On January 5, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a report detailing consumer complaint deficiencies by the national credit reporting agencies (NCRAs). Specifically, the CFPB found that, in 2021, the NCRAs together reported relief in response to less than 2% of covered complaints, down from nearly 25% of covered complaints in 2019. The CFPB noted three fact patterns believed to lead to inaccurate consumer credit reporting and thus potentially the denial of credit or offer of credit on less favorable terms.

The Fair Credit Reporting Act (FCRA) requires NCRAs to conduct a review of complaints sent to them through the CFPB where the consumer alleges there is incomplete or inaccurate information in their consumer report and appears to have previously attempted to fix the problem with the company. The companies must then report their determinations and actions for these covered complaints to the CFPB.

First, the CFPB noted that consumers repeatedly report being caught in “automated systems” which do not permit them to adequately address concerns they have with facts alleged in their credit reports. The report found that NCRAs relied heavily on template complaint responses instead of providing meaningful and thorough responses to consumers, despite having up to 60 calendar days to respond. This, the Bureau noted, can be especially important to consumers in the process of making large financial transactions such as paying off medical debt, buying a house, or alternatively, applying for housing or employment.

Second, the Bureau found that consumers were routinely paying off debts which they did not owe in order to “clear” their credit report in advance of a large financial transaction, simply because the process of disputing and correcting their report was too time-consuming and cumbersome. The report found that NCRAs often promised to investigate disputes but failed to provide the outcomes of their investigations to the CFPB and instead stated that they would forward the complaints to their “dispute channel.”

Third, the CFPB determined that consumers are often caught in what it describes as a “finger-pointing exercise” between furnishers of the data to include lenders and other merchants as well as the NCRAs themselves, which leaves the consumer with little recourse—especially those who may have been the victims of identity theft.

The report discussed specific alleged failures as well as congressional testimony put forward by some agencies to the effect that they were in compliance with the FCRA’s dispute resolution process requirements. It then noted that in light of these alleged failures, the Bureau believes that NCRA consumer complaint handling “raise[s] serious questions about whether they are unable—or unwilling—to comply with the law. The Bureau then stated that, “it will use its authorities to… ensure that consumers receive quality responses to their complaints.”

The concerns raised in this report may well ensnare others as witnesses and perhaps as subjects or targets of investigations under an “assisting and facilitating” theory for violations of the Bureau’s core consumer protection authority to penalize allegedly “unfair, deceptive, or abusive acts and practices” (UDAAP), which may also be enforced by the state attorneys general.

Lenders, especially those relying on rapid decision-making algorithms, should be certain that, when making a decision based on a credit score derived from NCRAs, that there is a mechanism for the consumer to provide information to refute any underlying algorithm which goes beyond simply sending the consumer back to the NCRAs. This report also sends a warning to lenders whose automated processes for correcting inaccuracies do not work and for companies whose automated processes do not respond to customers concerns.