What Are Reasonable Credit Report Investigative Procedures?
The Fair Credit Reporting Act (FCRA) requires that the credit reporting agencies maintain “reasonable procedures designed to ensure maximum possible accuracy of credit reports.” Further, the FCRA requires that the investigations performed by both the credit reporting agencies and the companies that furnish data to them also be reasonable. Where the FCRA fails is that it doesn’t define what constitutes “reasonable.” There is no “Follow these three steps” type of guidance in the Act that provides a safe harbor for the credit bureaus and data furnishers relative to investigation procedures.
The credit bureaus, as a matter of common practice, will homogenize the consumer’s dispute communication into a 3-digit dispute code. For example, code 001 reads “Not his/hers.” The code and language are placed on a form called an ACDV, which is then sent to the furnishing party, normally a bank or a collection agency. At that point the furnisher is tasked with determining if the item is actually “his or hers” or if it belongs to someone else. Normally they’ll look in their master file system and see if the information matches and perhaps even look at documents related to the loan.
If the furnisher feels comfortable that the item does belong to the individual they’ll respond back to the credit bureau, using that same ACDV form, letting them know that the item has been verified as accurate. Then the credit bureau will send the consumer the results of the investigation and the matter is closed. This process, which happens millions of times every year, is called “parroting” by critics because the credit bureaus are simply repeating what the furnisher has told them to say.
Is that process reasonable, or not? What should the credit bureaus do differently? Nobody ever seems to have a good answer to that question other than “get it right.” The bureaus are not the lender so they don’t know first hand if it’s your account, or if you’ve ever been late, or if you’re the victim of identity theft, or if the balance is wrong. They have to rely on the furnisher, who IS the lender. That seems reasonable to me, but probably not to a consumer who cannot get a legitimate error removed from their credit reports.