Even minor inaccuracies on a credit report can lead to a consumer being denied a loan, housing, or a job. As a result, it is critical that consumers have a meaningful opportunity to correct errors or inaccuracies when they are identified. Over the years, however, companies have relied on a series of legally dubious arguments to try to prevent consumers from being able to resolve problems on their credit reports — and protect themselves from being held accountable — when mistakes are made.
As the federal government agency charged with implementing and administering the federal consumer financial laws, the CFPB is committed to ensuring that companies follow the law. For that reason, the CFPB and the Federal Trade Commission (FTC), which together with the CFPB helps enforce fair credit reporting laws, filed an amicus brief yesterday in the U.S. Court of Appeals for the Third Circuit in Ingram v. Waypoint Resource Group, LLC, to ensure that businesses that provide information to credit reporting companies comply with the law and investigate potential inaccuracies or errors as required.
The responsibility of furnishers to investigate disputes
The Fair Credit Reporting Act (FCRA) provides consumers multiple ways to dispute inaccurate information on their credit reports. Commonly, consumers dispute the accuracy of information on their credit reports with the credit reporting company, such as Experian, Equifax, or TransUnion. In response, the credit reporting company often refers the dispute to the furnisher, which is the business that originally provided the disputed information. Consumers may also dispute the accuracy of information on their credit reports directly with the furnisher. For example, if a consumer’s credit report incorrectly states that a consumer has an outstanding credit card balance, the consumer can submit a dispute to the credit card company itself, file a dispute with the credit reporting company, or both.
When a consumer submits a dispute to a credit reporting company and it is passed along to the furnisher, the furnisher is then required to conduct its own investigation into the disputed information and report the results of its investigation back to the credit reporting company. Despite this clear obligation, some furnishers have argued that they are free to ignore disputes they decide are without merit.
The brief filed with the FTC indicates that a furnisher is required to investigate any dispute forwarded to it by a credit reporting company and can’t avoid that obligation by claiming a dispute is “frivolous.” Here are three reasons why.
FCRA is clear and unambiguous
First, the text of the FCRA is unambiguous. There is nothing in the statute that exempts a furnisher from investigating frivolous disputes forwarded by credit reporting companies. If Congress intended to allow furnishers not to investigate disputes that they thought were frivolous, it knew how to say so. In fact, in other parts of the statute, Congress expressly provided that certain frivolous disputes don’t need to be investigated.
Consumers have the right to be notified and informed of their options
Second, consumers are entitled to receive notice of the outcome of their disputes and to be informed of their options. When the FCRA, in other contexts, states that some disputes don’t need to be investigated, it consistently requires that the consumer be notified and advised of what additional information is necessary for the dispute to be investigated. If furnishers could just ignore disputes referred to them by credit reporting companies, that could create an unintended loophole that would allow the dispute to disappear into a proverbial “black hole.”
Credit reporting companies already serve as gatekeepers for frivolous disputes
Third, the FCRA already provides protection to furnishers from investigating frivolous disputes. The statute allows credit reporting companies to filter out frivolous disputes before forwarding them to furnishers. In that sense, the credit reporting companies play the role of gatekeeper. Since the credit reporting companies already have the ability to screen out frivolous disputes, there is no reason to allow furnishers to reject disputes they deem to have no merit.
Consumer reporting companies and furnishers have great power over consumers’ lives, and we’re committed to ensuring that those companies meet their obligations, including by investigating and correcting errors on consumer reports. As part of our mission to protect American consumers, Congress has charged us with implementing and administering the federal consumer financial laws. We have accordingly filed friend-of-court briefs in several other recent FCRA cases pending before federal courts of appeals to ensure that companies comply with the law. We have also taken action to safeguard the ability of state legislators and law enforcers to police the credit reporting markets, so that consumers have places to go and effective actions to take when they encounter problems.
The case is Ingram v. Waypoint Resource Group, LLC, No. 21-2430 (3d Cir.).