the changing climate for consumer reporting and disputes · 5/4/2016 · including communications...

© Copyright 2016, Proprietary Property of Bridgeforce Inc. 1

The Changing Climate for

Consumer Reporting and Disputes

Where do we go from here?


Discussion Topics

• Introductions and Session Overview

• Regulatory and Compliance Environment Update

• Emerging Trends and Hot Topics

• Bridgeforce® Data Quality Scanner™ ‒ What

We’ve Learned

• Q&A


Bridgeforce

A Different Kind of Consulting Company

Knowledge and Experience

• Over 75% of Bridgeforce

consultants have client-

side leadership

experience across the

credit life cycle

• We believe that no other

firm has the level of

real-world experience

that we do

Multi-RegionalInsight

• We have close working

relationships with both

US and European banks

• This gives us valuable

insight into the

interconnected regulatory

movement and strategic

trends across countries

ExecutionFocused

• We take very hands-on

roles in growing

our clients’ capabilities

• With our practical

experience and

knowledge base, we are

uniquely capable at

helping clients address

execution risk

B R I D G E F O R C E

Who We Are

• A specialized multi-

national consulting firm

• Serve clients in all

aspects of the consumer

and small business

lending and payments

space

• Solve complex problems

across every line of

business from sub-prime

to super-prime


Relevant Experience for Today’s Discussion

• Assessed end-to-end processes for Consumer and Small Business Reporting,

Disputes, and Usage (including horizontal reviews).

• Created audit-ready policies and procedures for Consumer and Small Business

Reporting related processes.

• Developed detailed field mapping & conversion documents to ensure reporting

processes were appropriately documented and governed.

• Implemented multi-stage reporting data validation and controls for consumer data

furnishers – including development of a proprietary Data Quality tool for Metro 2

consumer reporting.

• Designed Centralized Governance Structure to ensure consistency and processes

across all different areas of the organization.

Who:Large and small banks, credit unions, specialty and nonbank lenders, and processors

What:


Poll Question

Poll Question: Compared to the past, how much attention has your organization put

towards consumer reporting and disputes compliance over the last 12 months?

1. Less effort

2. About the same

3. More effort


Poll Question

Poll Question: Which area has received more attention in your organization, reporting or

disputes?

1. More attention on reporting

2. More attention on disputes

3. About the same on each


Regulatory and

Compliance Environment

Update


Regulatory and Compliance Update

• The CFPB has raised expectations for accuracy

• CRAs accept much greater documentation for consumer disputes

than in the past and pass that to furnishers

• Multiple court decisions have found the increased information

available greatly raises the duty for a “reasonable investigation”


CFPB Actions Generated Pressure

JULY 2012Began supervising larger participants in the credit reporting industry

AUGUST 2013The three largest CRAs begin allowing consumers to upload, mail,

or fax documents in support of allegations of disputed accuracy

SEPTEMBER 2013Published Bulletin 2013-09 stressing duty of “every furnisher

to review and consider ‘all relevant information’ relating to the dispute,” including documents received from CRAs

FEBRUARY 2014Published Bulletin 2014-01 stressing duties of furnishers to conduct

reasonable, actual investigations of disputes received from CRAs

DECEMBER 2014Began requiring CRAs to report on: 1) furnishers with the most disputes,

2) industries with the most disputes, and 3) furnishers with the highest dispute rates relative to their peers


Court Decisions Also a Major Force

Since 2004, every U.S. Court of Appeals that considered the issue recognized a right of

private action for claims brought under Section 623(b) of the FCRA alleging the failure by

a furnisher to conduct a “reasonable investigation” of a notice of dispute received from a

credit reporting agency (CRA)

“[F]irst and foremost a furnisher must review all information provided to it by a

CRA regarding a dispute in order to comply with [FCRA] Section 1681s-2(b)(1)(B).

Additionally, the nature and specificity of the information provided by the CRA to

the furnisher may affect the scope of the investigation required of the furnisher.”

Boggio v. USAA Federal Savings Bank, 696 F.3d 611, 617 (6th Cir. 2012)


Recent Court Decisions

Daugherty v. Equifax Information and Ocwen Loan Servicing, 2015 WL 645672 (S.D. Va.

2015). Although Fourth Circuit precedent provides that a “reasonable investigation” for

purposes of Section 623(b) of the FCRA “does not require the data furnisher to consult

external sources,” the court found issues of material fact and denied summary judgment

where:

Ocwen had available for review additional information about potential

inaccuracies with the Plaintiff’s account [beyond what was provided by Equifax,

including communications with the CFPB], had direct communications with the

Plaintiff about the inaccuracies, had knowledge that the Plaintiff’s credit report

inaccurately showed that the Ocwen account was past due, and in at least one

instance, that foreclosure proceedings had commenced.

Daugherty, Slip Copy, pages 5-7

The Daugherty court rejected defendants reliance on Westra v. Credit Control of Pinellas,

409 F.3d 825 (7th Cir. 2005) for the position that Section 623(b) only requires

consideration of the information that was received from the CRA with the dispute.

Rather, “a data furnisher must conduct a ‘searching inquiry’ . . .” Id. at 5-6.


Recent Court Decisions (continued)

Knowles v. Capital One Bank (USA), 2015 WL 3405288 (M.D. Pa. 2015). The fact

that the defendants had previously investigated the same allegations of inaccuracies

in the course of handling a dispute received directly from the plaintiff did not render

the dispute that plaintiff submitted through the CRAs frivolous or irrelevant:

Defendants make two arguments in support of their contentions that Plaintiff's

dispute was meritless. . . First, they claim that under the provided definition of a

frivolous or irrelevant dispute, they had already considered the dispute and there is

no evidence that Plaintiff had raised any new issues. This argument is tenuous.

Under § 1681s–2(a)(8)(F) (i)(II), a dispute is frivolous or irrelevant if the consumer

has already submitted the same or substantially similar dispute under § 1681s–

2(b). That subsection requires that the dispute be submitted through a CRA and

not directly to the defendant furnisher. There is no doubt that Plaintiff submitted

notice of a dispute through the CRAs only once; notice of a dispute given directly

to a furnisher is inapplicable under this definition of frivolous or irrelevant.

Knowles, Slip Copy., page 6


What this Means

Those armed with knowledge and the right

tools can successfully manage new regulatory

requirements and changes to the industry.


Emerging Trends and

Hot Topics


Compliance Expectations

The Foundation

• Both direct and indirect disputes are logged and worked in a centralized group

• Appropriate compliance codes are in use by the dispute group

• Responses / letters address consumer’s true concerns

• Direct escalation channels to a centralized Complaint Department exist

• Appropriate resolution of all disputes (ACDV and AUD) are completed within no

greater than 30 days from initial notification

• Dispute trends and the nature of disputes are closely monitored

• Process improvement teams identify and address root causes to prevent future

occurrences across the enterprise

DisputeExpectations

UsageExpectations

• Documented permissible purpose is required to request individual consumer reports• Appropriate use of inquiry type (soft vs. hard inquires)• Access is limited to only “authorized Individuals” who require it to complete their functional

activities, have completed FCRA training, and agree to protect the data• Appropriate tracking and reporting to ensure policies are being followed

ReportingExpectations

• Ensure compliant reporting practices across the business

• Report all loans that are able to be reported correctly in compliance with guidelines at

least once per month

• Perform validation of consumer data (both % distribution and trade-line specific) at

multiple reporting stages

• Include consumer reporting and file criteria in core system regression testing plans

Ensure compliant reporting practices across the businessPerform validation of consumer data

(both % distribution and trade-line specific) at multiple reporting stagesppropriate resolution of all disputes (ACDV and AUD)

are completed within no greater than 30 days from initial notification

• Both direct and indirect disputes are logged and worked in a centralized group

• Appropriate compliance codes are in use by the dispute group

• Responses / letters address consumer’s true concerns

• Direct escalation channels to a centralized Complaint Department exist

• Appropriate resolution of all disputes (ACDV and AUD) are completed within no

greater than 30 days from initial notification

• Dispute trends and the nature of disputes are closely monitored

• Process improvement teams identify and address root causes to prevent future

occurrences across the enterprise

DisputeExpectations

UsageExpectations

• Documented permissible purpose is required to request individual consumer reports• Appropriate use of inquiry type (soft vs. hard inquires)• Access is limited to only “authorized Individuals” who require it to complete their functional

activities, have completed FCRA training, and agree to protect the data• Appropriate tracking and reporting to ensure policies are being followed

ReportingExpectations

• Ensure compliant reporting practices across the business

• Report all loans that are able to be reported correctly in compliance with guidelines at

least once per month

• Perform validation of consumer data (both % distribution and trade-line specific) at

multiple reporting stages

• Include consumer reporting and file criteria in core system regression testing plans


Poll Question

Poll Question: How are your disputes operations structured across the enterprise?

1. One group for each business line/source system

2. One group across the enterprise

3. Some business lines/source systems are consolidated, but multiple disputes

operations exist across the enterprise

4. Each business line is responsible for execution, but a single oversight group

exists across the enterprise


Poll Question

Poll Question: How are your reporting processes structured across the enterprise?

1. One owner for each business line/source system

2. One owner across the enterprise

3. Some business lines/source systems are consolidated, but multiple processes

exist across the enterprise

4. Each business line is responsible for execution, but a single oversight group

exists across the enterprise


Consumer Disputes

Regulatory Hot Topics:

• Elimination of conditions for accepting

disputes (standards of documentation

etc.)

• Definitions for frivolous or irrelevant

disputes

• Review and analysis of data on

consumer disputes at least annually

• Investigation: how staff investigates,

time or resource constraints

Considerat ions for Success:

• Strong processes for ongoing root

cause analysis, verification and

sustainability of corrections

• Potential customer outreach for

documentation and details to enable

the investigation

• Dispute reporting function knowledge of

FCRA requirements and audit of

updated consumer reports for that

compliance

• Focus on the Customer Experience

CFPB Consumer Response Group is seeing a high frequency of consumer relief

from complaints when disputes were rejected or not resolved by the furnisher.


Consumer Reporting

Regulatory Hot Topics:

• Comprehensive data validation

process for files to CRAs to ensure

accuracy and integrity

• Accurate reporting for bankruptcy and

other complex account statuses

(foreclosures, repossessions, deferred

payments, etc.)

• Inconsistencies in reporting Special

Comment Codes especially for

Student Loans

• Consumer access to and

understanding of their credit reports

and credit scores

Considerat ions for Success:

• Policies, procedures and process maps

• Audit-ready Metro 2® data mapping and

conversion documents for each system

of record

• Staff training and assessment adequacy

• File accuracy verification and CRA

auditing

• Independent assessments (of data

accuracy, separate from those who

generate it)

Consumer reporting remains a top priority for the CFPB


Poll Question

Poll Question: What tools/processes do you use to enhance the accuracy of

your reporting? Select all that apply.

1. Disputes root cause analysis

2. Monthly CRA error reports

3. Annual CRA audits

4. An automated data validation routines

5. None of the above


Bridgeforce® Data Quality

Scanner™ Update


Bridgeforce® Data Quality Scanner™

Overview

• Allows furnisher the ability to perform data reviews

prior to transmitting the Metro 2 ® file

• Reviews each Metro 2 ® file against Metro 2 criteria

and field definitions (250+ rules), reducing reject and

error rates

• Reviews the entire Metro 2® file, identifying data

discrepancies that would not be rejected by the CRAs

• Allows for month over month tracking for illogical

changes to individual account data

• Provides discrepancy trend tracking / reporting

Compliance Management System

Last year, we introduced the Bridgeforce® Data Quality Scanner™

which serves as a layer of control by automating certain best practice

data quality audits.



How it Works and Live Demo



How it has Helped (Case Study)

“The DQS gives us a consistent baseline

measure of accuracy and a way to identify

and resolve systemic issues more quickly

than we have been able to in the past.”

“The DQS has been a

key tool in our Consumer

Reporting Program.”


The Path Forward:

Action Items & Wrap Up


The Path Forward

Action #1: Examine your Reporting Validation Process

Validate

Data

Quality

Provide

Data

Data Furnishers

Consumer Reporting

Agencies

Stage 1

Pre-transmission review of certain file

statistics

Stage 2

Quarterly evaluation of the reporting file

criteria, data mapping, and conversion

from the core system to the Metro 2® file

Stage 3

Quarterly evaluation of the actual reporting

file, to confirm that each of the fields are

reporting in the correct byte # or position #

on the file

Stage 4

Inclusion of consumer reporting processes

and file criteria in all regression testing

plans

Stage 8

Quarterly evaluation of a sample of

records to assess the data as it appears

on the credit bureau to confirm the bureau

has correctly mapped the data you

provided

Stage 7

Annual data audit with each CRA

Stage 6

Quarterly/Monthly review of CRA-

generated statistics report (a.k.a. Reject &

Error)

Stage 5

Post-transmission confirmation


The Path Forward

Action #2: Review your CMS


The Path Forward

Action #3: Assess Your Disputes Process

Are we conducting

“reasonable investigations”?

What are the controls in

place, and how are we

monitoring those to ensure we

are executing against our defined

procedures?

When was the last time we

updated our disputes procedures?

Are the controls sufficient?

Does the procedure ensure

agents review all relevant

information?

Have we looked at the

disputes process from

the customers’

viewpoint? Is it easy for

customers to contact us

related to their dispute?

Are we incenting dispute

agents in a manner that

promotes desired behavior?

Success requires understanding how well the right customer experience

is delivered, for each customer, and any failure’s root causes


The Path Forward

Themes and Philosophies

By taking action and keeping in mind today’s core themes,

this risk can be managed.

Core Themes & Philosophies

1. Consumer Reporting Compliance is a journey, not a destination

2. Recognize that a more deliberate Consumer Reporting

Compliance Program is required

3. Thoroughly assess your disputes process


Questions?


Bridgeforce Inc. 101 Ponds Edge Drive, Suite 300 • Chadds Ford, PA 19317 • +1 610.228.4508

Contact Information

Michelle Macartney (Managing Director)

+1 858.720.1065, [email protected]

Matt Scarborough (CEO)

+1 302.230.6872, [email protected]

mailto:[email protected]

mailto:[email protected]

the changing climate for consumer reporting and disputes · 5/4/2016 · including communications...

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