Operations Guide

CreditBureaus

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Published by insideARM.com an iA Company 6010 Executive Blvd, Suite 802, Rockville, Maryland, 20850 editor@insideARM.com | 240.499.3834 | www.compliancePF.com Copyright © 2015 All rights reserved Printed in the United States of America This publication is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out, or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser. The scanning, uploading, and distribution of this publication via the Internet or via any other means without the permission of the publisher is illegal and punishable by law. Please purchase only authorized editions.

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Legal Disclaimer This information contained in this report is not intended to be legal advice and may not be used as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure this information is up-to-date. It is not intended to be a full and exhaustive explanation of the law in any area, however, nor should it be used to replace the advice of your own legal counsel.

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Table of Contents

Contributors .................................................................................................................................................. 5

How to Use This Operations Guide ............................................................................................................... 6

Introduction .................................................................................................................................................. 7

The Main Areas of Liability............................................................................................................................ 8

Damages .................................................................................................................................................... 8

Reportable Information ................................................................................................................................ 9

Reporting Date of Delinquence ................................................................................................................ 9

Accounts in Collections ........................................................................................................................... 11

Duties of Data Furnishers ............................................................................................................................ 13

Definition of a Data Furnisher ................................................................................................................. 13

Important Elements of Accurate Reporting ............................................................................................ 13

Implement Credit Reporting and Disputes Compliance Program .......................................................... 15

Common Errors ....................................................................................................................................... 16

Identifying Information Checklist............................................................................................................ 17

Rules Addressing Accuracy/Integrity of Reported Information & Direct Disputes ..................................... 18

Identity Theft .............................................................................................................................................. 19

Permissible Purpose .................................................................................................................................... 20

e-OSCAR ...................................................................................................................................................... 22

Questions/Answers from the Credit Bureaus Webinar .............................................................................. 23

Due to nonpayment of a loan, a lender charges off a loan and reports to the credit bureaus. ............. 23

Does a trade line fall off seven years from the date of delinquency, or seven years plus 180 days from the day of delinquency? .......................................................................................................................... 24

Are there any state laws that have stricter provisions of the FCRA and the statute of limitations to report a trade line? ................................................................................................................................. 24

Must accounts be marked disputed and agencies notified when written disputes come in thorough e-OSCAR and by mail? ................................................................................................................................ 25

How do I answer vague disputes through e-OSCAR? ............................................................................. 26

Must I send a personally written letter directly to the consumer in answer to every written dispute letter? ...................................................................................................................................................... 26

Is it allowable to delete accounts when settled and requested? ........................................................... 27

Do you have to report deferrals on medical bad debt? ......................................................................... 27

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Appendix A: Transcript, insideOperations Credit Bureau Webinar ............................................................ 28

Appendix B: insideOperations Credit Bureau Webinar Slide Deck ............................................................. 57

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Contributors

David Kaminski Carlson & Messer Email: kaminskid@cmtlaw.com Phone: 310.242.2200

David Kaminski is a partner at Carlson & Messer LLP, and specializes in the defense of banks, collection agencies and creditors in all areas of financial services litigation. He is a recognized authority regarding consumer litigation laws and regularly gives presentations at the leading industry trade organizations throughout the U.S. He is a frequent contributor to numerous trade publications and is the 2013-2015 Chair of the Member Attorney Panel of the ACA, Int’l. He has substantial experience in class action and MDL litigation. David serves as outside

compliance counsel to creditors and collection agencies and has developed policies and compliance/training programs to minimize their risks of liability. He regularly defends clients in investigations and proceedings initiated by the CFPB, FTC, FCC, and other federal and state government and regulatory agencies. http://cmtlaw.com/cm/

Jen Maisano Credit Bureau Strategy Consulting, LLC Email: jen@cbstrategyconsult.com Phone: 410.208.6797

Jennifer Maisano , President & CEO of Credit Bureau Strategy Consulting, LLC, has more than 18 years of experience in the Financial Industry including Credit Bureau Strategy and Reporting, Credit and Fraud Risk Management, Credit Bureau Vendor Management, Credit Policy, Risk Systems and Compliance. Since forming CBSC in 2007, Jennifer’s focus has been on developing and implementing comprehensive Credit

Reporting and Disputes Compliance programs for data furnishers.

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How to Use This Operations Guide

To watch the webinar, please follow this link: insideOperations: Credit Bureaus.

Note to Trainers: We’ve included a certificate template at the end of this document. If you are using this Operations Guide as part of your training curriculum, you can fill out the certificate for each attendee. The certificates can be part of an employee file, and auditable proof of your on-going training program.

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Introduction

The Fair Credit Reporting Act is federal law that regulates the collection, dissemination, and use of consumer information, including consumer credit information.

Functions that most in the debt industry interact with on a daily basis in terms of consumer accounts.

Along with the FDCPA, it forms the base of consumer credit rights in the United States. It was originally passed in 1970, and is enforced by the US Federal Trade Commission and private litigants.

FCRA is in vogue right now with regard to litigation and the courts. Plaintiffs realize that a lot of their claims under the FDCPA are going by the wayside -- mostly due to the sophisticated and extraordinary compliance efforts most agencies have enacted in recent years. And when those FDCPA cases go away, they’re looking for something else, and that venue is often the FCRA.

Throughout the FCRA there’s different nomenclature and words that are being used. When the FCRA refers to the word person, it applies to business entities and individuals. But when they focus on the word consumer, that literally applies only to the consumer, meaning an individual.

How long is a delinquent account reportable?

Seven years from the date of first delinquency

What about a bankruptcy?

The bankruptcy reportable period is 10 years from the bankruptcy

discharge.

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The Main Areas of Liability

Duties of furnishers of credit information to the credit bureaus

Duties of users of consumer reports

You can be liable for willful noncompliance under the FCRA. That is not the same as doing something intentional. Willful has a different connotation under the FCRA.

The FCRA imposes liability on someone who fails to comply with the FCRA. In that regard, you have actual damages capped at $1,000, but you have the risk of potential punitive damages. There are attorney’s fees and costs, and this is where the plaintiff’s attorneys are going. With regard to any potential FCRA violations, they don’t want to deal with the negligent compliance.

If the plaintiff’s attorney can put the potential violation into the willful category, that’s where they want to do it, because of the potential for punitive damages.

Damages Damages under FCRA actually can now be up to $3,500 per occurrence. So for example, if you mess up date of first delinquency and an account rolls off the bureau later than the seven day drop date, for every one of those accounts that had that issue, you could be fined up to $3,500 per.

That’s why this whole statute and the FTC’s power over it and their interpretation thereof is of special interest to those in the debt industry. Generally, for a negligent noncompliance, the plaintiff is entitled to only their actual damages and attorney’s fees and costs. And agency will be liable for attorney’s fees and costs, which can be an enticement for cases to drag on.

Practical Examples

• If you know that you’re not able to report bankruptcy on the individual, but you’re reporting it at the account level, and you know that that’s a problem and you say, well, I’m just going to continue to report it that way, that would fall under willful noncompliance.

• If you had a duty because there was a dispute made and you completely failed, purposely, to conduct a reasonable investigation and you had no intent to do so, that can go under the willful noncompliant bucket.

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