On January 3, the Consumer Financial Protection Bureau (CFPB) released its annual report detailing what it characterized as “improvements and deficiencies” in the nationwide consumer reporting agencies’ (NCRAs) responses to complaints. The Fair Credit Reporting Act (FCRA) requires the CFPB to submit this annual report to Congress. While in last year’s report, the CFPB said that it had concluded that, in most instances, the NCRAs did not satisfy their FCRA obligations to review certain complaints and to report outcomes to the CFPB, this year’s report acknowledges that the NCRAs’ complaint responses have improved significantly.

The data used by the CFPB in its report came from two primary sources. First, complaint data collected during the consumer complaint process. From October 2021 to September 2022, the CFPB received nearly one million complaints. Of these, the CFPB sent 488,000 to the NCRAs, of which about 65% were covered complaints, i.e., complaints about incomplete or inaccurate information where a consumer appears to have previously disputed the information with the NCRA. Notably, while consumer reporting complaint volume had increased substantially over the past three years, this year the increase appears to have largely leveled off. The second category of data used in the report was collected from a set of focus groups and interviews conducted by the CFPB with 44 renters from low-to-medium income households to understand their experiences with credit reports and scores.

Among other findings from the report, the CFPB found:

• The NCRAs’ complaint responses have improved significantly.
  • In 2020 and 2021, the CFPB found most complaints received one of two response types:
    • A response indicating the NCRA was referring the complaint to its dispute channel; or
    • A response indicating the NCRA would not respond to the complaint because it suspected third-party involvement.
  • Recent complaint data show that the use of both response types has declined substantially in recent months. Most complaints now receive substantive responses.
• The NCRAs are providing more tailored responses.
  • The CFPB’s process allows companies up to 60 calendar days to provide a final response to the CFPB and the consumer. By late 2020, the NCRAs closed most complaints in just a few days, shorter than the CFPB considered feasible for a full investigation. This trend has since reversed. In August 2022, nearly 64% of complaints took 30 days or more to receive a response.
  • The written responses provided by the NCRAs to consumers and the CFPB have also improved. Most responses now describe the outcomes of consumers’ complaints, even when the NCRAs report that relief was not provided.
• The NCRAs are reporting greater rates of relief in response to complaints.
  • In 2021, the NCRAs reported providing relief in response to less than 2% of complaints. That trend has reversed with one NCRA reporting providing relief in response to nearly half of complaints.

The CFPB report concluded with the following recommendations for NCRAs moving forward:

• NCRAs should assess whether their efforts to automate processes shifts burden to consumers.
  • When companies consider introducing automated mechanisms into processes that affect consumers, particularly those that relate to a legal right, they should consider what burden they are creating, if any, for consumers.
  • For example, according to the CFPB, NCRAs have sought to evade the obligation to investigate disputes by requiring consumers to submit particular items of information or documentation with a dispute before the entity will conduct its investigation.
• NCRAs should consider how current processes will need to evolve in light of new technologies.
  • The use of technology, such as automation, is not exclusive to companies. Consumers also increasingly use technology to eliminate or reduce the time spent on burdensome tasks. To the extent that NCRAs have optimized systems based on a certain view of human behavior, as new technology emerges, they will need to reevaluate their systems.
  • One example is third-party screens that block complaints because of their similarity to other complaint narratives. The NCRAs assert that text similarity is an indicator of third-party activity, but it is becoming increasingly difficult to discern whether a human or a machine is the author of a text.
• Policymakers and market participants should consider how best to give consumers control over their data.
  • According to the CFPB, the landscape is shifting and pointing towards a world where consumers have more control over their data. Policymakers and market participants can shape the future of collecting, using, and sharing consumers’ data in a manner that navigates successfully from surveillance to participation.

Troutman Pepper will continue to monitor important developments involving the CFPB and the consumer reporting industry and will provide further updates as they become available.