Show Notes:

Text and email are not digital versions of a letter or a telephone call. There has to be a strategy that includes consumer consent but also a willingness by that same consumer to continue the conversation. Enter Quanta Credit Services, a new innovative digital-first solutions provider that manages communication strategies. Aleks Whitchurch, CEO and Co-Founder of Quanta stops by the next episode of #creditecotogo to talk about the nuts and bolts of the digital communications journey and the many paths that journey can take. Aleks tells us this is not a volume game but a problem-solving game. Quanta’s data shows that how you treat the consumer and customize the conversation can make a measurable difference. 

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In Fowler v. Preferred Collection & Mgmt. Servs., No. 8:21-cv-1038-WFJ-AAS (M.D. Fla. May 16, 2022), the court granted in part and denied in part the defendant’s motion for summary judgment as to claims asserted against it under Section 1681s-2(b) of the Fair Credit Reporting Act (FCRA). In doing so, the court weighed in on whether a consumer who lodged a dispute outside of the statute of limitations period can assert claims based on subsequent, similar disputes within the limitations period.

The defendant, Preferred Collection & Management Services (Preferred Collection), is a third-party debt collector. The plaintiff, Angela Fowler (Fowler), alleged that she reviewed her credit report in May 2019 and discovered that Preferred Collection was reporting that she is responsible for 13 accounts related to medical bills totaling $476. On May 18, 2019, Fowler disputed the reporting with one of the consumer reporting agencies (CRAs), asserting that she never received treatment from the medical provider named on the accounts. Fowler again disputed the reporting of the accounts in January 2021, and the CRA responded that Preferred Collection had verified the accounts as accurate. Subsequently, during discovery, Fowler conceded that she first disputed the reporting of the accounts in October 2017 and that some of the damages she claimed, such as being denied employment due to her credit report in November 2017, were related to the 2017 dispute.

On April 30, 2021, Fowler filed suit, alleging that Preferred Collection failed to conduct reasonable investigations of her May 2019 and January 2021 disputes in violation of Section 1681s-2(b).

In partially granting summary judgment in favor of Preferred Collection, the court noted that the two-year statute of limitations in FCRA Section 1681p applies to Fowler’s claims. Based on this, it held that any claims based on alleged violations or damages occurring before April 30, 2019 were time-barred. But this ruling only eliminated a portion of Fowler’s claims. Although the two disputes that were the focus of the complaint raised the same issues as the 2017 dispute, the claims based on the May 2019 and January 2021 disputes were timely because the court held that each notification of a consumer’s dispute from a CRA to a furnisher creates its own duties and corresponding limitations period. This is an issue on which courts have disagreed in recent years.

In addition to finding that Fowler’s claims were only partially barred by the statute of limitations, the court held that a genuine issue of material fact existed as to whether Preferred Collection satisfied its duty to investigate the May 2019 and January 2021 disputes. After receiving notice of the disputes, Preferred Collection matched its internal records to the demographic information provided by the CRA and verified the accounts as belonging to Fowler. In denying the defendant’s motion for summary judgment, the court held that question of fact existed as to whether merely reviewing internal records is sufficient to satisfy Section 1681s-2b’s requirement that furnishers perform “some degree of careful inquiry” after receiving notice of a dispute from a CRA.

On May 25, 2022, my colleagues, Mike Gordon, John Culhane and Ron Vaske published a blog which reported on a press release issued by the CFPB on the prior day entitled “CFPB Launches New Effort to Promote Competition and Innovation in Consumer Finance.”  The blog stated:

In its press release, the CFPB states that “[a]fter a review of these programs [the No Action Letter (NAL) and Compliance Assistance Sandbox (CAS) programs], the agency concludes that the initiatives proved to be ineffective and that some firms participating in these programs made public statements indicating that the Bureau had conferred benefits upon them that the Bureau expressly did not.”

In lieu of a company filing an application for an NAL or participation in a CAS, both of which apply to an individual company’s specific product offering, the press release encouraged companies, including start-ups, to file rulemaking petitions to ask for greater clarity in particular rules.  The Bureau states that any action taken in response to a rulemaking petition “will apply to all companies in the market.”

The CFPB press release also announced that it “is opening a new office, the Office of Competition and Innovation, as part of a new approach to help spur innovation in financial services by promoting competition and identifying stumbling blocks for new market entrants.  The new office will replace the Office of Innovation that focused on an application-based process to confer special regulatory treatment on individual companies.”

Since the CFPB, in its press release, called the NAL and CAS programs ineffective, indicated companies were mischaracterizing the benefits conferred by such programs, and encouraged companies to file rulemaking petitions going forward, the clear implication was that these programs were being eliminated.

Not so, according to Raul E. Cisneros of the CFPB’s press office.  This is what Mr. Cisneros told me by e-mail on June 3 which he said could be attributed to the Bureau:

At this time, the CFPB has not rescinded the not[sic]-action letter or sandbox programs, and is still taking new applications and processing previously submitted applications.  However, this is not the primary focus of the Office of Competition and Innovation. 

Hmm.  Calling programs ineffective that an agency plans to continue strikes us as an odd way of doing business.  While the CFPB may continue to process new applications, we expect its disparagement of the programs will lead most companies to reassess whether filing an application is worth the investment of time, effort, and cost required to do so.

On May 2, 2022, the CFPB issued its Supervisory Highlights for spring 2022 (the “spring 2022 Report”), which highlights legal violations identified by the CFPB’s examinations between July 2021 and December 2021. The findings in the spring 2022 Report cover the areas of auto servicing, consumer reporting, credit card account management, debt collection, deposits, mortgage origination, prepaid accounts, remittances, and student loan servicing. The spring 2022 Report also summarizes recent developments in the CFPB’s supervision program and remedial actions.

Focusing strictly on the area of consumer reporting, the CFPB notes that examiners have found deficiencies in credit reporting companies’ compliance with FCRA dispute investigation requirements and furnisher compliance with FCRA and Regulation V accuracy and dispute investigation requirements. The CFPB notes that in several reviews of credit reporting companies (“CRCs”), examiners found that they failed to conduct reasonable investigations of disputes. Specifically, CRCs deleted thousands of disputed tradelines rather than resolving disputes consistent with the investigation conducted by the furnisher and failed to review and consider all relevant information submitted by the consumer in support of their disputes. In addition, examiners found that CRCs failed to timely notify furnishers after receipt of a dispute and to timely and accurately notify consumers of the results of a dispute reinvestigation.

The CFPB also discusses several deficiencies with regard to credit card furnishers, deposit furnishers, and auto furnishers. The CFPB advises that credit card furnishers erroneously applied Regulation V’s “frivolous” designation to indirect disputes when the FCRA does not allow furnishers to deem indirect disputes as “frivolous.” The CFPB further advises that credit card furnishers sent incorrect indirect dispute investigation results to CRCs. Moreover, the CFPB notes that credit card furnishers failed to communicate the results of its investigations in response letters to direct disputes and failed to send updating or correcting information to CRCs after making a determination that the reported information was incomplete or inaccurate.

Lastly, the CFPB identifies violations of Regulation V’s requirement that all furnishers establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information relating to consumers. The CFPB emphasizes that furnishers must consider and incorporate, as appropriate, the guidelines of Appendix E to Regulation V when developing their policies and procedures, which address key business functions, such as record retention, training, third-party oversight, and receipt of feedback from CRCs and others. The CFPB identifies the following violations of the Regulation V requirement for reasonable written policies and procedures with respect to credit card furnishers:

• Failure to specify how particular data fields, such as the date of first delinquency, should be populated when furnishing information about credit card accounts.

• Failure to provide for the retention of records for a reasonable period of time to substantiate the accuracy of consumer information furnished to CRCs.

• Failure to perform account level analyses to determine which accounts should be reported in bankruptcy status after a consumer informs the furnisher of a bankruptcy filing.

Given that the CFPB included similar findings relating to credit reporting in its summer 2021 edition of Supervisory Highlights, it is apparent that the CFPB has a continuing interest in furnishers’ compliance with credit reporting, as well as their written policies and procedures. Therefore, it is imperative that furnishers re-review written credit reporting policies and procedures and ensure that such policies are being followed.