Handling disputes is a necessary function in any collection agency. Those of us who are data furnishers to credit reporting agencies have additional responsibilities related to dispute handling. Let’s look at how the Fair Debt Collection Practices Act (FDCPA) defines a dispute differently than the Fair Credit Reporting Act (FCR) and how the provisions of these statutes drive our responsibilities to respond. The Consumer Financial Protection Bureau (CFPB) has provided recent observations worth serious consideration in a Special Supervisory report issued in March 2017. We will look at the application of those observations as well.
The FDCPA does not specifically define a dispute, but does permit consumers to dispute the debt or a portion of a debt. Provided that the consumer disputes in writing within 30 days of the receipt of the validation notice, the written dispute triggers the collection agency’s duty to provide validation (also not defined) of the debt and provide the name and address of the original creditor, if requested by the consumer. Debt collectors who receive a written dispute within the validation period must cease attempts to collect a debt until validation has been sent to the consumer. The law provides no deadline in which validation must be sent, however, collection attempts must be stayed until it is sent. Alternatively, the agency may decide not to send validation, but in that case collection attempts must not resume. There is no provision to notify consumers if the debt collector decides to forgo sending validation but instead to cease collection attempts. (Jang v. A.M Miller & Assocs., 122 F.3d 480 (7th Cir. 1997).
Oral disputes under FDCPA erase the debt collector’s ability to assume the debt is valid. (Brady v. Credit Recovery Co., Inc., 160 F3d 64 (1st Cir. 1998)). Oral disputes trigger the responsibility to provide a disputed status to credit reporting agencies, if the debt collector is a data furnisher. Any other potential responsibilities triggered by an oral dispute are discussed below.
The definition of a dispute under the Fair Credit Reporting Act, and its implementing rule, Regulation V, also known as the Data Furnishers Rule (CFR Title 16, Part 660), is more concrete. Under Regulation V, a direct dispute means “a dispute submitted directly to a furnisher (including a furnisher that is a debt collector) by a consumer concerning the accuracy of any information contained in a consumer report and pertaining to an account or other relationship that the furnisher has or had with the consumer.” The rule defines the necessary components of a direct dispute: A direct dispute is a dispute that contains:
1. Sufficient information to identify the account or other relationship that is in dispute, such as an account number and the name, address, and telephone number of the consumer, if applicable;
2. The specific information that the consumer is disputing and an explanation of the basis for the dispute; and
3. All supporting documentation or other information reasonably required by the furnisher to substantiate the basis of the dispute. This documentation may include, for example: a copy of the relevant portion of the consumer report that contains the allegedly inaccurate information; a police report; a fraud or identity theft affidavit; a court order; or account statements. 660.4(3)(d)
This information, submitted to an address provided by the data furnisher, triggers the duty of the data furnisher to initiate a reasonable investigation related to the consumer’s dispute and to respond to the consumer related to the results of the investigation within 30 days, or remove the disputed item from the consumer’s credit report.
Whether or not an oral dispute triggers the data furnisher’s duty to conduct a reasonable investigation is open for debate. The data furnisher’s rule repeats the language found in Fair Credit Reporting Act at §1681s-2(8)(D), which provides that a consumer “shall provide a dispute notice directly to such person at the address specified by the person for such notices…” In an FTC advisory opinion issued on June 24, 1999, written by staff attorney Clarke W. Brinckerhoff, the attorney states “[the FCRA] forbids furnishers from continuing to report inaccurate information that is disputed by consumers in writing to the address. . .” (https:// www.ftc.gov/policy/advisory-opinions/advisory-opinionwatkins- 6-24-99 . Last accessed by the author, 3/26/2017). While “submit” and “provide” do not inherently mean “in writing,” Brinckerhoff’s interpretation is useful to data furnishers. Responsibility for enforcement of the FCRA is now shared between the FTC and the CFPB.
In late March 2017, the CFPB issued its Supervisory Highlights Consumer Reporting Special Edition. Supervisory Highlights publications provide insight related to observations reported in supervisory examinations. This publication provides readers with particularly insightful information about the position of the CFPB examiners. In summary, the report said the following, with my commentary following in italics:
• Examiners found that one or more furnisher’s policies and procedures failed to promote reasonable investigations of disputes. (Reg. V requires data furnishers to have policies governing the reasonable investigation of disputes.)
• Furnishers fail to provide proper notice to consumers of a determination that a dispute was frivolous or irrelevant. (Also required by Reg. V.)
• Dispute investigation defects were found. (The report is not extremely specific about the nature of the defects.)
• Furnishers did not adequately address the actual substance of the disputes in letters sent to consumers after investigation of direct disputes. (While the report is not specific, most likely data furnishers were responding with general form letters.)
• Furnishers failed to complete direct dispute investigations within the time periods required under FCRA. (Data furnishers know there is an either/or duty here—either you investigate and respond, or you remove the disputed item from a consumer’s credit report. Due to the volume of complaints they receive, many data furnishers choose to delete rather than investigate and respond.)
• Furnishers failed to conduct an investigation of indirect disputes. (Indirect disputes are those received by the data furnisher via the credit reporting agencies, commonly known as eOscar disputes.)
• Furnishers responded to notice of disputes from credit reporting agencies by verifying the information when the furnishers had not completed the investigations and had not determined the accuracy of the information disputed by the consumer.
By issuing this special Supervisory Highlights report, the CFPB demonstrates that credit reporting and the activities of data furnishers continue to be a special concern and emphasis for the Bureau. Data furnishers should review their policies and procedures related to dispute handling, investigation, and response to ensure full compliance in accordance with the requirements of Reg. V and the FCRA.
Debra Ciskey is the Compliance Officer at Wakefield & Associates. Inc. She is a member of the board of directors and a certified instructor for ACA International.