The Federal Trade Commission (FTC) recently announced a settlement with a company that services auto loans for alleged violations of the Fair Credit Reporting Act (FCRA) “Furnisher Rule.” The settlement serves as a reminder to all companies that furnish consumer information to consumer reporting agencies (CRA) of their obligations to maintain policies and procedures regarding the accuracy of the information they provide and to conduct investigations of direct consumer disputes. The settlement requires the servicer to pay an $82,777 civil penalty.

The Furnisher Rule requires companies that report information about consumers to CRAs to “establish and implement reasonable written procedures regarding the accuracy and integrity of the information relating to consumers that it furnishes to a [CRA].” It also requires furnishers to “conduct a reasonable investigation of a direct dispute [submitted to the furnisher by a consumer].” The furnisher must report the results of its investigation to the consumer. While a furnisher is not required to investigate a direct dispute it has determined to be frivolous or irrelevant, it must nevertheless notify the consumer that it has made such a determination and provide reasons for the determination.

According to the FTC’s complaint, the servicer was responsible for servicing auto loans made by an affiliated auto dealer. The loans were owned by the servicer’s subsidiary to which the dealer had transferred its interest in the loans. The FTC alleged that the servicer reported information to CRAs about the loans it serviced, including a consumer’s account status, payment history, address on file, social security number, and date of birth. The FTC claimed that the servicer violated the FCRA by failing to establish written policies and procedures or conduct investigations of direct disputes as required by the Furnisher Rule. According to the complaint, rather than conduct such investigations, the servicer forwarded all direct disputes to a CRA. The FTC also claimed that the servicer’s FCRA violations constituted unfair or deceptive acts or practices in violation of Section 5 of the FTC Act.

The FTC shares FCRA enforcement authority as to non-banks with the Consumer Financial Protection Bureau (CFPB), which has also imposed civil penalties for Furnisher Rule violations. In addition to complying with the Furnisher Rule requirements for direct disputes, a furnisher must comply with the FCRA requirement to conduct an investigation of disputed information when it is notified by a CRA that a consumer has disputed with the CRA the accuracy or completeness of information provided to the CRA by the furnisher. In July 2013, the CFPB issued a bulletin to furnishers about their obligation under the FCRA to review “all relevant information” relating to such a dispute.

Attorneys in Ballard Spahr’s Consumer Financial Services Group regularly advise clients on FCRA compliance and defend clients in FCRA lawsuits. The Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky, John L. Culhane, Jr., or Daniel JT McKenna.


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