Pub. 14 2017 Issue 1

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S 18 CFPB Complaints: Spotlight on Credit Reporting I f you’re looking to see what regulators are going to look for next, complaints are a good place to start. The February complaint report from the CFPB spotlights credit reporting complaints, so it may be a good time to review your FCRA policies and procedures. The three big credit reporting agencies - Equifax, TransUnion, and Experian - have consistently topped the charts for complaints received from consumers at the CFPB. Only one financial insti- tution, Wells Fargo, beat the credit bureaus out in the number of complaints received, likely due to several recent scandals at the company. To be fair, the credit bureaus are used by just about ev- ery financial institution in the country. The CRAs, by far, handle more consumer information than any other financial institution. Incorrect information on credit reports was the number one complaint levied on the reporting agencies. Complaints related to incorrect information account for 76% of the total credit report- ing complaints. Complaints related to credit reporting company investigation came in a distant second at 9%, followed by an in- ability to obtain a report or score, improper use of a credit report, and credit monitoring or ID protection. Some of the more specific complaints include: • Difficult process for disputing information. • Consumer reporting agencies attempting to refer consumers to the data furnisher first (i.e. the creditor) instead of trying to address the complaint directly. • Process for removing information due to ID theft was too com- plicated. • Incorrect information such as false addresses and unrecog- nized names appearing on the consumers’ credit report – re- ports often include information from people with similar names or other family members. • Complaints of unauthorized requests for credit information, • Transparency of “factors” in credit reporting. • Reporting accounts in bankruptcy. As these complaints on CRAs continue to pour in, it is ex- pected that regulators will continue putting pressure on the CRAs to fix their problems. This will inevitably roll downhill with the CRAs putting more pressure on furnishers, including financial institutions, to improve on the accuracy of the infor- mation provided. Now is a good time to go back and review how your bank handles credit information. What can you do to get ahead of the ball? Go over your current policies and procedures. Your bank may have grown in size, complexity, and the services you offer over the last few years. If your policies, procedures and controls hav- en’t kept up, then it is time to review and revamp them. Next, look at how you bank verifies and furnishes information. Review any complaints, either direct or through a CRA, about the accuracy of information provided to the bureaus. Complaints are the best way to identify which areas need attention, and also one of the first areas where examiners will probe. Additionally, you should also go back and check when your bank pulls credit reports, and who pulls them. The FCRA provides specific permissible purposes of when a creditor can pull a consumer repot, the most common for financial insti- tutions being: written consent, in connection with a credit transaction (i.e. an application for credit), employment pur- poses, in connection with buying or selling a loan to or from an investor, or to “review” a current account. As noted above, many of the complaints received by the CFPB were in regard to creditors pulling credit without au- thorization. Transparency is a best practice here. Even if you have a legitimate reason to pull credit without consent, such as a credit application, best practice would dictate that you be upfront with the customer and let them know that you are pulling credit on them to avoid surprises. On a positive note, the CFPB did mention that Equifax, TransUnion and Experian all provided timely responses to complaints and inquiries. Your bank should endeavor to do the same, though many banks are finding certain con- sumers are abusing the complaint process, often utilizing an attorney or “debt relief” service that send out robo-com- plaints like clockwork. Unfortunately, there isn’t much a bank can do with these sorts of complaints other than to respond to each and every duplicative and frivolous claim. The FCRA has now been around for decades and all of the requirements and complaints should be familiar. The difference now is that consumers have a direct line to the CFPB to launch complaints. Unfortunately, it isn’t clear how or if the CFPB actually vets these complaints. Many of the complaints are no doubt legitimate, however it is difficult to determine how many complaints are actually true. The CFPB does little to investigate the veracity of such claims. Indeed, a consumer who’s denied a loan is more likely to take their frustration out on creditors than a happy customer. Perhaps the CFPB should solicit remarks from satisfied customers as well, that way the industry would at least know what it was doing well.  By Dimitris Rousseas, Compliance Alliance