As we begin the new year, many auto finance companies start planning their annual compliance procedure review. If the September and December 2019 Consumer Financial Protection Bureau (CFPB) Supervisory Highlights were any indication, there will be an increased focus on credit reporting policies and compliance with the Fair Credit Reporting Act (FCRA) and related rules in 2020. Auto finance companies that furnish information to credit reporting agencies should review these 7 credit reporting compliance requirements that were noted in the CFPB’s recent Supervisory Highlights.
1. Conduct timely reviews of disputes.
Auto loan furnishers – companies that provide consumer information to credit bureaus – must respond to disputes received by credit reporting agencies or consumers in a timely manner (typically 30 days). This includes implementing procedures to receive notice of disputes, investigate the disputes, and then respond in a timely manner. To help avoid issues, the companies should have a systematic method to track disputes and policies that contain specific details on the types of information or locations individuals should use to investigate a dispute.
2. Update credit reporting agencies of corrected information after an investigation.
After a dispute and investigation, an auto loan furnisher may need to update a consumer’s information. The companies have a duty to report the corrected information to the credit reporting agency that sent the dispute and all other credit reporting agencies that were previously sent the information.
3. Notify credit reporting agencies of any previously furnished information that is incomplete or inaccurate.
Credit reporting laws require auto loan furnishers to update credit reporting agencies of any previously provided information that is incomplete or inaccurate. As a practical pointer, these companies should review their compliance procedures for policies to update credit reporting agencies of any accounts that are paid-in-full or settled-in-full. Further, if a company determines that an account had been opened as a result of identity theft, the furnisher should notify applicable credit reporting agencies of the corrected information.
4. Provide credit reporting agencies of disputed information under a notice of dispute.
If a customer disputes information to an auto loan furnisher, then the company can only provide the disputed information to a credit reporting agency if they inform the credit reporting agency that such information is under dispute. The companies should implement policies, procedures, and trainings with employees to capture a notice of dispute and correctly notify credit reporting agencies of any information that is under dispute.
5. Investigate identity theft allegations.
The CFPB recently noted that one or more auto loan furnishers did not have policies for conducting reasonable investigations of indirect disputes that contain allegations of identity theft. In order to conduct a reasonable investigation, the company should review internal records of fraud investigations before completing the identity theft dispute investigation and notifying a credit reporting agency.
6. Report an accurate date of delinquency.
Auto loan furnishers should review their policies to confirm that they are reporting the correct date of delinquency. The FCRA states that the date of delinquency is the month and year of the commencement of the first delinquency on the account. The date of delinquency is typically the date of the first missed payment – not the date of repossession of the vehicle.
7. Create and maintain effective policies and procedures.
At the end of the day, this comes down to creating and maintaining effective policies and procedures to preserve the accuracy and integrity of information reported to credit reporting agencies. Policies must be reasonable for the organization. But more than creating policies, companies need to take the extra step to make sure that their policies are implemented correctly.
As auto loan furnishers review their credit reporting policies, checking these 7 hot-button issues will help avoid issues with the CFPB and improve FCRA compliance.
Jeremy Rzepka is an Associate in McGlinchey Stafford’s Cleveland office, where he provides regulatory and compliance counsel to banks, finance companies, mortgage companies, and online lenders. He can be reached at [email protected] or (216) 455-5066.