New rules let consumers dispute credit report errors with merchants

New rules let consumers dispute credit report errors with merchants

On July 1, 2009, the Board of Governors of the Federal Reserve System announced new rules adopted by financial regulatory agencies concerning how information is furnished to consumer reporting agencies. Under these new rules (which go into effect on July 1, 2010), consumers can take up disputes over inaccuracies on their credit reports directly with the businesses that provided the information. Businesses, in turn, are required to investigate these disputes. This could have a significant impact on your record-keeping systems and administrative procedures.

Policies and procedures
The new rules require "furnishers" of information to the credit reporting agencies to establish "reasonable policies and procedures for implementing the guidelines." Policies and procedures should be "appropriate to the nature, size, complexity and scope" of their activities.

They also must be set down in writing, though you can incorporate any of your existing policies and procedures that are relevant. These internal guidelines must be periodically reviewed and updated as necessary. Fortunately, there are no requirements to conduct an official examination and verification of customer accounts and records.

The information you provide to the credit reporting agencies should reflect the terms of the customer's account including the credit limit, if applicable, and the customer's performance with respect to the account. The information should be substantiated by your records and should be presented in a clearly understandable form, updated as necessary to reflect the current status of the account. For example, if a customer's account is assigned for collection, you should report that information.

No new recordkeeping requirements
The new rules do not impose any additional record-keeping requirements. The regulatory agencies indicate that you should maintain records for a reasonable period of time, consistent with the record-keeping requirements in the regulations for the Truth in Lending Act, the Equal Credit Opportunity Act, or any other applicable requirement.

Direct disputes
Under the new rules, you must conduct a reasonable investigation if a direct dispute involves identity theft or fraud, whether there is individual or joint liability on an account, or whether the customer is authorized to use the credit account. A direct dispute may also involve the terms of the account such as the principal balance, scheduled payment amount, credit limit, current payment status, the date or amount of a payment, or the date an account was opened or closed.

When you receive a direct dispute notice, you must review the information provided by the customer, investigate the dispute, and report the results to the customer. If the information you reported was incorrect, you must promptly provide corrected information to each credit reporting agency to which you previously reported.

A direct dispute from a customer must identify the account, the specific information the customer is disputing and why it is being disputed, with supporting documentation such as a copy of the consumer report or account statement.

You are not required to investigate a direct dispute that you determine to be frivolous or irrelevant because the customer did not provide sufficient information, or the dispute is substantially the same as a previous dispute already satisfied. But you must still notify the customer of your determination within five business days, indicating why you determined the dispute was frivolous or irrelevant and what information is required to investigate that dispute. This can be a standardized form that describes the general nature of that information.

Published: July 20,2023