State AG – Credit Bureaus Settlement: What Furnishers Need to Know - More than 30 state attorneys general reached a settlement with three national credit reporting agencies that will require changes to certain business practices.

Ballard Spahr LLP

Last week, Ohio Attorney General Mike DeWine issued a press release announcing the results of a multi-state investigation into the three national credit reporting agencies (CRAs) - Equifax Information Services LLC, Experian Information Solutions Inc., and TransUnion LLC. DeWine and 30 other state attorneys general reached a settlement with the CRAs that will require the CRAs to change certain business practices to purportedly benefit consumers. Although the settlement applies only directly to the CRAs, regulatory pressure may be brought to bear on other consumer reporting agencies to get them to conform to the terms of the settlement. In addition, many of the required changes will also impact the approximately 10,000 furnishers that provide information to the CRAs. Any company acting as a furnisher under the Fair Credit Reporting Act (FCRA) should be prepared to update its procedures for furnishing information to reflect the following settlement requirements:

- CRA Monitoring / Discipline

  • CRAs are required to review and update the terms of use agreed to by furnishers using e-Oscar, as well as the Automated Credit Dispute Verification (ACDV) and Automated Universal Dataform (AUD) certifications made by furnishers through e-Oscar, the automated system that enables CRA and furnisher to create and respond to consumer credit history disputes.
  • CRAs are required to analyze data on disputes to determine whether action should be taken to enhance the e-Oscar system and furnisher conduct in processing automated consumer disputes.
  • CRAs are required to establish a working group to share best practices for monitoring furnishers.
  • CRAs must implement policies to monitor the performance of individual furnishers.
  • CRAs must take corrective action, when reasonably necessary, with respect to furnishers that fail to comply with furnisher obligations and reinvestigation requirements.
  • CRAs are required to provide semi-annual reports to the states containing aggregated furnisher metrics. However, CRAs must also provide records and reports about individual furnisher evaluations and material corrective actions upon a state’s request. (This reporting appears to differ from the reporting about furnishers required by the CFPB.).

- Debt Collection / Debt Buying

  • CRAs are required to reject data furnished by collection agencies and debt buyers that do not include the name of the original creditor and specified creditor classification codes.
  • CRAs are required to take corrective action against furnishers who misreport or misuse creditor classification codes on a recurring basis, including the use of a default value.
  • CRAs will no longer report debt that does not arise from a consumer contract or agreement to pay (i.e., parking tickets, fines, etc.).
  • CRAs will periodically remove or suppress collection accounts that have not been updated by the collection furnisher within the last six months.
  • CRAs must instruct collection furnishers to accurately report when collection accounts are sold, transferred, or are no longer being managed by the furnisher.
  • CRAs are required to remove or suppress known medical collections if such debt has been reported paid by a consumer’s insurance coverage.

- After a “reasonable notice period,” CRAs will no longer accept furnisher information in the Metro 1 data reporting format, but only Metro 2 formatted data.

- CRAs are required to form a working group to establish minimum standards for the type of information that furnishers must report for newly opened trade lines or collection data in order for the CRAs to accept the data. For example, CRAs are prohibited from reporting information furnished about authorized users unless a date of birth also has been furnished on new accounts.

- CRAs must send a consumer’s supporting documents to the furnisher as part of the complaint or dispute process.

The changes required under the settlement will be implemented in three phases to allow the CRAs to update their IT systems and to implement the new procedures with the furnishers. All changes are required to be implemented by August 12, 2018.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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