How ‘Furnishers’ Can Avoid Trouble with the Feds

The Consumer Financial Protection Bureau is targeting violations of strict rules for so-called “furnishers,” including auto lenders, plus in many cases their vendors, and potentially some independent dealers and buy-here, pay-here dealers, assuming they all furnish consumers’ nonpublic personal information to credit reporting bureaus.

For instance in August 2014, the CFPB reached a consent order with First Investors Financial Services Group of Houston, for failing to furnish accurate customer data to credit reporting agencies. The lender agreed to pay a fine of $2.75 million.

In general a good rule of thumb is, “if you didn’t document it, it didn’t happen,” said Richard Hudson, Dealer Management Systems Manager – Customer Support at DealerSocket. Hudson recently shared a list of “Top 5 deadliest mistakes” in credit reporting:

1. Untrained staff. Hudson recommends training – and documenting that the training is up-to-date – at least twice a year. Requirements change, so it’s vitally important that training isn’t just accomplished one time and then put on a shelf.
2. Failing to document procedures. Regulators expect companies to document “reasonable procedures” to insure the accuracy and integrity of consumer data that is furnished to credit reporting bureaus. For instance, Hudson said a furnisher should be able to show it has procedures in place to document if a repo is voluntary – which therefore shouldn’t show up on a consumer’s credit report as a charge-off.
3. Slow responses to consumer disputes. Companies must complete investigations within 30 days from the date the consumer filed. Failure to do this can lead to punitive damages on top of actual damages, he said.
4. Procedures that no longer fit. It’s important that as the business grows in size and complexity, compliance procedures should also grow appropriately in size and complexity, Hudson said.
5. Being unaware of your responsibilities as a furnisher. Ignorance is no excuse, Hudson said.

“One of the most important things is to make sure you employees are educated,” he said. The Consumer Data Industry Association can be a big help in training, Hudson said, including programs to certify data furnishers.

DealerSocket is a software provider that provides dealerships with solutions for marketing, sales, service, customer experience and data mining. Hudson said franchised dealerships aren’t usually legally defined as “furnishers,” but some independent dealerships and buy-here, pay-here dealers may be.

“A furnisher is anyone who sends consumer reporting data to one of the credit bureaus,” Hudson said. “Like, ‘John Doe paid on time,’ or ‘John Doe applied to a bank for a loan.’ That’s consumer information, and they can find themselves in trouble.”