Rule2022-25138
Consumer Financial Protection Circular 2022-07: Reasonable Investigation of Consumer Reporting Disputes
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Published
November 23, 2022
Issuing agencies
Consumer Financial Protection Bureau
Abstract
The Consumer Financial Protection Bureau (Bureau or CFPB) has issued Consumer Financial Protection Circular 2022-07, titled, "Reasonable Investigation of Consumer Reporting Disputes." In this circular, the Bureau responds to the questions, "1. Are consumer reporting agencies and the entities that furnish information to them (furnishers) permitted under the Fair Credit Reporting Act (FCRA) to impose obstacles that deter submission of disputes? " and "2. Do consumer reporting agencies need to forward to furnishers consumer- provided documents attached to a dispute? "
Full Text
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<title>Federal Register, Volume 87 Issue 225 (Wednesday, November 23, 2022)</title>
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[Federal Register Volume 87, Number 225 (Wednesday, November 23, 2022)]
[Rules and Regulations]
[Pages 71507-71509]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-25138]
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Rules and Regulations
Federal Register
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This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 87, No. 225 / Wednesday, November 23, 2022 /
Rules and Regulations
[[Page 71507]]
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Chapter X
Consumer Financial Protection Circular 2022-07: Reasonable
Investigation of Consumer Reporting Disputes
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Consumer financial protection circular.
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SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) has
issued Consumer Financial Protection Circular 2022-07, titled,
``Reasonable Investigation of Consumer Reporting Disputes.'' In this
circular, the Bureau responds to the questions, ``1. Are consumer
reporting agencies and the entities that furnish information to them
(furnishers) permitted under the Fair Credit Reporting Act (FCRA) to
impose obstacles that deter submission of disputes? '' and ``2. Do
consumer reporting agencies need to forward to furnishers consumer-
provided documents attached to a dispute? ''
DATES: The Bureau released this circular on its website on November 10,
2022.
ADDRESSES: Enforcers, and the broader public, can provide feedback and
comments to <a href="/cdn-cgi/l/email-protection#084b617a6b7d64697a7b486b6e786a266f677e"><span class="__cf_email__" data-cfemail="b7f4dec5d4c2dbd6c5c4f7d4d1c7d599d0d8c1">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: David Wake, Senior Counsel, at (202)
435-9613. If you require this document in an alternative electronic
format, please contact <a href="/cdn-cgi/l/email-protection#6a292c3a28352b09090f191903080306031e132a090c1a08440d051c"><span class="__cf_email__" data-cfemail="ca898c9a88958ba9a9afb9b9a3a8a3a6a3beb38aa9acbaa8e4ada5bc">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Questions Presented
1. Are consumer reporting agencies and the entities that furnish
information to them (furnishers) permitted under the Fair Credit
Reporting Act (FCRA) to impose obstacles that deter submission of
disputes?
2. Do consumer reporting agencies need to forward to furnishers
consumer-provided documents attached to a dispute?
Responses
1. No. Consumer reporting agencies and furnishers are liable under
the FCRA if they fail to investigate any dispute that meets the
statutory and regulatory requirements, as described in more detail
below. Enforcers may bring claims if consumer reporting agencies and
furnishers limit consumers' dispute rights by requiring any specific
format or requiring any specific attachment such as a copy of a police
report or consumer report beyond what the statute and regulations
permit.
2. It depends. Enforcers may bring a claim if a consumer reporting
agency fails to promptly provide to the furnisher ``all relevant
information'' regarding the dispute that the consumer reporting agency
receives from the consumer. While there is not an affirmative
requirement to specifically provide original copies of documentation
submitted by consumers, it would be difficult for a consumer reporting
agency to prove they provided all relevant information if they fail to
forward even an electronic image of documents that constitute a primary
source of evidence.\1\
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\1\ Examples of primary sources of evidence include but are not
limited to documents submitted by a consumer in support of a dispute
such as copies of letters from creditors, bank statements, checks,
or periodic billing statements.
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Background
Information contained in consumer reports has critical effects on
Americans' daily lives. Consumer reports are used to evaluate
consumers' eligibility for loans and the interest rates they pay, their
eligibility for insurance and the premiums they pay, their eligibility
for rental housing, and their eligibility for checking accounts.
Prospective employers commonly use consumer reports in their hiring
decisions.\2\ Given the importance of this information, Congress
enacted the FCRA to ``prevent consumers from being unjustly damaged
because of inaccurate or arbitrary information in a credit report.''
\3\
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\2\ See generally Consumer Financial Protection Bureau, Key
Dimensions and Processes in the U.S. Credit Reporting System (2012),
<a href="https://files.consumerfinance.gov/f/201212_cfpb_credit-reporting-white-paper.pdf">https://files.consumerfinance.gov/f/201212_cfpb_credit-reporting-white-paper.pdf</a>.
\3\ S. Rep. No. 91-517, at 1 (1969).
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A central component of the protections against inaccurate
information is the requirement to conduct a reasonable investigation of
consumer disputes. Since its enactment, the FCRA has required consumer
reporting agencies to investigate consumer disputes.\4\ To further
ensure that consumer reports are accurate, in 1996 Congress amended the
FCRA to also impose ``duties on the sources that provide credit
information to CRAs [consumer reporting agencies], called `furnishers'
in the statute.'' \5\ Thus, when consumer reporting agencies and
furnishers are properly notified of a dispute about information
furnished in a consumer report, both consumer reporting agencies and
furnishers must conduct a reasonable investigation of the dispute.\6\
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\4\ 84 Stat. 1114, 1132 (Oct. 26, 1970).
\5\ Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1153 (9th
Cir. 2009).
\6\ See, e.g., 15 U.S.C. 1681i(a)(1)(A) (Consumer reporting
agency obligation to ``conduct a reasonable reinvestigation to
determine whether the disputed information is inaccurate''); 15
U.S.C. 1681s-2(b)(1) (furnisher obligation to ``conduct an
investigation with respect to the disputed information'' for
disputes provided by a consumer reporting agency); 12 CFR
1022.43(e)(1) (furnisher obligation to ``conduct a reasonable
investigation with respect to the disputed information'' for
disputes sent directly from a consumer); see also Johnson v. MBNA
America Bank, NA, 357 F.3d 426, 431 (4th Cir. 2004) (holding that
furnishers receiving indirect disputes from consumer reporting
agencies must ``conduct a reasonable investigation of their records
to determine whether the disputed information can be verified'').
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These responsibilities are part of the FCRA's overall framework for
ensuring accuracy in consumer reports. Consumers are in a good position
to identify inaccurate information in their consumer reports, and
timely and responsive investigations of these identified inaccuracies
is crucial to the FCRA's purpose of ensuring fair and accurate consumer
reporting.
Despite Congress's repeated efforts to promote accuracy by
requiring reasonable investigation of disputes, consumers continue to
report problems with accuracy and dispute investigations. Between
January and September 2021, the CFPB received more than 500,000
complaints about credit or consumer reporting; the most common issue
they identified was incorrect information on a credit report.\7\ In
each of the past three
[[Page 71508]]
calendar years, the top two most frequently identified issues in
complaints submitted to the CFPB were ``Incorrect information on your
report'' and ``Problem with a credit reporting company's investigation
into an existing problem.''
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\7\ See Consumer Financial Protection Bureau, Annual Report of
Credit and Consumer Reporting Complaints (Jan. 2022), at 21, 30,
<a href="https://files.consumerfinance.gov/f/documents/cfpb_fcra-611-e_report_2022-01.pdf">https://files.consumerfinance.gov/f/documents/cfpb_fcra-611-e_report_2022-01.pdf</a>.
Figure 1: Credit or Consumer Reporting Complaints to the CFPB 2019-2021
[GRAPHIC] [TIFF OMITTED] TR23NO22.176
The CFPB is responsible for issuing rules and enforcing compliance
with these provisions of the FCRA.\8\ The FCRA can also be enforced by
other Federal government agencies and States,\9\ and through private
actions brought by consumers.\10\ The CFPB is issuing this Circular to
emphasize that certain practices involving the failure to conduct a
reasonable investigation of disputes can violate the FCRA.
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\8\ See, e.g., 12 U.S.C. 5481(12)(F), 5512(b), 5514(c), 5515(c),
and also Subtitle E (12 U.S.C. 5561-5567); 15 U.S.C. 1681s(b)(1)(H),
(e). Authority over 15 U.S.C. 1681m(e) and 1681w are limited to the
Federal banking agencies, the NCUA, the FTC, the CFTC, and SEC.
\9\ 15 U.S.C. 1681s. States can directly bring actions under
FCRA. See 12 U.S.C. 1681s(c). States can also bring actions under
the Consumer Financial Protection Act (CFPA) against ``covered
persons'' and ``service providers'' based upon violations of Federal
consumer financial laws, including the FCRA. See Authority of States
to Enforce the Consumer Financial Protection Act of 2010, 87 FR
31940 (May 26, 2022).
\10\ 15 U.S.C. 1681n, 1681o.
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Analysis
Consumer reporting agencies and furnishers cannot avoid the
obligation to conduct a reasonable investigation of disputes by making
consumers satisfy demands other than those specified by statute or
regulation.
The CFPB is aware that consumer reporting agencies and furnishers
have sought to evade the obligation to investigate disputes by
requiring consumers to submit particular items of information or
documentation with a dispute before the entity will conduct its
investigation of the dispute. Examples of this conduct include:
<bullet> Consumer reporting agencies that require a consumer to
provide a recent copy of the consumer's report or file disclosure
before investigating disputes despite the consumer providing sufficient
information to investigate the disputed information; \11\
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\11\ See, e.g., Consumer Financial Protection Bureau,
Supervisory Highlights (Spring 2014), at 10, <a href="https://files.consumerfinance.gov/f/201405_cfpb_supervisory-highlights-spring-2014.pdf">https://files.consumerfinance.gov/f/201405_cfpb_supervisory-highlights-spring-2014.pdf</a>.
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<bullet> Furnishers that require a consumer to provide additional
specific documents even though the consumer has already provided the
supporting documentation or other information reasonably required to
substantiate the basis of a direct dispute; \12\ and
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\12\ See, e.g., Complaint at 15, CFPB v. Fair Collections &
Outsourcing, Inc., D. Md. No. 19-Civ-2817 (Filed Sept. 25, 2019).
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<bullet> Consumer reporting agencies or furnishers that require a
consumer to attach a completed proprietary form before investigating
the consumer's dispute.\13\
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\13\ With respect to furnisher direct disputes, see 74 FR
31,484, 31,500 (July 1, 2009) (``Some industry commenters also
suggested that the Agencies issue a model direct dispute complaint
form, with some advocating that consumers be required to use the
model complaint form. The Agencies decline to adopt these
suggestions because such requirements would cause otherwise valid
disputes to be rejected as frivolous or irrelevant due solely to the
consumer's failure to meet a technical requirement that probably
would be unknown to the consumer.'').
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Enforcers may consider bringing an action under the FCRA when
furnishers and consumer reporting agencies require consumers to provide
documentation or proof documents, other than as described in the
statute or regulation, as a precondition to investigation. For disputes
received directly from a consumer, a consumer reporting agency or
furnisher must reasonably investigate the dispute unless they have
reasonably determined that the dispute is frivolous or irrelevant.\14\
If such a determination is made, the consumer reporting agency or
furnisher must notify the consumer of such determination within five
business days of the determination and identify the additional
information needed from the consumer to investigate the dispute.\15\
Further, furnishers are not permitted to deem disputes as frivolous or
irrelevant if the dispute has been provided to the furnisher from a
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consumer reporting agency pursuant to FCRA section 623(b).\16\
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\14\ 15 U.S.C. 1681i(a)(3)(A) (identifying which disputes the
consumer reporting agency can determine to be frivolous or
irrelevant); 12 CFR 1022.43(f)(1) (identifying which disputes the
furnisher can determine to be frivolous or irrelevant).
\15\ 15 U.S.C. 1681i(a)(3) (Consumer reporting agency frivolous
or irrelevant determination); 12 CFR 1022.43(f) (furnisher direct
dispute frivolous or irrelevant determination).
\16\ 15 U.S.C. 1681s-2(b). See Brief for Consumer Financial
Protection Bureau and Federal Trade Commission as Amici Curiae
Supporting Plaintiff-Appellant, Ingram v. Waypoint Resource Group,
LLC, Third Circuit Court of Appeals (No. 21-2430).
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Accordingly, consumer reporting agencies and furnishers must
reasonably investigate disputes received directly from consumers that
are not frivolous or irrelevant--and furnishers must reasonably
investigate all indirect disputes received from consumer reporting
agencies--even if such disputes do not include the entity's preferred
format, preferred intake forms, or preferred documentation or forms.
Consumer reporting agencies must provide to the furnisher all
relevant information regarding the dispute that it received from the
consumer.
Enforcers may bring a claim if a consumer reporting agency fails to
promptly provide to the furnisher ``all relevant information''
regarding the dispute that the consumer reporting agency receives from
the consumer.\17\ Through its supervision, the CFPB has found that
consumer reporting agencies tend to ingest dispute information from
consumers using automated protocols, and they also share dispute
information with furnishers electronically.\18\ The use of these
technologies has reduced the cost and time to transmit relevant
information.
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\17\ 15 U.S.C. 1681i(a)(2)(A).
\18\ Consumer Financial Protection Bureau, Bulletin 2013-09
(Sept. 4, 2013), at 1, <a href="https://files.consumerfinance.gov/f/201309_cfpb_bulletin_furnishers.pdf">https://files.consumerfinance.gov/f/201309_cfpb_bulletin_furnishers.pdf</a> (alerting furnishers to the fact
that consumer reporting agencies have begun forwarding images of
relevant documentation to furnishers as part of the reasonable
investigation of disputes).
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When transmitting information about a dispute, a consumer reporting
agency may be able to demonstrate that it has transmitted ``all
relevant information'' even if it does not provide original documents
in paper form. However, given that primary sources of evidence provided
by consumers can be dispositive in determining whether there has been a
furnishing error, and given that the character of a primary source of
evidence is probative and thus relevant to the investigation,\19\ it
will be difficult for a consumer reporting agency to prove that it
complied with the FCRA if it does not provide electronic images of
primary evidence for evaluation by the furnisher.\20\
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\19\ For example, a copy of a bill supporting the consumer's
dispute conveys information regarding the persuasiveness of a
consumer's dispute that data about the bill would not.
\20\ Federal Trade Commission, 40 Years of Experience with the
Fair Credit Reporting Act: An FTC Staff Report with Summary of
Interpretations (July 2011), at 77, <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> (``A CRA does not comply with this provision if
it merely indicates the nature of the dispute, without communicating
to the furnisher the specific relevant information received from the
consumer. For example, if the consumer claimed ``never late'' and
submitted documentation (such as cancelled checks) to support his/
her dispute, a CRA does not comply with the requirement that is
provide ``all relevant information'' if it simply notifies the
furnisher that the consumer disputes the payment history without
communicating the evidence received.'').
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The consumer reporting agency's failure to provide the furnisher
with all relevant information limits the furnisher's ability to
reasonably investigate the dispute. A furnisher must ``review all
relevant information'' provided by the consumer reporting agency.\21\
Accordingly, consumer reporting agency compliance with the obligation
to provide all relevant information is crucial to the consumer's right
to have their dispute reasonably investigated.
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\21\ 15 U.S.C. 1681s-2(b)(1)(B).
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About Consumer Financial Protection Circulars
Consumer Financial Protection Circulars are issued to all parties
with authority to enforce Federal consumer financial law. The CFPB is
the principal Federal regulator responsible for administering Federal
consumer financial law, see 12 U.S.C. 5511, including the Consumer
Financial Protection Act's prohibition on unfair, deceptive, and
abusive acts or practices, 12 U.S.C. 5536(a)(1)(B), and 18 other
``enumerated consumer laws,'' 12 U.S.C. 5481(12). However, these laws
are also enforced by State attorneys general and State regulators, 12
U.S.C. 5552, and prudential regulators including the Federal Deposit
Insurance Corporation, the Office of the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, and the National
Credit Union Administration. See, e.g., 12 U.S.C. 5516(d), 5581(c)(2)
(exclusive enforcement authority for banks and credit unions with $10
billion or less in assets). Some Federal consumer financial laws are
also enforceable by other Federal agencies, including the Department of
Justice and the Federal Trade Commission, the Farm Credit
Administration, the Department of Transportation, and the Department of
Agriculture. In addition, some of these laws provide for private
enforcement.
Consumer Financial Protection Circulars are intended to promote
consistency in approach across the various enforcement agencies and
parties, pursuant to the CFPB's statutory objective to ensure Federal
consumer financial law is enforced consistently. 12 U.S.C. 5511(b)(4).
Consumer Financial Protection Circulars are also intended to
provide transparency to partner agencies regarding the CFPB's intended
approach when cooperating in enforcement actions. See, e.g., 12 U.S.C.
5552(b) (consultation with CFPB by State attorneys general and
regulators); 12 U.S.C. 5562(a) (joint investigatory work between CFPB
and other agencies).
Consumer Financial Protection Circulars are general statements of
policy under the Administrative Procedure Act. 5 U.S.C. 553(b). They
provide background information about applicable law, articulate
considerations relevant to the Bureau's exercise of its authorities,
and, in the interest of maintaining consistency, advise other parties
with authority to enforce Federal consumer financial law. They do not
restrict the Bureau's exercise of its authorities, impose any legal
requirements on external parties, or create or confer any rights on
external parties that could be enforceable in any administrative or
civil proceeding. The CFPB Director is instructing CFPB staff as
described herein, and the CFPB will then make final decisions on
individual matters based on an assessment of the factual record,
applicable law, and factors relevant to prosecutorial discretion.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-25138 Filed 11-22-22; 8:45 am]
BILLING CODE 4810-AM-P
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