amount equal to'' actual or statutory damages of up to
$1,000 per violation, such punitive damages as the court allows, and
costs and reasonable attorney's fees.\38\ A violation is willful when
it is inconsistent with ``authoritative guidance'' from a relevant
agency.\39\ As with any guidance issued by the CFPB on the FCRA, or
predecessor agencies that were responsible for administering the FCRA
prior to the CFPB's creation, consumer reporting agencies risk
liability under Section 616 if they violate the FCRA in a manner
described in this Advisory Opinion, regardless of whether the consumer
reporting agencies were previously liable for willful violations prior
to its issuance.
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\36\ 15 U.S.C. 1681s.
\37\ 15 U.S.C. 1681o (emphasis added).
\38\ 15 U.S.C. 1681n (emphasis added); Safeco Ins. Co. of Am. v.
Burr, 551 U.S. 47, 57-58 (2007) (construing meaning of ``willful'').
\39\ Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 70 (2007);
Fuges v. Sw. Fin. Servs., Ltd., 707 F.3d 241, 253 (3d Cir. 2012).
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II. Regulatory Matters
This advisory opinion is an interpretive rule issued under the
Bureau's authority to interpret the FCRA, including under section
1022(b)(1) of the Dodd-Frank Wall Street Reform and Consumer Protection
Act,\40\ which authorizes guidance as may be necessary or appropriate
to enable the Bureau to administer and carry out the purposes and
objectives of Federal consumer financial laws.\41\
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\40\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, 124 Stat. 1376 (2010).
\41\ 12 U.S.C. 5512(b)(1).
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The Bureau has determined that this advisory opinion does not
impose any new or revise any existing recordkeeping, reporting, or
disclosure requirements on covered entities or members of the public
that would be collections of information requiring approval by the
Office of Management and Budget under the Paperwork Reduction Act.\42\
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\42\ 4 U.S.C. 3501-3521.
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Pursuant to the Congressional Review Act,\43\ the Bureau will
submit a report containing this interpretive rule and other required
information to the United States Senate, the United States House of
Representatives, and the Comptroller General of the United States prior
to the
[[Page 64693]]
rule's published effective date. The Office of Information and
Regulatory Affairs has designated this interpretive rule as not a
``major rule'' as defined by 5 U.S.C. 804(2).
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\43\ 5 U.S.C. 801 et seq.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-23264 Filed 10-25-22; 8:45 am]
BILLING CODE 4810-AM-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.