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CFPB questions CEOs on credit card payment reporting
On May 25, the CFPB announced that it sent letters to the CEOs of the nation’s largest credit card companies asking them to explain how they furnish data to credit reporting agencies regarding the exact monthly payment amounts made by borrowers. The letters noted that in 2020, the Bureau released a consumer credit trends report on the prevalence of actual payment information in consumer credit reporting, concluding that actual payment furnishing for installment loan products had increased steadily between 2012 and 2020 while actual payment furnishing for credit card and retail revolving accounts had declined significantly (covered previously by InfoBytes here). The Bureau stated in the letters that, based on “easily accessible credit report information,” the CFPB understands that the addressed companies do not currently “regularly or consistently” report actual payment amount information to the nationwide credit reporting agencies. The Bureau asserted, that without this information, lenders may have more difficulty pricing credit and offering consumers “the best valued credit offers and loans for their money.” Additionally, the letter stated that, “[c]onsumers reasonably expect that they will receive competitively priced credit based on their ability to manage and repay their credit obligations, but this is impaired if actual payment amount information is being suppressed by major credit card companies.” The letters present a series of questions that ask the CEOs to explain their companies’ credit card data furnishing practices, which include, among other things, if there are any “material barriers that would prevent including the actual payment field in the account information your company already furnishes,” and if there are “plans to start furnishing actual payment amount information.” The Bureau noted the letter does not serve as a supervisory request, and answering these questions is not mandatory, but submission of answers is due in writing within thirty days of the receipt of this letter.
CFPB reports on payment information furnishing
On November 12, the CFPB released its latest quarterly consumer credit trends report on the prevalence of actual payment information in consumer credit reporting, concluding that actual payment furnishing for installment loan products has increased steadily between 2012 and 2020 while actual payment furnishing for credit card and retail revolving accounts has declined significantly. Specifically, the Bureau found that, between 2012 and 2020, shares of auto loan, student loan, and mortgage tradelines with actual payment amount information trended upward with over 90 percent of such tradelines reporting actual payment amount information by March 2020. In contrast, shares of revolving and credit card tradelines reporting actual payment data significantly declined over the same time period, falling from 95 percent to 71 percent and from 88 percent to 40 percent respectively. The Bureau also found that, for the nation’s largest credit card issuers, the decision to furnish actual payment information appears to be a binary one, with the issuers either furnishing actual payment information for nearly all accounts or not furnishing such information at all. As of 2020, only half of the nation’s largest credit card issuers furnished actual payment data for their accounts, down from 70 percent in 2013. The Bureau theorizes that the decline in reporting of actual payment data for both revolving and credit card accounts may reflect attempts to prevent account poaching by competitors.
2nd Circuit: Furnisher’s duty to investigate triggered only after it receives notice of dispute from CRA
On August 10, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal with prejudice of FCRA and related state law allegations against a state bank and trust company, concluding that the bank’s duty to investigate is triggered only after it receive a notice of dispute from a consumer reporting agency (CRA). According to the opinion, the plaintiffs obtained a mortgage from the bank but later defaulted on their payments. The bank initiated foreclosure proceedings, and in 2014 both parties agreed to a deficiency judgment. In February 2016, one of the plaintiffs notified the bank that his credit report “inaccurately indicated ‘that the mortgage. . .was still open and payments had not been made in more than two years.’” The bank acknowledged the error in March, said a correction had been made to report the loan as closed, and indicated that “information [would] be supplied to the credit reporting agencies.” However, the plaintiff claimed the bank did not correct the information until November 2016. In their amended complaint, the plaintiffs alleged the bank violated the FCRA by (i) “negligently and willfully fail[ing] to perform a reasonable reinvestigation and correction of inaccurate information”; and (ii) “engag[ing] in behavior prohibited by [the] FCRA by failing to correct errors in the information that it provided to credit reporting agencies.” The bank countered that its “duty of investigation is only triggered after a furnisher of information receives notice of a dispute from a consumer reporting agency” and that the plaintiffs failed to allege that the bank “‘ever received notice of a dispute from a consumer reporting agency.’” The district court granted the bank’s motion to dismiss with prejudice for failure to state a claim.
On appeal, the 2nd Circuit agreed with district court, concluding, among other things, that the plaintiffs “do not allege that a CRA notified [the bank] of their dispute concerning the information in the [r]eport.” According to the appellate court, the plaintiffs “do not even allege that they notified a CRA of the discrepancy. The [a]mended [c]omplaint alleges only that, after receiving the [r]eport, [the plaintiff] directly notified [the bank] of the [r]eport’s inaccuracy. This alone is insufficient to state a claim under Section 1681s–2(b).”
House passes bill allowing for reporting of rental, telecom, and utility payments to CRAs
On June 25, the House passed H.R. 435, the “The Credit Access and Inclusion Act of 2017.” The bill would amend the Fair Credit Reporting Act to include a section allowing a person or the Department of Housing and Urban Development to furnish information to credit reporting agencies relating to the payment performance of a residential lease agreement, contract for a utility, or contract for a telecommunications service. The bill does not allow an energy utility to furnish information related to the usage of utility services or information related to an outstanding consumer balance if the consumer has entered into a payment plan and is meeting the obligations of the payment plan. Civil liability for violations of the Consumer Credit Protection Act do not apply to violations of the bill.