The Consumer Financial Protection Bureau (CFPB) has published a circular addressing “shoddy investigation practices” by consumer reporting agencies (CRAs). In its report, the bureau affirmed that CRAs could not avoid their responsibilities to investigate and resolve consumer disputes. Furthermore, the bureau added that federal and state authorities may bring enforcement actions for failure to perform reasonable investigations.

According to the CFPB, supervisory exams have found that some CRAs and furnishers failed to perform reasonable investigations in response to consumer disputes. Furthermore, the CRAs and furnishers did not attempt to understand the reported errors. As a result of their failures to correct these errors, consumers can suffer from a loss of employment, housing, credit opportunities, and more.

In a new release, CFPB Director Rohit Chopra stated, “One wrong piece of information on a person’s credit report can have destructive consequences that follow a consumer for years. Companies that fail to properly address consumer disputes in accordance with the law may face serious consequences.”

When consumers find inaccurate information on their consumer reports, the Fair Credit Reporting Act (FCRA) gives them the right to dispute it with the provider. However, CRAs and furnishers must perform a reasonable investigation to resolve the errors for this right to be effective. Unfortunately, the CFPB revealed that this does not always happen.

The CFPB receives many complaints; the most common include inaccurate reporting and failure to investigate. However, the CFPB has also discovered that some CRAs may ignore the results of required investigations and delete the disputed tradeline rather than correct the error.

The Consumer Financial Protection Bureau (CFPB) has issued a warning to credit reporting agencies (CRAs) and furnishers that failure to properly investigate and resolve valid disputes could lead to legal liability under the Fair Credit Reporting Act (FCRA). The CFPB emphasized that not only can they pursue such claims, but other federal and state regulators or consumer protection agencies can as well. The CFPB also outlined two specific examples of investigation responsibilities.

  • CRAs must provide furnishers with all relevant information concerning consumer disputes: Once receiving a dispute, CRAs must notify the applicable data furnisher within five business days. This notice must include all pertinent information that the consumer has provided.
  • CRAs and furnishers cannot limit consumers’ right to dispute: CRAs and furnishers must perform a reasonable investigation of all directly filed disputes. In the case of furnishers, they must also investigate all indirect disputes forwarded by CRAs. This requirement is true regardless of whether a consumer uses the organization’s preferred methods or format for disputes.

In recent months, the CFPB has considerably boosted its enforcement and guidance activities toward consumer reporting agencies. As a result, it is more important than ever for employers, housing providers, and others to ensure that they work with a trusted background check provider. The right provider will ensure they avoid potential liabilities.

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.