Fair Credit Reporting; Facially False Data, 64689-64693 [2022-23264]

Download as PDF 64689 Rules and Regulations Federal Register Vol. 87, No. 206 Wednesday, October 26, 2022 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. DEPARTMENT OF ENERGY 10 CFR Parts 429 and 431 [EERE–2020–BT–TP–0011] Energy Conservation Program: Test Procedure for Electric Motors Correction In rule document 2022–21891, appearing on pages 63588 through 63660 in the issue of Wednesday, October 19, 2022, make the following correction: [Corrected] In § 431.12, on page 63655, in the second column, remove the first definition of IEC Design HY by removing lines eleven through twentyfive. ■ [FR Doc. C1–2022–21891 Filed 10–25–22; 8:45 am] BILLING CODE 0099–10–D BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1022 Fair Credit Reporting; Facially False Data Bureau of Consumer Financial Protection. ACTION: Advisory opinion. AGENCY: The Consumer Financial Protection Bureau (Bureau) is issuing this advisory opinion to highlight that a consumer reporting agency that does not implement reasonable internal controls to prevent the inclusion of facially false data, including logically inconsistent information, in consumer reports it prepares is not using reasonable procedures to assure maximum possible accuracy under section 607(b) of the Fair Credit Reporting Act (FCRA). DATES: This advisory opinion is effective on October 26, 2022. lotter on DSK11XQN23PROD with RULES1 SUMMARY: VerDate Sep<11>2014 16:06 Oct 25, 2022 Ilana Waxman, Senior Counsel, Tyler Sines or Jason Grimes, Counsels, Office of Supervision Policy at (202) 435–7700 or https://reginquiries.consumerfinance. gov/. If you require this document in an alternative electronic format, please contact CFPB_Accessibility@cfpb.gov. SUPPLEMENTARY INFORMATION: The Bureau is issuing this advisory opinion through the procedures for its Advisory Opinions Policy.1 Refer to those procedures for more information. I. Advisory Opinion RIN 1904–AE62 § 431.12 FOR FURTHER INFORMATION CONTACT: Jkt 259001 A. Background Accuracy in consumer reports is of vital importance to the consumer reporting system, particularly as consumer reports play an increasingly central role in the lives of American consumers. Consumer reporting agencies collect and assemble credit, public record, and other consumer information into consumer reports.2 Creditors, insurers, landlords, employers, and others use the information in these reports to make eligibility determinations and other decisions that can have a significant impact on consumers. For example, creditors use information in consumer reports to determine whether, and on what terms, to extend credit to a particular consumer, while landlords and employers use background screening reports in deciding whether to rent to prospective tenants and hire employees, respectively. Inaccurate, derogatory information in consumer reports can have significant adverse impacts on consumers. For example, inaccurate, derogatory information in consumer reports can lead to higher interest rates, ineligibility for promotional offers, or otherwise less favorable credit terms for affected consumers. This in turn may cost consumers hundreds or thousands of dollars in additional interest. Even worse, inaccurate, derogatory information in consumer reports could lead lenders to deny a consumer credit entirely, making it difficult or impossible for that consumer to obtain a mortgage, auto loan, student loan, or other credit. Any of these consequences can be devastating for a consumer’s 1 85 FR 77987 (Dec. 3, 2020). 15 U.S.C. 1681a(d) (defining ‘‘consumer report’’). 2 See PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 financial well-being and life. Inaccurate, derogatory information in consumer reports can also harm the businesses that use such reports by leading them to make unsupported decisions. Consumer report accuracy depends on the various parties to the consumer reporting system, including: the three nationwide consumer reporting agencies (Equifax, Experian, and TransUnion); other consumer reporting agencies, such as background screening companies; entities such as creditors who furnish information to consumer reporting agencies (i.e., furnishers); and public record repositories. While any of these parties may introduce inaccurate information into the consumer reporting process, a consumer reporting agency is uniquely positioned to identify certain obvious inaccuracies and implement policies, procedures, and systems to keep them off of consumer reports. In some cases, such as when certain account or other information fields on consumer reports are logically inconsistent with other fields of information, a consumer reporting agency can detect the logical inconsistencies and prevent the inaccurate information from being included in consumer reports it generates, thereby avoiding the consumer harm to individual consumers that can result from reporting such inaccurate information. Inaccuracy in consumer reports is a long-standing issue that remains a problem today. Pursuant to its obligations under the Fair and Accurate Credit Transactions (FACT) Act 3 to conduct a study of consumer report accuracy and completeness, the Federal Trade Commission in 2012 published a report finding, among other things, that one in five consumers who participated in the study had an error on at least one of their three nationwide credit reports.4 Another more recent study, published in 2021, found that over 34% of consumers surveyed were able to 3 Fair and Accurate Credit Transactions Act of 2003, Public Law 108–159, sec. 319, 117 Stat. 1952 (2003). 4 See Fed. Trade Comm’n, Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003, at 64 (Dec. 2012), https:// www.ftc.gov/sites/default/files/documents/reports/ section-319-fair-and-accurate-credit-transactionsact-2003-fifth-interim-federal-trade-commission/ 130211factareport.pdf. E:\FR\FM\26OCR1.SGM 26OCR1 64690 Federal Register / Vol. 87, No. 206 / Wednesday, October 26, 2022 / Rules and Regulations lotter on DSK11XQN23PROD with RULES1 identify at least one error in their credit reports.5 Consumer complaints submitted to the Bureau continue to reflect significant consumer concern about inaccuracies in consumer reports. Complaints about ‘‘incorrect information on your report’’ have represented the largest share of credit or consumer reporting complaints submitted to the Bureau each year for at least the last six years.6 In 2021 alone, companies responded to more than 157,000 such complaints, representing a majority (53%) of credit or consumer reporting complaint responses that year.7 Moreover, the Bureau continues to see accuracy issues at furnishers and consumer reporting agencies through its supervisory activities. For example, the Bureau noted in its Spring 2022 Supervisory Highlights that many furnishers lacked ‘‘reasonable written policies and procedures regarding the accuracy and integrity of the information relating to consumers.’’ 8 In its Summer 2021 Supervisory Highlights, the Bureau explained that some consumer reporting agencies lacked adequate procedures for assuring maximum possible accuracy of consumer reports when they ‘‘continued to include information in consumer 5 See Syed Ejaz, Consumer Reports, A Broken System: How the Credit Reporting System Fails Consumers and What to Do About It 4 (June 10, 2021), https://advocacy.consumerreports.org/wpcontent/uploads/2021/06/A-Broken-System-Howthe-Credit-Reporting-System-Fails-Consumers-andWhat-to-Do-About-It.pdf. 6 See Consumer Fin. Prot. Bureau, Consumer Response Annual Report, at 20 (Mar. 2022), https:// files.consumerfinance.gov/f/documents/cfpb_2021consumer-response-annual-report_2022-03.pdf; Consumer Fin. Prot. Bureau, Consumer Response Annual Report, at 22 (Mar. 2021), https:// files.consumerfinance.gov/f/documents/cfpb_2020consumer-response-annual-report_03-2021.pdf; Consumer Fin. Prot. Bureau, Consumer Response Annual Report, at 19 (Mar. 2020), https:// files.consumerfinance.gov/f/documents/cfpb_ consumer-response-annual-report_2019.pdf; Consumer Fin. Prot. Bureau, Consumer Response Annual Report, at 19 (Mar. 2019), https:// files.consumerfinance.gov/f/documents/cfpb_ consumer-response-annual-report_2018.pdf; Consumer Fin. Prot. Bureau, Consumer Response Annual Report, at 13 (Mar. 2018), https:// files.consumerfinance.gov/f/documents/cfpb_ consumer-response-annual-report_2017.pdf; Consumer Fin. Prot. Bureau, Consumer Response Annual Report, at 18 (Mar. 2017), https:// files.consumerfinance.gov/f/documents/201703_ cfpb_Consumer-Response-Annual-Report2016.PDF. 7 See Consumer Fin. Prot. Bureau, Consumer Response Annual Report, at 20 (Mar. 2022), https:// files.consumerfinance.gov/f/documents/cfpb_2021consumer-response-annual-report_2022-03.pdf for more in-depth analyses. 8 See Consumer Fin. Prot. Bureau, Spring 2022 Supervisory Highlights, at 10 (May 2022), https:// files.consumerfinance.gov/f/documents/cfpb_ supervisory-highlights_issue-26_2022-04.pdf. VerDate Sep<11>2014 16:06 Oct 25, 2022 Jkt 259001 reports that was provided by unreliable furnishers.’’ 9 The Bureau also continues to find accuracy issues in the consumer reporting context through its enforcement activities. For example, the Bureau has brought enforcement actions against consumer reporting agencies whose inadequate ‘‘name-only matching’’ led to reports with inaccurate derogatory criminal and public records information on consumers.10 The Bureau also has brought enforcement actions against furnishers who furnish information with inherent logical inconsistencies, such as furnishing an increasing ‘‘original loan amount’’ over time, where that field should not change.11 The FCRA regulates consumer reporting.12 The statute was designed to ensure that ‘‘consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.’’ 13 In interpreting the statute, Federal courts likewise highlight the importance of data accuracy. The FCRA was enacted ‘‘to protect consumers from the transmission of inaccurate information about them and to establish credit reporting practices that utilize accurate, relevant, and current information in a confidential and responsible manner.’’ 14 Because of the importance of consumer report accuracy to businesses and consumers, the structure of the FCRA creates interrelated legal standards and requirements to support the policy goal of accurate credit 9 See Consumer Fin. Prot. Bureau, Summer 2021 Supervisory Highlights, at 7 (Jun. 2021), https:// files.consumerfinance.gov/f/documents/cfpb_ supervisory-highlights_issue-24_2021-06.pdf. 10 Consent Order at ¶¶ 8–29, In re Gen. Inf. Svcs. Inc., 2015–0028 (Oct. 29, 2015), https:// files.consumerfinance.gov/f/201510_cfpb_consentorder_general-information-service-inc.pdf; Complaint at ¶¶ 5–11, Consumer Fin. Prot. Bureau v. Sterling Infosys., Inc., No. 1:19–cv–10824 (S.D.N.Y. Nov. 22, 2019), https:// www.consumerfinance.gov/enforcement/actions/ sterling-infosystems-inc/. 11 Consent Order at ¶ 41, In re Hyundai Capital Am., 2022–CFPB–0005 (July 26, 2022), https:// files.consumerfinance.gov/f/documents/cfpb_ hyundai-capital-america_consent-order_202207.pdf. 12 See 15 U.S.C. 1681–1681x. 13 15 U.S.C. 1681(b). 14 Guimond v. Trans Union Credit Info., 45 F.3d 1329, 1333 (9th Cir.1995) (citations omitted); see also S. Rep. No. 91–517, at 1 (1969) (explaining that the FCRA was intended to ‘‘prevent consumers from being unjustly damaged because of inaccurate or arbitrary information in a credit report’’). PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 reporting. Among these is the requirement that, when preparing a consumer report, consumer reporting agencies ‘‘shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.’’ 15 Inaccuracies in consumer reports can, in part, be attributed to consumer reporting agencies failing to maintain reasonable procedures, such as business rules, to prevent the inclusion of facially false data, including logical inconsistencies relating to consumer data and/or the status or other information associated with consumer accounts, when preparing consumer reports. Courts have recognized that in ‘‘certain instances, inaccurate credit reports by themselves can fairly be read as evidencing unreasonable procedures[.]’’ 16 The Bureau is issuing this advisory opinion to highlight that the legal requirement to follow reasonable procedures to assure maximum possible accuracy of the information concerning the individuals about whom the reports relate includes, but is not limited to, procedures to screen for and eliminate logical inconsistencies to avoid including facially false data in consumer reports. There are many logical inconsistencies that could result in inaccurate, facially false data being included on consumer reports in violation of section 607(b). The following is a non-exhaustive list of examples of some of the types of logical inconsistencies that reasonable procedures to assure maximum possible accuracy would screen for and eliminate: Inconsistent Account Information or Statuses A consumer reporting agency’s policies and procedures should be sufficient to detect tradelines with account statuses or codes that are plainly inconsistent with other information reported for that same account, such that, if included in a consumer report, at least one item of information therein would necessarily be inaccurate. Such inconsistencies may include: • An account whose status is paid in full, and thus has no balance due but nevertheless reflects a balance due; 17 15 15 U.S.C. 1681e(b). v. Credit Bureau, Inc., 734 F.2d 47, 52 (D.C. Cir. 1984). 17 Cf. Consent Order at ¶ 20, In re Santander Consumer USA Inc., 2022–BCFP–0027 (Dec. 20, 2020) (‘‘Respondent also reported in approximately 250,000 instances that accounts had a current balance and simultaneously furnished contradictory 16 Stewart E:\FR\FM\26OCR1.SGM 26OCR1 Federal Register / Vol. 87, No. 206 / Wednesday, October 26, 2022 / Rules and Regulations lotter on DSK11XQN23PROD with RULES1 • An account that reflects an ‘‘Original Loan Amount’’ that increases over time, an impossibility by definition; 18 and • Derogatory information being reported on an account, although that derogatory information predates an earlier report that did not include the derogatory information.19 A consumer reporting agency’s policies and procedures should further identify and prevent illogical reporting of a Date of First Delinquency in connection with an account.20 Section 605(a) of the FCRA identifies categories of information that cannot be included in a consumer report after a certain amount of time.21 For example, a consumer reporting agency may not include on a consumer report accounts placed for collection or charged to profit and loss that antedate the report by more than seven years and 180 days.22 This provision enables consumers to move beyond their past and rebuild their credit following a delinquency. The Date of First Delinquency provided by a furnisher must reflect the month and year on which the delinquency being reported commenced.23 When information, such as also furnishing information indicating that the accounts were paid in full.’’), https://files.consumerfinance.gov/f/documents/ cfpb_santander-consumer-usa-inc_consent-order_ 2020-12.pdf. The Santander consent order, along with other CFPB consent orders cited herein, relate to furnisher obligations under section 623 of the FCRA, but the underlying logical inconsistencies involved, as described herein, are illustrative examples of the types of inconsistencies that a credit reporting agency’s reasonable policies and procedures to assure maximum possible accuracy should be designed to detect. 18 Cf. Consent Order at ¶ 41, In re Hyundai Capital Am., 2022–CFPB–0005 (July 26, 2022) (‘‘After furnishing the correct original loan amount (a field that should not change), Respondent furnished increased amounts for the ‘‘original loan amount,’’ making it appear that a consumer had taken out a larger loan than they had actually taken out.’’), https://files.consumerfinance.gov/f/ documents/cfpb_hyundai-capital-america_consentorder_2022-07.pdf. 19 Bryant v. TRW, Inc., 487 F. Supp. 1234, 1242 (E.D. Mich. 1980) (refusing to set aside a jury verdict finding that a consumer reporting agency failed to follow reasonable procedures under FCRA section 607(b) for failing to detect inconsistencies between a September report containing derogatory information and an earlier May report on which such information did not appear even though at least one of the derogatory items predated the May report). 20 The Date of First Delinquency herein refers to the date furnished to a credit reporting agency by a furnisher that purportedly reflects the month and year on which the delinquency being reported in connection with a consumer’s account commenced. 21 15 U.S.C. 1681c(a). 22 15 U.S.C. 1681c(a)(4), (c). 23 15 U.S.C. 1681s–2(a)(5)(A). Under the FCRA, furnishers must report a Date of First Delinquency within 90 days of furnishing information regarding delinquent accounts being placed for collection, charged to profit or loss, or subjected to any similar action. Id. VerDate Sep<11>2014 16:06 Oct 25, 2022 Jkt 259001 accurate, that date corresponds with the start of the time period that, once elapsed, precludes the delinquency from remaining on a consumer report under FCRA section 605(a). A Date of First Delinquency that is more recent than the start of a delinquency may lead a report user to believe a consumer had financial difficulty more recently than is the case. Similarly, a Date of First Delinquency reflected on a report where a consumer is not in fact delinquent could cause a user to inaccurately believe that the consumer is delinquent. Examples of an illogical Date of First Delinquency may include: • A Date of First Delinquency reported for an account whose records reflect no delinquency, such as through activity reflecting a current account (complete history of timely payments, $0 amount overdue) or through a current account status code; 24 • A Date of First Delinquency that post-dates a charge-off date; and • A Date of First Delinquency, or date of last payment, that predates the account open date (for non-collection accounts). Illogical Information Relating to Consumers A consumer reporting agency’s policies and procedures should also identify logical inconsistencies in consumer information, such that, if included in a consumer report, some of the information therein would necessarily be inaccurate. Such inconsistencies may include: • Impossible information about consumers—for example, a tradeline that includes a relevant date, such as a date of account opening, account closing, date of last payment, or date of first delinquency, for an account that is in the future—an obvious impossibility—or for an individual account that either predates that consumer’s listed date of birth or that is so far in the past (e.g., January 1, 1800) that it must predate every living consumers’ date of birth, as individuals 24 Cf. Consent Order at ¶ 36, In re Hyundai Capital Am., 2022–CFPB–0005 (July 26, 2022) (‘‘Respondent furnished account data showing that the consumer account was current, such as reporting $0 amount overdue or full payments made timely each month, but then also furnished a [Date of First Delinquency], a field that inaccurately indicated that the account was in an ongoing delinquency.’’); Consent Order at ¶ 17, In re Santander Consumer USA Inc., 2020–BCFP–0027 (Dec. 20, 2020) (alleging Santander violated FCRA § 623(a)(1)(A) by inaccurately furnishing ‘‘internally inconsistent’’ data, including reporting ‘‘[Date of First Delinquencies] for accounts that were current, paid in full (and not delinquent immediately beforehand), or previously delinquent but subsequently became current’’). PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 64691 cannot open an account before they are born; 25 and • Information about consumer accounts that is plainly inconsistent with other reported information, such that one piece of information must be inaccurate—for example, if every other tradeline is reporting ongoing payment activity, while one tradeline contains a ‘‘deceased’’ indicator, reasonable policies and procedures should identify the inconsistency and the consumer reporting agency should prevent the inclusion of the inaccurate information in consumer reports it generates.26 A consumer reporting agency’s policies, procedures and internal controls should further identify and prevent reporting of illegitimate credit transactions for a minor. Minors generally cannot legally enter into contracts for credit except in certain limited circumstances. It is logically inconsistent when a credit transaction is reported for a person who lacks capacity to enter into a contract because they are a minor, unless there are indicia that the credit transaction is legitimate, such as in the context of student loans, credit card authorized users, or emancipated minors.27 The Bureau is aware of evidence showing that instances of identity theft are especially prevalent for minors, suggesting that identity thieves may target minors due to the value of unused Social Security numbers and a belief that there is a lower probability of discovery of the 25 See, e.g., Sheffer v. Experian Information Solutions, Inc., 2003 WL 21710573, at *2 (E.D. Pa. 2003) (referencing a consumer report that ‘‘indicated both that Plaintiff was born in 1969 and that the account was opened in 1965’’ as one of two ‘‘inconsistencies’’ that ‘‘provide[d] a basis from which a jury could infer that the procedures were unreasonable’’). 26 Gohman v. Equifax Information Services, LLC, 395 F. Supp. 2d 822, 827 (D. Minn. 2005); see also Sheffer, 2003 WL 21710573, at *2 (referencing the fact that only one account of approximately two dozen on a consumer’s report included the ‘‘deceased’’ notation as one of two ‘‘inconsistencies’’ that ‘‘provide[d] a basis from which a jury could infer that the procedures were unreasonable’’). 27 This example is consistent with prior Federal Trade Commission (FTC)’s 40 Years Report. See FTC, 40 Years of Experience with the Fair Credit Reporting Act (July 2011) [hereinafter, the ‘‘FTC 40 Years Report’’], available at https://www.ftc.gov/ sites/default/files/documents/reports/40-yearsexperience-fair-credit-reporting-act-ftc-staff-reportsummary-interpretations/110720fcrareport.pdf, at 68, comment 8 (‘‘A [consumer reporting agency] must maintain procedures to avoid reporting information with obvious logical inconsistencies, such as a credit account opened when the consumer was known to be a minor.’’). FTC staff published the 40 Years Report, an updated compilation of past FTC interpretations of the FCRA, to coincide with the transfer of authority to the Bureau. Effective July 21, 2011, the Dodd-Frank Act transferred rulemaking authority related to most of the FCRA to the Bureau, giving the Bureau the primary regulatory and interpretive roles under the FCRA. E:\FR\FM\26OCR1.SGM 26OCR1 64692 Federal Register / Vol. 87, No. 206 / Wednesday, October 26, 2022 / Rules and Regulations fraud.28 This risk may be even more acute for minors in the United States foster care system, who often lack a permanent address and frequently have their personal information shared among numerous adults and agency databases, making them particularly susceptible to identity theft and inaccurate credit history information.29 This heightened risk faced by minors underscores the importance for consumer reporting agencies to maintain procedures designed to identify illegitimate credit transactions reported for minors and prevent inclusion thereof when preparing consumer reports. The Bureau is issuing this advisory opinion to remind consumer reporting agencies that the failure to maintain reasonable procedures to screen for and eliminate logical inconsistencies, to prevent the inclusion of facially false data in consumer reports, is a violation of their FCRA obligation to ‘‘follow reasonable procedures to assure maximum possible accuracy’’ under section 607(b) of the FCRA. B. Coverage This advisory opinion applies to all consumer reporting agencies as defined in FCRA section 603(f).30 lotter on DSK11XQN23PROD with RULES1 C. Legal Analysis Section 607(b) of the FCRA provides that ‘‘[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.’’ 31 The Bureau has interpreted this requirement in section 607(b) to include as an integral component that consumer reporting agencies implement and maintain reasonable screening procedures, such as business rules, designed to identify and prevent the inclusion of facially false data, such as logical inconsistencies relating to consumer or account information, in the consumer reports they prepare. Courts have spoken on this topic. For example, in Bryant v. TRW, Inc., the 28 See, e.g., Richard Power, Carnegie Mellon CyLab, Child Identity Theft: New Evidence Indicates Identity Thieves are Targeting Children for Unused Social Security Numbers (2011), available at https://www.cylab.cmu.edu/_files/pdfs/ reports/2011/child-identity-theft.pdf. 29 See Consumer Fin. Prot. Bureau, ‘‘CFPB Releases Tools to Protect Foster Care Children from Credit Reporting Problems’’ (May 1, 2014), available at https://www.consumerfinance.gov/about-us/ newsroom/cfpb-releases-tools-to-protect-foster-carechildren-from-credit-reporting-errors/#:∼:text=To %20submit%20a%20complaint%2C %20consumers,1%2D855%2D237%2D2392. 30 15 U.S.C. 1681a(f). 31 15 U.S.C. 1681e(b). VerDate Sep<11>2014 16:06 Oct 25, 2022 Jkt 259001 court rejected a consumer reporting agency’s assertion that it had ‘‘no obligation’’ to compare facially inconsistent information contained in two of plaintiff’s consumer reports from different months because such an interpretation would make the consumer reporting agency ‘‘simply a conduit and eliminate from the [FCRA] its emphasis on the reasonableness of the procedures followed in putting together a consumer report,’’ contrary to Congressional intent.32 Courts have also indicated that the inclusion of facially false data inaccuracies on a consumer report may, in certain circumstances, evidence the unreasonableness of a consumer reporting agency’s procedures.33 It continues to be the Bureau’s interpretation as outlined in this advisory opinion that such procedures are required, consistent with the core purpose of the FCRA as described in FCRA section 602—i.e., to require consumer reporting agencies to adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner that is fair and equitable to the consumer with regard to accuracy, among other responsibilities.34 This interpretation also aligns with the Federal Trade Commission’s 40 Years Report, which states that pursuant to 607(b), a consumer reporting agency ‘‘must maintain procedures to avoid reporting information with obvious logical inconsistencies, such as a credit account opened when the consumer was known to be a minor.’’ 35 In addition to provisions authorizing Federal and State enforcement,36 the FCRA contains two provisions relating to civil liability to consumers for noncompliance. Section 617 provides that ‘‘any person who is negligent in failing to comply with any requirement imposed under this title with respect to 32 See Bryant v. TRW, Inc., 487 F. Supp. at 1242. See also McKeown v. Sears Roebuck & Co., 335 F. Supp. 2d 917, 930 (W.D. Wis. 2004) (‘‘[R]eceiving apparently inconsistent credit reports may trigger an obligation to investigate on the part of the credit reporting agency . . . . [because] allowing credit reporting agencies to act as nothing more than mere conduits of information would eviscerate the act’s emphasis on reasonable compilation procedures.’’) (citing Bryant, 487 F. Supp. at 1242); Wright v. Experian Info. Sols., Inc., 805 F.3d 1232, 1239 (10th Cir. 2015) (‘‘Courts have held [consumer reporting agencies] must look beyond information furnished to them when it is inconsistent with the [consumer reporting agencies’] own records, contains a facial inaccuracy, or comes from an unreliable source.’’). 33 See Stewart v. Credit Bureau, Inc., 734 F.2d at 52; Sheffer, 2003 WL 21710573, at *2. 34 15 U.S.C. 1681(b); see also Guimond, 45 F.3d at 1333. 35 FTC 40 Years Report, at 68, comment 8. 36 15 U.S.C. 1681s. PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 any consumer is liable to that consumer in an amount equal to’’ the consumer’s actual damages, and costs and reasonable attorney’s fees.37 Section 616 provides that ‘‘any person who willfully fails to comply with any requirement imposed under this title with respect to any consumer is liable to that consumer in an amount equal to’’ actual or statutory damages of up to $1,000 per violation, such punitive damages as the court allows, and costs and reasonable attorney’s fees.38 A violation is willful when it is inconsistent with ‘‘authoritative guidance’’ from a relevant agency.39 As with any guidance issued by the CFPB on the FCRA, or predecessor agencies that were responsible for administering the FCRA prior to the CFPB’s creation, consumer reporting agencies risk liability under Section 616 if they violate the FCRA in a manner described in this Advisory Opinion, regardless of whether the consumer reporting agencies were previously liable for willful violations prior to its issuance. II. Regulatory Matters This advisory opinion is an interpretive rule issued under the Bureau’s authority to interpret the FCRA, including under section 1022(b)(1) of the Dodd-Frank Wall Street Reform and Consumer Protection Act,40 which authorizes guidance as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of Federal consumer financial laws.41 The Bureau has determined that this advisory opinion does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring approval by the Office of Management and Budget under the Paperwork Reduction Act.42 Pursuant to the Congressional Review Act,43 the Bureau will submit a report containing this interpretive rule and other required information to the United States Senate, the United States House of Representatives, and the Comptroller General of the United States prior to the 37 15 U.S.C. 1681o (emphasis added). U.S.C. 1681n (emphasis added); Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57–58 (2007) (construing meaning of ‘‘willful’’). 39 Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 70 (2007); Fuges v. Sw. Fin. Servs., Ltd., 707 F.3d 241, 253 (3d Cir. 2012). 40 Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111–203, 124 Stat. 1376 (2010). 41 12 U.S.C. 5512(b)(1). 42 4 U.S.C. 3501–3521. 43 5 U.S.C. 801 et seq. 38 15 E:\FR\FM\26OCR1.SGM 26OCR1 Federal Register / Vol. 87, No. 206 / Wednesday, October 26, 2022 / Rules and Regulations rule’s published effective date. The Office of Information and Regulatory Affairs has designated this interpretive rule as not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). Rohit Chopra, Director, Consumer Financial Protection Bureau. [FR Doc. 2022–23264 Filed 10–25–22; 8:45 am] BILLING CODE 4810–AM–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA–2022–1252; Project Identifier AD–2022–01163–T; Amendment 39–22204; AD 2022–21–05] RIN 2120–AA64 Airworthiness Directives; The Boeing Company Airplanes Federal Aviation Administration (FAA), DOT. ACTION: Final rule; request for comments. AGENCY: The FAA is adopting a new airworthiness directive (AD) for certain The Boeing Company Model 737–300, –400, and –500 series airplanes. This AD was prompted by a report that a spoiler sensor failure may go undetected by the autothrottle (A/T) computer. This AD requires repetitive built-in test equipment (BITE) tests of the A/T computer to detect a spoiler sensor failure, and corrective action if necessary. The FAA is issuing this AD to address the unsafe condition on these products. DATES: This AD is effective November 10, 2022. The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of November 10, 2022. The FAA must receive comments on this AD by December 12, 2022. ADDRESSES: You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods: • Federal eRulemaking Portal: Go to regulations.gov. Follow the instructions for submitting comments. • Fax: 202–493–2251. • Mail: U.S. Department of Transportation, Docket Operations, M– 30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE, Washington, DC 20590. • Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 lotter on DSK11XQN23PROD with RULES1 SUMMARY: VerDate Sep<11>2014 16:06 Oct 25, 2022 Jkt 259001 p.m., Monday through Friday, except Federal holidays. AD Docket: You may examine the AD docket at regulations.gov by searching for and locating Docket No. FAA–2022– 1252; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this final rule, any comments received, and other information. The street address for Docket Operations is listed above. Material Incorporated by Reference: • For service information identified in this final rule, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110 SK57, Seal Beach, CA 90740–5600; telephone 562–797–1717; website myboeingfleet.com. • You may view this referenced service information at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206–231–3195. It is also available at regulations.gov by searching for and locating Docket No. FAA–2022–1252. FOR FURTHER INFORMATION CONTACT: Eric Igama, Aerospace Engineer, Systems and Equipment Section, FAA, Los Angeles ACO Branch, 3960 Paramount Boulevard, Lakewood, CA 90712–4137; phone: 562–627–5388; email: Roderick.igama@faa.gov. SUPPLEMENTARY INFORMATION: Background The FAA has received a report that a spoiler sensor failure may go undetected by the A/T computer. A review of the A/T cruise thrust split monitor logic terms showed that failure of the spoiler sensor input, including the wiring into the monitor logic, cannot be detected without a maintenance action performed on the flight control system. Latent loss of spoiler sensor position data or erroneous spoiler sensor position data could result in failure of the A/T cruise thrust split monitor to activate, which may result in a significant throttle split leading to asymmetric thrust. The subsequent lack of A/T disengagement could lead to an uncommanded roll. This condition, if not addressed, could result in potential loss of control of the airplane or reduced ability of the flightcrew to maintain the safe flight and landing of the airplane. The FAA is issuing this AD to address the unsafe condition on these products. The FAA has confirmed that accomplishment of the applicable BITE test in the existing airplane maintenance PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 64693 manual (AMM) detects the spoiler sensor failure. This test is currently not required to be performed repetitively, leading to a potential latent failure if the test is not performed regularly, which will be required by this AD. FAA’s Determination The FAA is issuing this AD because the agency has determined the unsafe condition described previously is likely to exist or develop in other products of the same type design. Related Service Information Under 1 CFR Part 51 The FAA reviewed Boeing Alert Requirements Bulletin 737–22A1411 RB, dated August 22, 2022. This service information specifies procedures for performing an A/T computer BITE test, ‘‘Autopilot Aileron Actuator Test— DFCS BITE,’’ and, if the test fails, performing applicable corrective actions to repair defects and repeating the test until the test passes. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in ADDRESSES. AD Requirements This AD requires accomplishing the actions identified in Boeing Alert Requirements Bulletin 737–22A1411 RB, dated August 22, 2022, already described, except as discussed under ‘‘Differences Between this AD and the Service Information,’’ and except for any differences identified as exceptions in the regulatory text of this AD. For information on the procedures and compliance times, see this service information at regulations.gov by searching for and locating Docket No. FAA–2022–1252. Differences Between This AD and the Service Information Boeing Alert Requirements Bulletin 737–22A1411 RB, dated August 22, 2022, specifies a compliance time of 250 flight hours for the initial BITE test. However, this AD requires the initial BITE test within 250 flight hours or 2 months after the effective date of this AD, whichever occurs first, to ensure that airplanes with low utilization rates are addressed in a timely manner. Justification for Immediate Adoption and Determination of the Effective Date Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq.) authorizes agencies to dispense with notice and comment procedures for rules when the agency, for ‘‘good cause,’’ finds that those E:\FR\FM\26OCR1.SGM 26OCR1

Agencies

BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 87, Number 206 (Wednesday, October 26, 2022)]
[Rules and Regulations]
[Pages 64689-64693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23264]


=======================================================================
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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1022


Fair Credit Reporting; Facially False Data

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Advisory opinion.

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SUMMARY: The Consumer Financial Protection Bureau (Bureau) is issuing 
this advisory opinion to highlight that a consumer reporting agency 
that does not implement reasonable internal controls to prevent the 
inclusion of facially false data, including logically inconsistent 
information, in consumer reports it prepares is not using reasonable 
procedures to assure maximum possible accuracy under section 607(b) of 
the Fair Credit Reporting Act (FCRA).

DATES: This advisory opinion is effective on October 26, 2022.

FOR FURTHER INFORMATION CONTACT: Ilana Waxman, Senior Counsel, Tyler 
Sines or Jason Grimes, Counsels, Office of Supervision Policy at (202) 
435-7700 or https://reginquiries.consumerfinance.gov/. If you require 
this document in an alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION: The Bureau is issuing this advisory opinion 
through the procedures for its Advisory Opinions Policy.\1\ Refer to 
those procedures for more information.
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    \1\ 85 FR 77987 (Dec. 3, 2020).
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I. Advisory Opinion

A. Background

    Accuracy in consumer reports is of vital importance to the consumer 
reporting system, particularly as consumer reports play an increasingly 
central role in the lives of American consumers. Consumer reporting 
agencies collect and assemble credit, public record, and other consumer 
information into consumer reports.\2\ Creditors, insurers, landlords, 
employers, and others use the information in these reports to make 
eligibility determinations and other decisions that can have a 
significant impact on consumers. For example, creditors use information 
in consumer reports to determine whether, and on what terms, to extend 
credit to a particular consumer, while landlords and employers use 
background screening reports in deciding whether to rent to prospective 
tenants and hire employees, respectively.
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    \2\ See 15 U.S.C. 1681a(d) (defining ``consumer report'').
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    Inaccurate, derogatory information in consumer reports can have 
significant adverse impacts on consumers. For example, inaccurate, 
derogatory information in consumer reports can lead to higher interest 
rates, ineligibility for promotional offers, or otherwise less 
favorable credit terms for affected consumers. This in turn may cost 
consumers hundreds or thousands of dollars in additional interest. Even 
worse, inaccurate, derogatory information in consumer reports could 
lead lenders to deny a consumer credit entirely, making it difficult or 
impossible for that consumer to obtain a mortgage, auto loan, student 
loan, or other credit. Any of these consequences can be devastating for 
a consumer's financial well-being and life. Inaccurate, derogatory 
information in consumer reports can also harm the businesses that use 
such reports by leading them to make unsupported decisions.
    Consumer report accuracy depends on the various parties to the 
consumer reporting system, including: the three nationwide consumer 
reporting agencies (Equifax, Experian, and TransUnion); other consumer 
reporting agencies, such as background screening companies; entities 
such as creditors who furnish information to consumer reporting 
agencies (i.e., furnishers); and public record repositories. While any 
of these parties may introduce inaccurate information into the consumer 
reporting process, a consumer reporting agency is uniquely positioned 
to identify certain obvious inaccuracies and implement policies, 
procedures, and systems to keep them off of consumer reports. In some 
cases, such as when certain account or other information fields on 
consumer reports are logically inconsistent with other fields of 
information, a consumer reporting agency can detect the logical 
inconsistencies and prevent the inaccurate information from being 
included in consumer reports it generates, thereby avoiding the 
consumer harm to individual consumers that can result from reporting 
such inaccurate information.
    Inaccuracy in consumer reports is a long-standing issue that 
remains a problem today. Pursuant to its obligations under the Fair and 
Accurate Credit Transactions (FACT) Act \3\ to conduct a study of 
consumer report accuracy and completeness, the Federal Trade Commission 
in 2012 published a report finding, among other things, that one in 
five consumers who participated in the study had an error on at least 
one of their three nationwide credit reports.\4\ Another more recent 
study, published in 2021, found that over 34% of consumers surveyed 
were able to

[[Page 64690]]

identify at least one error in their credit reports.\5\
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    \3\ Fair and Accurate Credit Transactions Act of 2003, Public 
Law 108-159, sec. 319, 117 Stat. 1952 (2003).
    \4\ See Fed. Trade Comm'n, Report to Congress Under Section 319 
of the Fair and Accurate Credit Transactions Act of 2003, at 64 
(Dec. 2012), https://www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-accurate-credit-transactions-act-2003-fifth-interim-federal-trade-commission/130211factareport.pdf.
    \5\ See Syed Ejaz, Consumer Reports, A Broken System: How the 
Credit Reporting System Fails Consumers and What to Do About It 4 
(June 10, 2021), https://advocacy.consumerreports.org/wp-content/uploads/2021/06/A-Broken-System-How-the-Credit-Reporting-System-Fails-Consumers-and-What-to-Do-About-It.pdf.
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    Consumer complaints submitted to the Bureau continue to reflect 
significant consumer concern about inaccuracies in consumer reports. 
Complaints about ``incorrect information on your report'' have 
represented the largest share of credit or consumer reporting 
complaints submitted to the Bureau each year for at least the last six 
years.\6\ In 2021 alone, companies responded to more than 157,000 such 
complaints, representing a majority (53%) of credit or consumer 
reporting complaint responses that year.\7\
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    \6\ See Consumer Fin. Prot. Bureau, Consumer Response Annual 
Report, at 20 (Mar. 2022), https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf; 
Consumer Fin. Prot. Bureau, Consumer Response Annual Report, at 22 
(Mar. 2021), https://files.consumerfinance.gov/f/documents/cfpb_2020-consumer-response-annual-report_03-2021.pdf; Consumer Fin. 
Prot. Bureau, Consumer Response Annual Report, at 19 (Mar. 2020), 
https://files.consumerfinance.gov/f/documents/cfpb_consumer-response-annual-report_2019.pdf; Consumer Fin. Prot. Bureau, 
Consumer Response Annual Report, at 19 (Mar. 2019), https://files.consumerfinance.gov/f/documents/cfpb_consumer-response-annual-report_2018.pdf; Consumer Fin. Prot. Bureau, Consumer Response 
Annual Report, at 13 (Mar. 2018), https://files.consumerfinance.gov/f/documents/cfpb_consumer-response-annual-report_2017.pdf; Consumer 
Fin. Prot. Bureau, Consumer Response Annual Report, at 18 (Mar. 
2017), https://files.consumerfinance.gov/f/documents/201703_cfpb_Consumer-Response-Annual-Report-2016.PDF.
    \7\ See Consumer Fin. Prot. Bureau, Consumer Response Annual 
Report, at 20 (Mar. 2022), https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf for 
more in-depth analyses.
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    Moreover, the Bureau continues to see accuracy issues at furnishers 
and consumer reporting agencies through its supervisory activities. For 
example, the Bureau noted in its Spring 2022 Supervisory Highlights 
that many furnishers lacked ``reasonable written policies and 
procedures regarding the accuracy and integrity of the information 
relating to consumers.'' \8\ In its Summer 2021 Supervisory Highlights, 
the Bureau explained that some consumer reporting agencies lacked 
adequate procedures for assuring maximum possible accuracy of consumer 
reports when they ``continued to include information in consumer 
reports that was provided by unreliable furnishers.'' \9\
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    \8\ See Consumer Fin. Prot. Bureau, Spring 2022 Supervisory 
Highlights, at 10 (May 2022), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-26_2022-04.pdf.
    \9\ See Consumer Fin. Prot. Bureau, Summer 2021 Supervisory 
Highlights, at 7 (Jun. 2021), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-24_2021-06.pdf.
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    The Bureau also continues to find accuracy issues in the consumer 
reporting context through its enforcement activities. For example, the 
Bureau has brought enforcement actions against consumer reporting 
agencies whose inadequate ``name-only matching'' led to reports with 
inaccurate derogatory criminal and public records information on 
consumers.\10\ The Bureau also has brought enforcement actions against 
furnishers who furnish information with inherent logical 
inconsistencies, such as furnishing an increasing ``original loan 
amount'' over time, where that field should not change.\11\
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    \10\ Consent Order at ]] 8-29, In re Gen. Inf. Svcs. Inc., 2015-
0028 (Oct. 29, 2015), https://files.consumerfinance.gov/f/201510_cfpb_consent-order_general-information-service-inc.pdf; 
Complaint at ]] 5-11, Consumer Fin. Prot. Bureau v. Sterling 
Infosys., Inc., No. 1:19-cv-10824 (S.D.N.Y. Nov. 22, 2019), https://www.consumerfinance.gov/enforcement/actions/sterling-infosystems-inc/.
    \11\ Consent Order at ] 41, In re Hyundai Capital Am., 2022-
CFPB-0005 (July 26, 2022), https://files.consumerfinance.gov/f/documents/cfpb_hyundai-capital-america_consent-order_2022-07.pdf.
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    The FCRA regulates consumer reporting.\12\ The statute was designed 
to ensure that ``consumer reporting agencies adopt reasonable 
procedures for meeting the needs of commerce for consumer credit, 
personnel, insurance, and other information in a manner which is fair 
and equitable to the consumer, with regard to the confidentiality, 
accuracy, relevancy, and proper utilization of such information.'' \13\ 
In interpreting the statute, Federal courts likewise highlight the 
importance of data accuracy. The FCRA was enacted ``to protect 
consumers from the transmission of inaccurate information about them 
and to establish credit reporting practices that utilize accurate, 
relevant, and current information in a confidential and responsible 
manner.'' \14\ Because of the importance of consumer report accuracy to 
businesses and consumers, the structure of the FCRA creates 
interrelated legal standards and requirements to support the policy 
goal of accurate credit reporting. Among these is the requirement that, 
when preparing a consumer report, consumer reporting agencies ``shall 
follow reasonable procedures to assure maximum possible accuracy of the 
information concerning the individual about whom the report relates.'' 
\15\
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    \12\ See 15 U.S.C. 1681-1681x.
    \13\ 15 U.S.C. 1681(b).
    \14\ Guimond v. Trans Union Credit Info., 45 F.3d 1329, 1333 
(9th Cir.1995) (citations omitted); see also S. Rep. No. 91-517, at 
1 (1969) (explaining that the FCRA was intended to ``prevent 
consumers from being unjustly damaged because of inaccurate or 
arbitrary information in a credit report'').
    \15\ 15 U.S.C. 1681e(b).
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    Inaccuracies in consumer reports can, in part, be attributed to 
consumer reporting agencies failing to maintain reasonable procedures, 
such as business rules, to prevent the inclusion of facially false 
data, including logical inconsistencies relating to consumer data and/
or the status or other information associated with consumer accounts, 
when preparing consumer reports. Courts have recognized that in 
``certain instances, inaccurate credit reports by themselves can fairly 
be read as evidencing unreasonable procedures[.]'' \16\ The Bureau is 
issuing this advisory opinion to highlight that the legal requirement 
to follow reasonable procedures to assure maximum possible accuracy of 
the information concerning the individuals about whom the reports 
relate includes, but is not limited to, procedures to screen for and 
eliminate logical inconsistencies to avoid including facially false 
data in consumer reports.
---------------------------------------------------------------------------

    \16\ Stewart v. Credit Bureau, Inc., 734 F.2d 47, 52 (D.C. Cir. 
1984).
---------------------------------------------------------------------------

    There are many logical inconsistencies that could result in 
inaccurate, facially false data being included on consumer reports in 
violation of section 607(b). The following is a non-exhaustive list of 
examples of some of the types of logical inconsistencies that 
reasonable procedures to assure maximum possible accuracy would screen 
for and eliminate:
Inconsistent Account Information or Statuses
    A consumer reporting agency's policies and procedures should be 
sufficient to detect tradelines with account statuses or codes that are 
plainly inconsistent with other information reported for that same 
account, such that, if included in a consumer report, at least one item 
of information therein would necessarily be inaccurate. Such 
inconsistencies may include:
     An account whose status is paid in full, and thus has no 
balance due but nevertheless reflects a balance due; \17\
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    \17\ Cf. Consent Order at ] 20, In re Santander Consumer USA 
Inc., 2022-BCFP-0027 (Dec. 20, 2020) (``Respondent also reported in 
approximately 250,000 instances that accounts had a current balance 
and simultaneously furnished contradictory information, such as also 
furnishing information indicating that the accounts were paid in 
full.''), https://files.consumerfinance.gov/f/documents/cfpb_santander-consumer-usa-inc_consent-order_2020-12.pdf. The 
Santander consent order, along with other CFPB consent orders cited 
herein, relate to furnisher obligations under section 623 of the 
FCRA, but the underlying logical inconsistencies involved, as 
described herein, are illustrative examples of the types of 
inconsistencies that a credit reporting agency's reasonable policies 
and procedures to assure maximum possible accuracy should be 
designed to detect.

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[[Page 64691]]

     An account that reflects an ``Original Loan Amount'' that 
increases over time, an impossibility by definition; \18\ and
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    \18\ Cf. Consent Order at ] 41, In re Hyundai Capital Am., 2022-
CFPB-0005 (July 26, 2022) (``After furnishing the correct original 
loan amount (a field that should not change), Respondent furnished 
increased amounts for the ``original loan amount,'' making it appear 
that a consumer had taken out a larger loan than they had actually 
taken out.''), https://files.consumerfinance.gov/f/documents/cfpb_hyundai-capital-america_consent-order_2022-07.pdf.
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     Derogatory information being reported on an account, 
although that derogatory information predates an earlier report that 
did not include the derogatory information.\19\
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    \19\ Bryant v. TRW, Inc., 487 F. Supp. 1234, 1242 (E.D. Mich. 
1980) (refusing to set aside a jury verdict finding that a consumer 
reporting agency failed to follow reasonable procedures under FCRA 
section 607(b) for failing to detect inconsistencies between a 
September report containing derogatory information and an earlier 
May report on which such information did not appear even though at 
least one of the derogatory items predated the May report).
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    A consumer reporting agency's policies and procedures should 
further identify and prevent illogical reporting of a Date of First 
Delinquency in connection with an account.\20\ Section 605(a) of the 
FCRA identifies categories of information that cannot be included in a 
consumer report after a certain amount of time.\21\ For example, a 
consumer reporting agency may not include on a consumer report accounts 
placed for collection or charged to profit and loss that antedate the 
report by more than seven years and 180 days.\22\ This provision 
enables consumers to move beyond their past and rebuild their credit 
following a delinquency. The Date of First Delinquency provided by a 
furnisher must reflect the month and year on which the delinquency 
being reported commenced.\23\ When accurate, that date corresponds with 
the start of the time period that, once elapsed, precludes the 
delinquency from remaining on a consumer report under FCRA section 
605(a). A Date of First Delinquency that is more recent than the start 
of a delinquency may lead a report user to believe a consumer had 
financial difficulty more recently than is the case. Similarly, a Date 
of First Delinquency reflected on a report where a consumer is not in 
fact delinquent could cause a user to inaccurately believe that the 
consumer is delinquent. Examples of an illogical Date of First 
Delinquency may include:
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    \20\ The Date of First Delinquency herein refers to the date 
furnished to a credit reporting agency by a furnisher that 
purportedly reflects the month and year on which the delinquency 
being reported in connection with a consumer's account commenced.
    \21\ 15 U.S.C. 1681c(a).
    \22\ 15 U.S.C. 1681c(a)(4), (c).
    \23\ 15 U.S.C. 1681s-2(a)(5)(A). Under the FCRA, furnishers must 
report a Date of First Delinquency within 90 days of furnishing 
information regarding delinquent accounts being placed for 
collection, charged to profit or loss, or subjected to any similar 
action. Id.
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     A Date of First Delinquency reported for an account whose 
records reflect no delinquency, such as through activity reflecting a 
current account (complete history of timely payments, $0 amount 
overdue) or through a current account status code; \24\
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    \24\ Cf. Consent Order at ] 36, In re Hyundai Capital Am., 2022-
CFPB-0005 (July 26, 2022) (``Respondent furnished account data 
showing that the consumer account was current, such as reporting $0 
amount overdue or full payments made timely each month, but then 
also furnished a [Date of First Delinquency], a field that 
inaccurately indicated that the account was in an ongoing 
delinquency.''); Consent Order at ] 17, In re Santander Consumer USA 
Inc., 2020-BCFP-0027 (Dec. 20, 2020) (alleging Santander violated 
FCRA Sec.  623(a)(1)(A) by inaccurately furnishing ``internally 
inconsistent'' data, including reporting ``[Date of First 
Delinquencies] for accounts that were current, paid in full (and not 
delinquent immediately beforehand), or previously delinquent but 
subsequently became current'').
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     A Date of First Delinquency that post-dates a charge-off 
date; and
     A Date of First Delinquency, or date of last payment, that 
predates the account open date (for non-collection accounts).
Illogical Information Relating to Consumers
    A consumer reporting agency's policies and procedures should also 
identify logical inconsistencies in consumer information, such that, if 
included in a consumer report, some of the information therein would 
necessarily be inaccurate. Such inconsistencies may include:
     Impossible information about consumers--for example, a 
tradeline that includes a relevant date, such as a date of account 
opening, account closing, date of last payment, or date of first 
delinquency, for an account that is in the future--an obvious 
impossibility--or for an individual account that either predates that 
consumer's listed date of birth or that is so far in the past (e.g., 
January 1, 1800) that it must predate every living consumers' date of 
birth, as individuals cannot open an account before they are born; \25\ 
and
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    \25\ See, e.g., Sheffer v. Experian Information Solutions, Inc., 
2003 WL 21710573, at *2 (E.D. Pa. 2003) (referencing a consumer 
report that ``indicated both that Plaintiff was born in 1969 and 
that the account was opened in 1965'' as one of two 
``inconsistencies'' that ``provide[d] a basis from which a jury 
could infer that the procedures were unreasonable'').
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     Information about consumer accounts that is plainly 
inconsistent with other reported information, such that one piece of 
information must be inaccurate--for example, if every other tradeline 
is reporting ongoing payment activity, while one tradeline contains a 
``deceased'' indicator, reasonable policies and procedures should 
identify the inconsistency and the consumer reporting agency should 
prevent the inclusion of the inaccurate information in consumer reports 
it generates.\26\
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    \26\ Gohman v. Equifax Information Services, LLC, 395 F. Supp. 
2d 822, 827 (D. Minn. 2005); see also Sheffer, 2003 WL 21710573, at 
*2 (referencing the fact that only one account of approximately two 
dozen on a consumer's report included the ``deceased'' notation as 
one of two ``inconsistencies'' that ``provide[d] a basis from which 
a jury could infer that the procedures were unreasonable'').
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    A consumer reporting agency's policies, procedures and internal 
controls should further identify and prevent reporting of illegitimate 
credit transactions for a minor. Minors generally cannot legally enter 
into contracts for credit except in certain limited circumstances. It 
is logically inconsistent when a credit transaction is reported for a 
person who lacks capacity to enter into a contract because they are a 
minor, unless there are indicia that the credit transaction is 
legitimate, such as in the context of student loans, credit card 
authorized users, or emancipated minors.\27\ The Bureau is aware of 
evidence showing that instances of identity theft are especially 
prevalent for minors, suggesting that identity thieves may target 
minors due to the value of unused Social Security numbers and a belief 
that there is a lower probability of discovery of the

[[Page 64692]]

fraud.\28\ This risk may be even more acute for minors in the United 
States foster care system, who often lack a permanent address and 
frequently have their personal information shared among numerous adults 
and agency databases, making them particularly susceptible to identity 
theft and inaccurate credit history information.\29\ This heightened 
risk faced by minors underscores the importance for consumer reporting 
agencies to maintain procedures designed to identify illegitimate 
credit transactions reported for minors and prevent inclusion thereof 
when preparing consumer reports.
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    \27\ This example is consistent with prior Federal Trade 
Commission (FTC)'s 40 Years Report. See FTC, 40 Years of Experience 
with the Fair Credit Reporting Act (July 2011) [hereinafter, the 
``FTC 40 Years Report''], available at https://www.ftc.gov/sites/default/files/documents/reports/40-years-experience-fair-credit-reporting-act-ftc-staff-report-summary-interpretations/110720fcrareport.pdf, at 68, comment 8 (``A [consumer reporting 
agency] must maintain procedures to avoid reporting information with 
obvious logical inconsistencies, such as a credit account opened 
when the consumer was known to be a minor.''). FTC staff published 
the 40 Years Report, an updated compilation of past FTC 
interpretations of the FCRA, to coincide with the transfer of 
authority to the Bureau. Effective July 21, 2011, the Dodd-Frank Act 
transferred rulemaking authority related to most of the FCRA to the 
Bureau, giving the Bureau the primary regulatory and interpretive 
roles under the FCRA.
    \28\ See, e.g., Richard Power, Carnegie Mellon CyLab, Child 
Identity Theft: New Evidence Indicates Identity Thieves are 
Targeting Children for Unused Social Security Numbers (2011), 
available at https://www.cylab.cmu.edu/_files/pdfs/reports/2011/child-identity-theft.pdf.
    \29\ See Consumer Fin. Prot. Bureau, ``CFPB Releases Tools to 
Protect Foster Care Children from Credit Reporting Problems'' (May 
1, 2014), available at https://www.consumerfinance.gov/about-us/
newsroom/cfpb-releases-tools-to-protect-foster-care-children-from-
credit-reporting-errors/
#:~:text=To%20submit%20a%20complaint%2C%20consumers,1%2D855%2D237%2D2
392.
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    The Bureau is issuing this advisory opinion to remind consumer 
reporting agencies that the failure to maintain reasonable procedures 
to screen for and eliminate logical inconsistencies, to prevent the 
inclusion of facially false data in consumer reports, is a violation of 
their FCRA obligation to ``follow reasonable procedures to assure 
maximum possible accuracy'' under section 607(b) of the FCRA.

B. Coverage

    This advisory opinion applies to all consumer reporting agencies as 
defined in FCRA section 603(f).\30\
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    \30\ 15 U.S.C. 1681a(f).
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C. Legal Analysis

    Section 607(b) of the FCRA provides that ``[w]henever a consumer 
reporting agency prepares a consumer report it shall follow reasonable 
procedures to assure maximum possible accuracy of the information 
concerning the individual about whom the report relates.'' \31\ The 
Bureau has interpreted this requirement in section 607(b) to include as 
an integral component that consumer reporting agencies implement and 
maintain reasonable screening procedures, such as business rules, 
designed to identify and prevent the inclusion of facially false data, 
such as logical inconsistencies relating to consumer or account 
information, in the consumer reports they prepare.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 1681e(b).
---------------------------------------------------------------------------

    Courts have spoken on this topic. For example, in Bryant v. TRW, 
Inc., the court rejected a consumer reporting agency's assertion that 
it had ``no obligation'' to compare facially inconsistent information 
contained in two of plaintiff's consumer reports from different months 
because such an interpretation would make the consumer reporting agency 
``simply a conduit and eliminate from the [FCRA] its emphasis on the 
reasonableness of the procedures followed in putting together a 
consumer report,'' contrary to Congressional intent.\32\ Courts have 
also indicated that the inclusion of facially false data inaccuracies 
on a consumer report may, in certain circumstances, evidence the 
unreasonableness of a consumer reporting agency's procedures.\33\
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    \32\ See Bryant v. TRW, Inc., 487 F. Supp. at 1242. See also 
McKeown v. Sears Roebuck & Co., 335 F. Supp. 2d 917, 930 (W.D. Wis. 
2004) (``[R]eceiving apparently inconsistent credit reports may 
trigger an obligation to investigate on the part of the credit 
reporting agency . . . . [because] allowing credit reporting 
agencies to act as nothing more than mere conduits of information 
would eviscerate the act's emphasis on reasonable compilation 
procedures.'') (citing Bryant, 487 F. Supp. at 1242); Wright v. 
Experian Info. Sols., Inc., 805 F.3d 1232, 1239 (10th Cir. 2015) 
(``Courts have held [consumer reporting agencies] must look beyond 
information furnished to them when it is inconsistent with the 
[consumer reporting agencies'] own records, contains a facial 
inaccuracy, or comes from an unreliable source.'').
    \33\ See Stewart v. Credit Bureau, Inc., 734 F.2d at 52; 
Sheffer, 2003 WL 21710573, at *2.
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    It continues to be the Bureau's interpretation as outlined in this 
advisory opinion that such procedures are required, consistent with the 
core purpose of the FCRA as described in FCRA section 602--i.e., to 
require consumer reporting agencies to adopt reasonable procedures for 
meeting the needs of commerce for consumer credit, personnel, 
insurance, and other information in a manner that is fair and equitable 
to the consumer with regard to accuracy, among other 
responsibilities.\34\ This interpretation also aligns with the Federal 
Trade Commission's 40 Years Report, which states that pursuant to 
607(b), a consumer reporting agency ``must maintain procedures to avoid 
reporting information with obvious logical inconsistencies, such as a 
credit account opened when the consumer was known to be a minor.'' \35\
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    \34\ 15 U.S.C. 1681(b); see also Guimond, 45 F.3d at 1333.
    \35\ FTC 40 Years Report, at 68, comment 8.
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    In addition to provisions authorizing Federal and State 
enforcement,\36\ the FCRA contains two provisions relating to civil 
liability to consumers for noncompliance. Section 617 provides that 
``any person who is negligent in failing to comply with any requirement 
imposed under this title with respect to any consumer is liable to that 
consumer in an amount equal to'' the consumer's actual damages, and 
costs and reasonable attorney's fees.\37\ Section 616 provides that 
``any person who willfully fails to comply with any requirement imposed 
under this title with respect to any consumer is liable to that 
consumer in an amount equal to'' actual or statutory damages of up to 
$1,000 per violation, such punitive damages as the court allows, and 
costs and reasonable attorney's fees.\38\ A violation is willful when 
it is inconsistent with ``authoritative guidance'' from a relevant 
agency.\39\ As with any guidance issued by the CFPB on the FCRA, or 
predecessor agencies that were responsible for administering the FCRA 
prior to the CFPB's creation, consumer reporting agencies risk 
liability under Section 616 if they violate the FCRA in a manner 
described in this Advisory Opinion, regardless of whether the consumer 
reporting agencies were previously liable for willful violations prior 
to its issuance.
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    \36\ 15 U.S.C. 1681s.
    \37\ 15 U.S.C. 1681o (emphasis added).
    \38\ 15 U.S.C. 1681n (emphasis added); Safeco Ins. Co. of Am. v. 
Burr, 551 U.S. 47, 57-58 (2007) (construing meaning of ``willful'').
    \39\ Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 70 (2007); 
Fuges v. Sw. Fin. Servs., Ltd., 707 F.3d 241, 253 (3d Cir. 2012).
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II. Regulatory Matters

    This advisory opinion is an interpretive rule issued under the 
Bureau's authority to interpret the FCRA, including under section 
1022(b)(1) of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act,\40\ which authorizes guidance as may be necessary or appropriate 
to enable the Bureau to administer and carry out the purposes and 
objectives of Federal consumer financial laws.\41\
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    \40\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376 (2010).
    \41\ 12 U.S.C. 5512(b)(1).
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    The Bureau has determined that this advisory opinion does not 
impose any new or revise any existing recordkeeping, reporting, or 
disclosure requirements on covered entities or members of the public 
that would be collections of information requiring approval by the 
Office of Management and Budget under the Paperwork Reduction Act.\42\
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    \42\ 4 U.S.C. 3501-3521.
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    Pursuant to the Congressional Review Act,\43\ the Bureau will 
submit a report containing this interpretive rule and other required 
information to the United States Senate, the United States House of 
Representatives, and the Comptroller General of the United States prior 
to the

[[Page 64693]]

rule's published effective date. The Office of Information and 
Regulatory Affairs has designated this interpretive rule as not a 
``major rule'' as defined by 5 U.S.C. 804(2).
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    \43\ 5 U.S.C. 801 et seq.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-23264 Filed 10-25-22; 8:45 am]
BILLING CODE 4810-AM-P

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