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CFPB Issues New Opinions on FCRA

Earlier this month the Consumer Financial Protection Bureau (CFPB) issued two new advisory opinions on background screening and file disclosure. The opinions are part of the CFPB’s ongoing efforts to clean up credit reporting practices and ensure credit report accuracy and transparency.

Background Checks

First, the CFPB addresses the provision of background check reports. These reports often contain information compiled from several sources about a consumer’s credit history, rental history, employment, salary, professional licenses, criminal arrests and convictions, and driving records. As a rich source of individual information, background checks are often used in processing rental or employment applications while consumers have few means to ensure their accuracy outside of frequent and active monitoring.

The advisory opinion highlights Section 607(b) of the Fair Credit Reporting Act (FCRA) which requires that credit report agencies (CRAs) “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” A CRA must have reasonable procedures in place to “assure maximum possible accuracy.” Specifically, per the advisory opinion, a CRA’s procedures should:

  1. Avoid the reporting of duplicative information;
  2. Prevent the reporting of public record information that has been expunged, sealed, or otherwise legally restricted from public access; and
  3. Guarantee the inclusion of any disposition information if it reports any arrests, criminal charges, eviction proceedings, or other court filings.

The advisory opinion goes on to remind CRAs that there is a time limit on reporting most negative items. Outdated negative information, such as a criminal charge that does not result in a conviction, for periods longer than permitted under FCRA section 605(a) may not be reported. While no time limit applies to reporting disposition information on criminal convictions, an arrest with no conviction ends seven years after the arrest date and subsequent events do not restart the reporting period applicable to the arrest.

CRA File Disclosure

In the second advisory opinion, the CFPB addresses CRA disclosure responsibilities to deliver complete files to consumers upon request. In the opinion, the CFPB clarifies that CRA’s must act upon request to “clearly and accurately” disclose “all information in the consumer’s file at the time of the request.”

Specifically, a CRA must provide consumers the following:

  1. At least one free file disclosure annually and in connection with adverse action notices and fraud alerts;
  2. Consumer’s complete file with clear and accurate information presented in a way an average person could understand and a format that will assist consumers in identifying inaccuracies and exercising their rights to dispute any incomplete or inaccurate information; and
  3. All sources for the information contained in consumers’ files so consumers can identify the source and correct any misinformation.

For banks, these opinions may not have a direct application, but credit reports are regularly used in the customer intake process and the above should give context as to what’s going on behind the report and may help you or may help you assist customers with any issues with a CRA. Please feel free to reach out to us on the hotline with any additional questions you may have.