On Sept. 13, 2022, the Consumer Financial Protection Bureau (CFPB) filed an amicus brief regarding a district court case decided between a consumer plaintiff and a credit reporting agency defendant. For those with a limited legal background, an amicus brief is simply a brief submitted to a court by a person or organization, not a party to a case but with interest in the action that is essentially trying to convince or have the court consider deciding a matter a particular way in order preserve their interest.

Back to the case, in a nutshell, the case was about a consumer who discovered an error on their credit report that stated the consumer had a delinquent account with a service provider. The consumer claims the account was never his and was fraudulently opened, so the consumer filed a dispute with the service provider. In response to the dispute, the service provider requested additional documentation, including an affidavit and a police report, which the consumer never provided before or after the request by the service provider. As a result of the consumer’s failure to respond to the request, the service provider concluded that the account was not fraudulently opened and then referred the delinquent account to a collection agency.

The consumer then filed a dispute with the consumer reporting company, which was passed to the collection agency. Because the account was never noted to be in dispute, the collection agency took no action and did not note the account in dispute even after it was handed the dispute. The consumer then filed a second dispute with the consumer reporting company, which was, again, passed to the collection agency. This time, however, the consumer stated that the account was subject to litigation and obtained a police report. As a result, the collection agency removed the delinquent account from the credit report and ceased collections. In the litigated matter, the court held for the defendant that furnishers are only obligated to investigate bona fide disputes.

The CFPB recognizes that errors on a credit report can have life-altering consequences, as those errors can cause an individual to be denied loans, housing, and even employment. Due to the significant impacts an error on a credit report can have, the CFPB realizes the need for consumers to have meaningful procedures in place for companies to investigate and resolve these errors.

The Fair Credit Reporting Act (FCRA) gives consumers multiple avenues to dispute errors on their credit reports. Since consumers receive their credit information from consumer report companies, they often initiate disputes with the consumer report company, which usually gets passed down to the furnisher, the business that reports the information to the reporting company in the first place; this is called an indirect dispute. Consumers also have the option to file their dispute directly with the furnisher, which is called a direct dispute. Any time a furnisher receives a dispute, the furnisher must investigate the dispute and report the investigation findings back to the consumer report company. However, disputes get lost in this process because furnishers, usually businesses, have adopted the notion that they are free to dismiss these disputes based on whether they believe the dispute is legitimate. Due to this discretion that furnishers believe they have, one can probably see why consumers could feel powerless and hopeless when trying to resolve errors on their credit reports.

The CFPB made three arguments to try to close any gaps in the dispute process:

• The first argument is that there is no provision in the FCRA stating furnishers are only obligated to investigate bona fide disputes. The regulation makes no exception or removes any furnisher from fulfilling that obligation. Additionally, the CFPB takes the angle that the drafters of the regulation knew what they were doing by making no exception to the obligation to investigate. Nothing in the statute exempts a furnisher from investigating frivolous disputes forwarded from consumer report companies.
• The second argument the CFPB makes focuses more on the transparency of the investigation/dispute process. It argues that consumers are entitled to receive notice from furnishers of the findings and conclusions of their investigation and that the notice informs the consumers of their options tends to propose that consumers should not be left high and dry and with no closure. Essentially, the argument suggests that if a furnisher has no remedy for the consumer after an investigation, the furnisher must inform the consumer of other avenues available to remedy the error.
• The third argument the CFPB makes is that furnishers are already insulated from dealing with frivolous disputes, or disputes that are not bona fide, because the FCRA already requires consumer reporting companies to essentially do a preliminary investigation because the FCRA allows consumer report companies to not forward disputes to the furnisher if it discovers that the dispute is frivolous. In essence, the CFPB is saying that furnishers have little to no excuse not to investigate disputes due to them being frivolous since the consumer reporting company has already filtered out that policy before handing the dispute to the furnisher, which means that the furnisher does have a bona fide dispute to investigate.

In summary, the CFPB seeks to do away with a potential loophole that furnishers may try to take advantage of to evade their obligation to investigate disputes and merely write them off as frivolous at their own discretion. The CFPB has reiterated and reminded furnishers of their role in the dispute process not only as investigators in the dispute process but for them to be effective communicators that try to resolve disputes, to be a source of guidance to consumers who need to have their options laid out and not let consumers lives hang in limbo due to a faulty credit report that could have life-altering consequences. Regarding the litigated matter described above, the CFPB has asked the court to reverse its judgment because furnishers are only required to investigate bona fide disputes.