New Rules for Consumer Reporting Accuracy and Direct Disputes

New Rules for Consumer Reporting Accuracy and Direct Disputes


Furnishing inaccurate information about consumers to consumer reporting agencies (CRAs) can be both costly and time-consuming for furnishers and consumers alike. Consumer report information is used widely to determine a consumer’s eligibility for credit, employment and insurance. Inaccurate information can affect an individual’s eligibility and may be damaging to his or her reputation. Furnishers of inaccurate information are responsible for responding to consumer report accuracy disputes and may be subject to litigation as well as regulatory review and enforcement.

In response to concerns regarding the accuracy and integrity of consumer report information, and to provide another method for consumers to dispute inaccurate information directly with the furnisher of this information, Congress enacted the Fair and Accurate Credit Transactions Act of 2003 (FACT Act). This incorporates and extends the Fair Credit Reporting Act (FCRA), which had preemption provisions due to expire in December 2003. In addition, the federal banking agencies and the Federal Trade Commission published specific regulations to address these concerns. While these regulations will become effective on July 1, 2010, furnishers should be proactive by assessing current processes and developing thorough implementation plans to address program gaps and the new regulatory requirements.

These new requirements apply substantially to all companies that furnish consumer report data to CRAs. It is important to note that “consumer report” includes more than the familiar credit report regarding a consumer’s performance on financial obligations; rather, it is defined broadly to include “any written, oral or other communication by a [CRA] bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living” used to determine a consumer’s eligibility for credit, insurance, employment or other permissible purpose under the FCRA.1

Challenges and Opportunities

The FACT Act imposes new compliance requirements on furnishers of consumer report information. Specifically:

  • Furnishers must establish reasonable written policies and procedures regarding the accuracy and integrity of consumer report information furnished to the CRAs that should:
    • Be customized to the nature, size, complexity and scope of its activities;
    • Establish technological standards, employee training and monitoring of its reporting practices; and
    • Be updated periodically to reflect changes to the organization.
  • Furnishers must conduct reasonable reinvestigations in response to consumer report accuracy-related disputes received directly from consumers and must:
    • Establish a mechanism to receive such disputes from consumers;
    • Develop standards for evaluating the sufficiency of information received from a consumer, including classification of disputes as frivolous or irrelevant; and
    • Implement a process to investigate and respond to such disputes and make updates to information previously furnished to the CRAs, as necessary.

Furnishers should take steps as early as possible to enhance processes and develop clear policies and procedures to overcome potential implementation challenges, such as:

  • Poorly documented processes by which consumer report information is furnished to the CRAs from the source system(s) of record, requiring coordination with operations and IT resources and third-party vendors
  • Inadequate management monitoring related to consumer report accuracy and integrity
  • Lack of training to recognize when written consumer correspondence constitutes a consumer report accuracy dispute
  • Inadequate resources to research and respond to direct consumer reporting accuracy disputes

Our Point of View

The keys to the effective implementation of these new requirements include the following actions:

  • Assess current consumer reporting and dispute processes and conduct a gap analysis to compare against the new regulatory requirements.
  • Establish a cross-functional team, including representation from sales, operations, compliance and legal, to develop and implement appropriate policies and procedures.
  • Conduct robust training on the new requirements and processes, focusing on customer delivery and service.
  • Develop regular monitoring of these processes to detect and resolve irregularities and identify enhancement opportunities.

How We Help Companies Succeed

Our Regulatory Consulting professionals can help your institution meet the challenges of complying with the new FCRA requirements in numerous ways:

Implementation Project Management – We can assist with:

  • Documenting consumer reporting and dispute processes
  • Developing and/or enhancing existing policies, procedures and internal monitoring programs
  • Developing and delivering training materials

Compliance Readiness Assessment – We can review your program prior to or shortly following the mandatory date to evaluate criteria such as:

  • The sufficiency of policies and procedures related to consumer report accuracy and integrity
  • Processes to log, research and respond to consumer reporting accuracy disputes received directly from consumers
  • The completeness of compliance training provided to personnel responsible for complying with the new requirements

Internal Audit Services – We can provide outsourced or co-sourced internal audit support related to the new FCRA requirements, including an assessment of your institution’s compliance management program as well as a transactionlevel compliance assessment, with a focus on identifying compliance risks and potential control weaknesses. We can then provide recommendations to enhance your program and minimize regulatory criticism.


A regional U.S. bank engaged us to conduct an internal audit of the consumer reporting and dispute resolution processes in its mortgage, consumer and credit card lending divisions, and provide recommendations to enhance these processes.

First, we mapped the credit report information the bank furnished to the CRAs to the source systems of record and compared this information to industry reporting guidelines to identify potential deficiencies. We also reviewed the bank’s processes to identify and respond to consumer report accuracy disputes and compared the results of the bank’s reinvestigations to the original disputes and the bank’s records to ascertain the appropriateness and completeness of the responses.

In response to our audit recommendations, the bank established a cross-division team that standardized its processes throughout the organization and implemented internal monitoring procedures to identify and mitigate further process risks. The bank’s processes were later examined by its regulatory agency, which noted no further findings.


Carol Beaumier
Michael Brauneis
Steven Stachowicz

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