CFPB, FTC Say Court Ruling Would Undercut Credit Reporting Law

Source: American Banker

The Consumer Financial Protection Bureau and the Federal Trade Commission say that a 2021 federal court decision could limit protections for consumers looking to remove errors on their credit reports.

In a court filing this week, the two agencies argued that the ruling "undercuts a central remedial purpose" of the Fair Credit Reporting Act. The law requires financial institutions, mortgage lenders, debt collectors and other companies that furnish information used in credit reports to investigate any disputes and correct errors.

The case involves a Pennsylvania man who reported that a Comcast account opened under his name was fraudulent. The debt under the account was sent to a debt collection agency. After the man's lawyer asked for the information to be scrapped from his credit report, Comcast asked for a police report and determined that the account wasn't fraudulent absent more information.

Last year, a federal judge ruled sided with the remaining defendant, the debt collector Waypoint Resources Group. The judge wrote that the man had "failed to provide sufficient information" so that Waypoint could investigate the issue, calling his complaint "frivolous."

Now the CFPB and FTC are taking issue with the ruling. They submitted a "friend of the court" brief with the U.S. Court of Appeals for the Third Circuit, where the man's lawyers are hoping to get the earlier decision overturned.

The two federal agencies argued that the law is clear that companies that furnish information to credit reporting agencies must investigate any disputes. They also wrote that the judge's ruling could lead to companies not advising consumers that their dispute was deemed frivolous, thereby "leaving consumers in the dark."

"Allowing furnishers to reject purportedly frivolous disputes risks opening a loophole to this rule, whereby consumers may never be advised of the outcome of their disputes and will not be provided the information necessary to cure any deficiencies," the CFPB wrote in a summary of the brief posted on its website. "As a result, inaccuracies in credit reports may go uncorrected."

Consumer complaints relating to credit reports would likely increase as a result, the two agencies wrote in their filing.