CFPB Issues Advisory Opinion to Consumer Reporting Agencies to Remove “Facially False Data” to Maintain FCRA Compliance

Pursuant to its authority under Section 1022(b)(1) of the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion to consumer reporting agencies (CRAs), highlighting their obligation to screen for and eliminate obviously false data from consumers’ credit reports. Specifically, CRAs were instructed to implement policies, procedures, and systems to screen for and remove “logically inconsistent” information.

In its advisory opinion, the CFPB emphasized the negative effects that inaccurate reporting can have on consumers: “[I]naccurate, 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.”

The advisory opinion also provided examples of some of the types of logical inconsistencies that the CFPB contends “reasonable procedures to assure maximum possible accuracy” would screen for and eliminate:

- Inconsistent Account Information of Statuses, which may include:

• An account whose status is paid in full, and thus has no balance due but nevertheless reflects a balance due;
  
  
• An account that reflects an “Original Loan Amount” that increases over time, an impossibility by definition;
  
  
• Derogatory information being reported on an account, although that derogatory information predates an earlier report that did not include the derogatory information;

• 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;
  
  
• A Date of First Delinquency that post-dates a charge-off date; and
  
  
• A Date of First Delinquency, or date of last payment, that predates the account open date (for non-collection accounts).

- Illogical reporting of information relating to consumers, which may include:

• Impossible information about consumers — for example, a tradeline that includes a relevant date for an account that is in the future or for an individual account that either predates that consumer’s listed date of birth or that is impossibly far in the past;
  
  
• Information 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; and

- Illegitimate credit transactions for a minor.

According to the CFPB, complaints about incorrect information on consumer reports have represented the largest share of credit or consumer reporting complaints submitted to the CFPB each year for at least the last six years. The advisory opinion emphasized 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.”