CFPB Issues Advisory Opinion on Fair Credit Reporting and Facially False Data

The CFPB issued an advisory opinion highlighting the obligations of a consumer reporting agency (CRA) under the Fair Credit Reporting Act (FCRA) to maintain reasonable procedures to screen for and eliminate facially false data in consumer reports.  The advisory opinion became effective on October 26, 2022.

In the advisory opinion, the CFPB recognized that consumer report accuracy depends on various parties in the consumer reporting system, including entities such as creditors who furnish information to CRAs.  However, the opinion states that CRAs are uniquely positioned to identify certain obvious inaccuracies, and can implement policies, procedures, and systems to keep such logical inconsistencies off consumer reports.

The advisory opinion explains that, to support the goal of accurate credit reporting, FCRA requires that CRAs follow reasonable procedures when preparing consumer reports to assure maximum possible accuracy of the information concerning the individual about whom the report relates.  According to the CFPB, this requires that CRAs implement and maintain reasonable screening procedures designed to identify and prevent the inclusion of facially false data in the consumer reports they prepare.

The CFPB states that a CRA’s policies and procedures should be sufficient to detect tradelines with account statuses or codes that are plainly inconsistent with other information reported for that same account.  Examples of such inconsistencies include: (i) an account whose status is paid in full, and thus has no balance due but nevertheless reflects a balance due; (ii) an account that reflects an “Original Loan Amount” that increases over time, an impossibility by definition; and (iii) derogatory information being reported on an account, although that derogatory information predates an earlier report that did not include the derogatory information.  Additionally, the advisory opinion states that the CRA’s policies and procedures should further identify and prevent illogical reporting of a Date of First Delinquency in connection with an account.

The CFPB further states that a CRA’s policies and procedures should identify logical inconsistencies in consumer information.  Examples include: (i) impossible information about consumers; and (ii) information about consumer accounts that is plainly inconsistent with other reported information, such that one piece of information must be inaccurate.  Additionally, the advisory opinion states that the CRA’s policies and procedures should further identify and prevent reporting of illegitimate credit transactions for minors, as they may face heightened risk of identity theft.