CFPB Issues Circular on Investigation of Consumer Reporting Disputes

The CFPB has issued a circular (2022-07) to address “shoddy investigation practices” and “affirm that neither consumer reporting companies nor information furnishers can skirt dispute investigation requirements.”  

The Fair Credit Reporting Act (FCRA) requires both consumer reporting agencies (CRAs) and furnishers of information to CRAs  to conduct a reasonable investigation when properly notified of a dispute about information furnished in a consumer report.  The first question discussed in the circular is whether the FCRA permits CRAs and furnishers “to impose obstacles that deter submission of disputes.”

The CFPB indicates that CRAs and furnishers can violate the FCRA by requiring any specific format or specific attachment to a dispute, other than as described in the FCRA and regulations, as a precondition to conducting an investigation.  It gives the following examples of requirements that would not be permissible:

• A requirement by a CRA that a consumer must provide a recent copy of the consumer’s report or file disclosure before the CRA will investigate a dispute despite the consumer providing sufficient information to investigate the disputed information;
  
  
• A requirement by a furnisher that a consumer must 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; and
  
  
• A requirement by a CRA or furnisher that a consumer must attach a completed proprietary form before investigating the consumer’s dispute.

The CFPB notes that while a CRA or furnisher must reasonably investigate a dispute received directly from a consumer unless it has reasonably determined that the dispute is frivolous or irrelevant, a furnisher is not permitted to deem disputes as frivolous or irrelevant if the dispute has been provided to the furnisher from a CRA pursuant to FCRA Section 623(b).  Thus, a CRA or furnisher must reasonably investigate direct disputes that are not frivolous or irrelevant and furnishers must reasonably investigate all indirect disputes “even if such disputes do not include the entity’s preferred format, preferred intake forms, or preferred documentation or forms.”

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The second question discussed in the circular is whether CRAs need to forward to furnishers consumer-provided documents attached to a dispute.  A CRA can violate the FCRA by failing to promptly provide to a the furnisher “all relevant information” regarding the dispute that the CRA receives from the consumer.  The CFPB states that while there is no affirmative requirement for a CRA to provide original copies of documentation received from consumers, it would be difficult for a CRA to prove that it provided all relevant information if it failed to forward “even an electronic image of documents that constitute a primary source of evidence.”

The CFPB notes that, through its supervisory activity, it has found that CRAs “tend to ingest dispute information from consumers using automated protocols, and they also share dispute information with furnishers electronically” and that “[t]he use of these technologies has reduced the cost and time to transmit relevant information.”  Although a CRA might be able to show that it transmitted “all relevant information” about a dispute even if it did not provide original documents received in paper form, it will be difficult for the CRA to do so.  The CFPB states that “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,” 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.”