Credit Reporting Agencies May Be Affected by SECURE Act Amendments to FCRA

Earlier this month, U.S. Senators Sherrod Brown (D-OH) and Brian Schatz (D-HI) held a news conference where they discussed their proposed legislation intended to protect consumers from inaccurate credit reports and credit scores.  The Senators’ legislation, Stop Errors in Credit Use and Reporting (SECURE) Act of 2014, will be introduced after Consumers Union releases a new report addressing credit report errors that affect 40 million of U.S. citizens. 

Under the Fair Credit Reporting Act (“FCRA”) (15 U.S.C. 1681 et seq.), credit reporting agencies (“CRAs”) are required to “Follow reasonable procedures to assure maximum possible accuracy” of information contained in credit reports.  Senators Brown and Schatz contend that many reports still contain many errors that can be prevented.  In fact, in a 2013 report the Federal Trade Commission (“FTC”) found that one in five consumers has an error on at least one of their credit reports.  Those errors were significant enough to impact the credit scores of half of those consumers.

Senator Schatz commented on the legislation: “Errors in a credit report can make the difference between whether someone can live the American Dream and buy a home or even get a job…  Our legislation will make credit reports more accurate, help people to correct any mistakes, give federal agencies more tools to enforce the law, and hold reporting agencies and data furnisher accountable for their mistakes.”

The SECURE Act proposes changes for credit reporting agencies intended to:

1)      Make credit reports more accurate from the beginning;

2)      Ensure that consumers are heard when they dispute information in their credit report;

3)      Provide consumers with a free, meaningful credit score once a year;

4)      Require CRAs and data furnishers to conduct meaningful investigations when consumers file disputes;

5)      Provide additional tools to agencies to adequately regulate and supervise creditreporting agencies; and

6)      Give consumers better legal tools to enforce their rights under the FCRA.

The SECURE Act would provide increased requirements on CRAs and data furnishers:

-          Requires CRAs to pass along documentation sent by consumers to data furnishers and requires data furnishers to consumer the documentation in their re-investigation;

-          Prevents CRAs from ignoring new or additional information provided by a consumer that is relevant to an on-going dispute;

-          Requires CRAs to gather report information on disputesand their resolution;

-          Directs the Consumer Financial Protection Bureau (“CFPB”) to establish minimum procedures that a CRA must follow to ensure maximum possible accuracy of consumer reports.

Among the amendments to the FCRA is section 612, where, among other changes, subsection (b) will be stricken and the following will be inserted:

(b)Free Disclosure After Notice of Adverse Action or Offer of Credit on Materially Less Favorable Terms.—

“(1) In general.—Not later than 14 days after the date on which a consumer reporting agency received a notification under subsection (a)(2) or (h)(6) or section 615, or from a debt collection agency affiliated with the consumer reporting agency, the consumer reporting agency shall make, without charge to the consumer, all disclosures required in accordance with the rules prescribed by the Bureau under section 609(h).

The SECURE Act is also intended to provide:

More disclosures to consumers:

1)      Provides consumers with access to meaningful credit scores free of charge annually; and

2)      Ensures that consumers get the information they need to understand their credit reports by enabling consumers to identify and correct errors on their report, understand how their credit report is being used and by whom, and see the same information that is used by lenders to deny a consumer credit or increase interest rates.

Legal redress:

1)      Holds CRAs accountable to the FTC for negligent violations of the FCRA; and

2)      Provides for injunctive relief as a remedy for consumers who sue CRAs under the FCRA.

Regulatory reforms:

1)      Creates a national registry of CRAs to provide consumers with opportunity to know which companies are collecting and disseminating information about them; and

2)      Directs the Government Accountability Office to conduct a study of existing public credit reporting systems and evaluate the feasibility, costs and benefits of creating a national credit reporting system in the U.S.

For more questions regarding the SECURE Act and the FCRA in general, you may contact Joseph Messer at (312) 334-3440, or at jmesser@messerstrickler.com.