Accuracy and Integrity in Consumer Reporting – 2020 Supervisory Priority Refresher
Chances are, you or someone at your credit union took stock of NCUA’s 2020 supervisory priorities, which were released last month. If not, an overview of this year’s priorities and related resources is available to NAFCU members here. One item new to the list this year is the Fair Credit Reporting Act (FCRA) – specifically, NCUA will be looking at credit unions’ reporting policies and procedures including the accuracy of reporting to credit bureaus, “particularly the date of first delinquency.” So what are the requirements?
As a starting point, the FCRA does not require credit unions to report data to any consumer reporting agency (CRA), but many credit unions do so, making them “furnishers” of information under the Act. There are rules that apply not only when providing information relating to credit reports, like those provided by Equifax, Experian, or Trans Union, but any consumer report like those created by ChexSystems. The CFPB created a non-exhaustive list of CRAs which may be helpful.
The FCRA directed regulators to create guidelines to ensure information provided to CRAs is “accurate” and has “integrity.” These provisions are found in Subpart E of Regulation V (Part 1022) which sets forth the “duties of furnishers of information.” Additional guidelines are located in the rule’s Appendix E.
Accuracy & Integrity
What does it mean for information provided to CRAs to be accurate? This is a defined term in the rule. Accuracy means that the information a credit union provides to a CRA about an “account or other relationship with a consumer” correctly identifies the consumer and reflects:
- the terms of and liability for the account/relationship; and
- the consumer’s performance and other conduct with respect to the account/relationship.
Data provided to CRAs also must have integrity, which is also a defined term meaning:
- the information is substantiated by the credit union’s records at the time it is given to the CRA;
- the information is provided in a form designed to minimize the likelihood that the information may be incorrectly reflected in a consumer report;
- the credit union includes information about the account that, if absent, might be misleading in evaluating that consumer’s creditworthiness; and
- the credit limit is provided, if applicable.
Part I(b) of Appendix E includes objectives that help contextualize what is required for information to be accurate and have integrity.
Policy and Procedure Requirements
Section 1022.42 of Regulation V requires furnishers like credit unions to “establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information relating to consumers” that is provided to a CRA. Appendix E contains interagency guidelines on these policies and procedures. Specific components include but are not limited to:
- using standard data reporting formats and procedures for compiling and furnishing data;
- maintaining records for a reasonable time period to substantiate the accuracy of information that might be subject to a direct dispute;
- establishing appropriate internal controls, which might include “verifying random samples of information” provided to CRAs;
- conducting reasonable investigations of disputes; and
- conducting a periodic evaluation of both the credit union’s practices and the CRA practices “of which the [credit union] is aware.”
These are just a few examples, Appendix E is worth reviewing in full if evaluating a credit union’s duties as a furnisher of information to any CRAs or assessing a credit union’s policies and procedures in this area.
Date of First Delinquency
Finally, why is NCUA making a point to review reporting the date of first delinquency? The supervisory priorities do not explain this, but the CFPB’s recent supervisory highlights focused on consumer reporting may offer insight. In this report, the bureau noted that the date of first delinquency is an important piece of information for CRAs, creditors, and consumers because it “determines when information on a consumer report becomes obsolete and may no longer be reported.” However, in its supervision, the CFPB found that some lenders were reporting the date of first delinquency incorrectly, such as providing the date a vehicle was repossessed.
Section 623(a)(5) of the FCRA requires furnishers of information to provide the date of delinquency to the CRAs. Specifically, if a credit union reports an account as in being in collections or similar, the credit union is required to provide the CRA the month and year that the delinquency began within 90 days of furnishing such negative information. Reporting a repossession date as the date of first delinquency would typically be several months after the date of the first missed payment, impacting the length of time the negative information remained on the consumer report.
For more information, the Federal Trade Commission (FTC) published 40 Years of Experience with the Fair Credit Reporting Act which contains some useful, although non-binding. insights from when that regulator held rulemaking authority for the FCRA. A past issue of our Compliance Monitor includes an article some NAFCU members may find helpful, A Furnisher’s Guide to the FCRA. If you’re reviewing your credit union’s FCRA compliance more broadly, members may also find Unraveling the Risk-Based Pricing Notice Requirements useful on that subject. NAFCU members can also reach out to our compliance team for direct assistance as well.