Presenting a live 90-minute webinar with interactive Q&A Fair Credit Reporting Act: Litigation, Regulatory and Enforcement Developments in the Financial Services Industry and Beyond Minimizing Exposure to Litigation and Adapting to Evolving Regulatory Oversight TUESDAY, JUNE 23, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: David N. Anthony, Partner, Troutman Sanders , Richmond, Va. Angela E. Kleine, Partner, Morrison Foerster , San Francisco Rebecca E. Kuehn, Partner, Hudson Cook , Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Fair Credit Reporting Act: Litigation, Regulatory and Enforcement Developments in the Financial Services Industry and Beyond Angela Kleine, Morrison & Foerster, LLP akleine@mofo.com Rebecca E. Kuehn, Hudson Cook, LLP rkuehn@hudco.com David Anthony, Troutman Sanders, LLP david.anthony@troutmansanders.com
OVERVIEW OF THE FCRA 5
What Is the Fair Credit Reporting Act? • Enacted in 1970 – Concern about “secret” files used to make important decisions – Seeking to balance privacy & fairness with benefits of system • Provides consumers with rights to access and correct data • Imposes obligations on “users” – To notify consumers when “adverse” decisions made • Imposes duties on “consumer reporting agencies” to – Protect data and only provide for a “permissible purpose” – Maintain accuracy and investigate disputes – Report certain data and not report other data • Requires “furnishers” to maintain accuracy and investigate disputes 6
What Is the Fair Credit Reporting Act? • Not just about credit – FCRA regulates the collection, disclosure and use of consumer report information • Information used by businesses to make important decisions about consumers – Such as credit, insurance, employment, check cashing, rental 7
What Is a Consumer Report? • A communication of information by a consumer reporting agency • Bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living 8
What Is a Consumer Report? • Which is used, or expected to be used, or collected in whole or in part • For the purpose of serving as a factor in establishing the consumer's eligibility for – credit or insurance to be used primarily for personal, family, or household purposes • NOT business purposes – employment purposes, or – any other eligibility “permissible purpose” authorized under the FCRA 9
What Is a Consumer Report? • “Consumer Reporting Agency” (“CRA”) – any person which – for monetary fees, dues, or on a cooperative nonprofit basis, – regularly engages in whole or in part – in the practice of assembling or evaluating consumer credit information or other information on consumers – for the purpose of furnishing consumer reports to third parties. • No federal registration or licensing required 10
What Is NOT a Consumer Report? • Information that does NOT bear on the 7 characteristics – Only ID information – “header data” – Non-identifiable information – e.g., aggregated or blind data • Information that is NOT collected or expected to be used for eligibility for a permissible purpose – Claims administration, ID verification, law enforcement, portfolio review – Non-consumer (e.g., business) purposes – Marketing 11
What Is NOT a Consumer Report? • Statutory Exclusions – FCRA § 603(d)(2)(A) – Transaction and experience (“T&E”) information • Permits financial institutions to report to one another and to CRAs – T&E, when shared among affiliates – Non-T&E, when shared among affiliates after notice & opt-out • Includes consumer report information, application information • Exceptions to the exclusion for medical information (very broadly defined) • Other Exclusions – Employment agencies (FCRA § 603(o)) – Employment investigations (FCRA § 603(y)) – Point-of-sale approvals (FCRA § 603(d)(2)(B)) 12
Duties of Consumer Reporting Agencies 13
Duties of CRAs • Permissible purposes and data security • Content of a consumer report and accuracy of data • Consumer file disclosures – Credit score disclosures • Disputes and reinvestigations • Identity theft and fraud • Special types of consumer reports – Employment reports – Investigative consumer reports 14
Special Types of CRAs • Nationwide CRA – A consumer reporting agency that – Regularly engages in assembling or evaluating, and maintaining • public record information regarding consumers residing nationwide ; and • credit account information – regarding consumers residing nationwide – from persons who furnish that information regularly and in the ordinary course of business – For the purpose of furnishing consumer reports bearing on creditworthiness ( i.e ., credit reports) • Prohibition on circumventing status as Nationwide CRA – FCRA § 629; 16 CFR § 611 • TransUnion, Equifax, Experian 15
Obligations of a Nationwide CRA • Annual credit report – Centralized source • Centralized prescreening opt-out • Toll-free telephone assistance • Fraud alerts and referrals – Additional free reports • Address discrepancy notices • Centralized automated consumer dispute verification system • Referral of ID theft complaints and report to CFPB • Respond to CFPB consumer complaint referrals 16
Special Types of CRAs • Nationwide Specialty CRA – A consumer reporting agency that – compiles and maintains files on consumers – on a nationwide basis – relating to • medical records or payments • residential or tenant history • check writing history • employment history, or • insurance claims • Telecheck, MIB, CLUE • Free annual credit report (no central source) 17
Special Types of CRAs • Reseller – A consumer reporting agency that – Assembles and merges information – Contained in the database of another CRA or multiple CRAs – For purposes of furnishing such information to any third party, and – Does not maintain a database of the assembled or merged information from which new consumer reports are produced • Residential mortgage credit reporting agency – “Merge and purge” 18
Obligations of Businesses That Use Consumer Reports 19
Overview of User Duties • Permissible purpose – Prescreening • Adverse action • Disposal of consumer report information • Medical information • Notice of address discrepancy • Employment – notice and consent, pre-adverse action • Fraud alert duties for lenders • Red Flags Rule 20
Obligations of Businesses that Provide Information to Consumer Reporting Agencies 21
Overview of Furnisher Duties • Generally no private right of action • Accuracy duty – “knows or has reason to believe” • Duty to correct and update • Duty to investigate disputed information – Rules for direct disputes – CFPB v. Syndicated Office Systems, LLC, 2015-CFPB-0012 (June 18, 2015) • Duties with respect to specific information • Lender duties – Negative information notice • Red Flags Rule §§ 611, 623 * See the additional enforcement actions discussed below. 22
Furnisher Rule The FCRA requires a furnisher to: • “ [N]ot furnish any information . . . [it] knows or has reasonable cause to believe . . . is inaccurate.” • “Completeness” issue • Correct & Update Information • Investigate Disputes Furnisher Policies and Procedures: • Reasonable written policies and procedures re: • accuracy and integrity of information • appropriate to the nature, size, complexity and scope of the furnisher’s activities Regulation V, 12 C.F.R. 1022, et seq. 23
SHIFTING LITIGATION, REGULATORY, AND ENFORCEMENT ENVIRONMENT 24
History of FCRA Guidance • Before Dodd-Frank, primary enforcement authority for FCRA rested with FTC. – FTC’s 40 Years Report • Post-Dodd-Frank, CFPB is charged with primary enforcement, guidance and rulemaking authority. • CFPB also vested with examination authority. 25
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