FCRA and Withholding Negative Information from CRA
Bank is developing a new credit product to allow consumers to improve their credit scores. It will not report negative performance on such loans to consumer reporting agencies. Is this permissible?
Summary. The Fair Credit Reporting Act (“FCRA”) does not require a financial institution to report to a consumer reporting agency. Many of its provisions are concerned with resolving disputes regarding the accuracy of negative information reported by consumer reporting agencies. The contract between the bank and any consumer reporting agency will provide greater detail as to what information should be provided. Nevertheless, if a financial institution reports anything to a consumer reporting agency, it must report everything. FCRA requires information furnished to a consumer reporting agency to be complete and accurate. If it is not, the furnisher of the information must take steps to correct the information or to provide additional information. The guidelines of Regulation V, giving effect to FCRA, require the furnisher of information to a consumer reporting agency to have policies and procedures ensuring the accuracy and integrity of the information it provides, including information reflecting on the consumer’s performance on the account. A failure to provide negative information to a consumer reporting agency would therefore be a violation of the legal and regulatory requirements for consumer credit reporting.
ANALYSIS
The Fair Credit Reporting Act (“FCRA”) does not require a financial institution to report information to a consumer reporting agency. Many of its provisions are concerned with resolving disputes regarding the accuracy of negative information reported by consumer reporting agencies. The contract between the bank and any consumer reporting agency will provide greater detail as to what information should be provided.
Nevertheless, if a financial institution reports anything to a consumer reporting agency, it must report everything. FCRA prohibits a furnisher of information to a consumer reporting agency from furnishing information the person knows or has reasonable cause to believe is inaccurate or incomplete. 15 USC 1681s-2(a)(1)(A), 2(a)(2).
If a bank regularly and in the ordinary course of business furnishes information to one or more consumer reporting agencies about the bank’s transactions or experiences with any consumer, and bank determines that information it furnished “is not complete or accurate,” it has a duty to:
Promptly notify the consumer reporting agency of that determination and provide to the agency any corrections to that information, or any additional information, that is necessary to make the information provided…to the agency complete and accurate, and shall not thereafter furnish to the agency any of the information that remains not complete or accurate. 15 USC 1681s-2(a)(2).
Regulation V gives effect to FCRA. Appendix E to Regulation V provides the “Interagency Guidelines Concerning the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies” (the “Interagency Guidelines”). The Interagency Guidelines require each furnisher of information to consumer reporting agencies to establish and implement reasonable written policies and procedures concerning the accuracy and integrity of the information it furnishes. Among other things, such policies and procedures should:
- Reflect the terms and liability for those accounts or other relationships;
- Reflect the consumer’s performance and other conduct with respect to the account or other relationship;
Information provided should be updated as necessary to reflect the current status of the consumer’s account, including, for example, any cure of the consumer’s failure to abide by the terms of the account or other relationship. 12 CFR 1022.42. This implies that the information reported in the first place includes any failure by the consumer to abide by the terms of the account.
Under the legal and regulatory requirements for consumer credit reporting, therefore, the furnisher of information to consumer reporting agencies must take reasonable steps to insure that such information is complete and accurate, and this includes reporting negative information pertaining to the account. A failure to report that information would be a violation of those requirements.