The CFPB recently issued an advisory opinion to consumer reporting companies about their obligation to prevent obviously false “junk data” from appearing on consumers’ credit reports.  The opinion states that companies must take steps to reliably detect and remove logically inconsistent data from consumers’ credit reports such as information that is obviously impossible.

“When a credit report accuses someone of defaulting on a loan before they were born, this is nonsensical, junk data that should have never shown up in the first place” said Director Chopra in remarks about the opinion.  He also stated that “[c]onsumer reporting companies have a clear obligation to use better procedures to screen for and eliminate conflicting information, or information that cannot be true.”

Under section 607(b) of the Fair Credit Reporting Act, consumer reporting companies must “follow reasonable procedures to assure maximum possible accuracy” of the information they collect and report.  The advisory opinion is intended to serve as a reminder to consumer reporting agencies “that the failure to maintain reasonable procedures to screen for and eliminate logical inconsistencies, to prevent the inclusion of facially false data in consumer reports, is a violation of [section 607(b)].”

The opinion states that a consumer reporting agency’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 such that, if included in a consumer report, at least one item of information therein would necessarily be inaccurate. The opinion provides the following examples of logically inconsistent account information or statuses:

• “An account whose status is paid in full, and thus has no balance due but nevertheless reflects a balance due;
• An account that reflects an “Original Loan Amount” that increases over time, an impossibility by definition; and
• Derogatory information being reported on an account, although that derogatory information predates an earlier report that did not include the derogatory information.”

The opinion further states that a consumer reporting agency’s policies and procedures should further identify and prevent illogical reporting of a Date of First Delinquency in connection with an account and provides examples of an illogical Date of First Delinquency.

 The opinion also addresses the need for a consumer reporting agency’s policies and procedures to identify logical inconsistencies in consumer information such that, if included in a consumer report, some of the information therein would necessarily be inaccurate. Such inconsistencies include impossible information about consumers and information about consumer accounts that is plainly inconsistent with other reported information, such that one piece of information must be inaccurate.

The opinion advises that consumer reporting company’s policies, procedures and internal controls should further identify and prevent reporting of illegitimate credit transactions for a minor. It states that “minors generally cannot legally enter into contracts for credit except in limited circumstances, including applications for student loans, for emancipated minors, or as credit card authorized users.”  The CFPB notes that minors, particularly minors in the foster care system, are more susceptible to identity theft and inaccurate credit history information.

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