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Credit Reporting Agencies Reach Settlement with State Attorneys General Regarding Credit Report Inaccuracies
Practical Law Legal Update 2-614-5406 (Approx. 4 pages)
Credit Reporting Agencies Reach Settlement with State Attorneys General Regarding Credit Report Inaccuracies
by Practical Law Finance
| Published on 02 Jun 2015 • USA (National/Federal) |
Various state attorneys general have announced a settlement with three major credit reporting agencies to end the states' probe into the inaccuracy of their credit reports.
On May 20, 2015, 31 state attorneys general announced a settlement with Equifax Information Services LLC, Experian Information Solutions Inc. and TransUnion LLC to resolve a multistate investigation into suspected violations of the Fair Credit Reporting Act (FCRA) and state consumer protection statutes prohibiting unfair and deceptive practices (UDAAPs). For an overview of the FCRA, see Practice Note, US Privacy and Data Laws: Overview: Other Federal Laws: Fair Credit Reporting Act (FCRA) and Fair and Accurate Credit Transactions Act (FACTA).
The investigation, which the state attorneys general initiated in 2012, focused on inaccuracies in consumer credit reports, which may have resulted from errors in the information received from data furnishers.
The investigation also examined flaws in the credit reporting agencies' processes for handling consumer disputes regarding credit reports.
As a result of the settlement, the three major credit reporting agencies must pay $6 million to 31 states. Further, to prevent future FCRA and UDAAP violations, the settlement contains numerous requirements.
To ensure credit report accuracy, each consumer reporting agency must:
- Monitor the activity of data furnishers, including financial institutions and debt collectors. In particular, the credit reporting agency must:
- improve its internal systems to allow more detailed tracking of consumer data that is shared with data furnishers; and
- maintain information about "problem" data furnishers, to be provided to state attorneys general upon request.
- Require debt collectors to provide the original creditor's name and additional information about the debt before the debt may be included in the credit report. For a discussion of the various consumer regulations governing debt collectors, see Practice Note, Consumer Regulations Governing Debt Collection.
To improve the consumer dispute resolution process, each credit reporting agency must:
- Implement an escalated process for handling complicated disputes, such as those involving identity theft or fraud.
- Notify the other consumer reporting agencies if it finds that one consumer's information has been mixed with the information of another consumer.
- Forward any consumer documentation regarding the dispute to the data furnisher.
- Prohibit its employees or service providers from conditioning a dispute call on the purchase of a credit monitoring product, or otherwise marketing any credit monitoring products to consumers during a dispute. (The marketing of ancillary credit products typically presents heightened UDAAP risk. For guidance on minimizing this risk, see UDAAP Compliance Checklist. For a discussion of ancillary credit products and their governing regulations, see Practice Note, Consumer Issues Affecting Ancillary Credit Card Products.)
In addition, the settlement contains provisions related to the following:
- Medical debt. Credit reporting agencies must:
- institute a 180-day waiting period before medical debt will be reported on a consumer's credit report; and
- remove all medical debts from a consumer's credit report after the debt is paid by insurance.
- Free credit reports. Credit reporting agencies must:
- prominently display a method for consumers to access their free annual credit report; and
- provide a second free credit report to consumers who experience a change in their credit report as a result of initiating a dispute.
- Consumer education. Credit reporting agencies must launch a three-year consumer education campaign in New York via public service announcements and paid placements on television, radio, print media and online. Consumers will be educated concerning their rights to:
- obtain a free annual credit report; and
- dispute errors in their credit reports using supporting documentation.
The credit reporting agencies will implement the changes required under the settlement in three phases, with the last changes to be completed three years and 90 days after the settlement's effective date.