On December 10, the Federal Trade Commission (“FTC”) and Consumer Financial Protection Bureau (“CFPB”) held a joint workshop on accuracy in consumer reporting. The workshop included remarks from FTC Commissioner Noah Joshua Phillips, CFPB Assistant Director for Supervision Policy Peggy Twohig, CFPB Deputy Director Brian Johnson, and FTC Deputy Director for the Bureau of Economics Andrew Stivers. The workshop included four panels:
- Panel 1: Furnisher Practices and Compliance with Accuracy Requirements
- Panel 2: Current Accuracy Topics for Traditional Credit Reporting
- Panel 3: Accuracy Considerations for Background Screening
- Panel 4: Navigating the Dispute Process
Panelists included a range of stakeholders in the consumer reporting ecosystem, including representatives from consumer reporting agencies (“CRAs”), trade associations, furnishers, and consumer advocacy organizations.
In her closing remarks, Maneesha Mithal, Associate Director in the FTC’s Division of Privacy & Identity Protection, discussed three key takeaways and themes from the workshop:
- (1) Alternative Data: Mithal noted that the issue of alternative data came up on almost every panel, and that there appeared to be a consensus that using some types of alternative data may benefit consumers and the industry. Mithal noted that a number of panelists expressed caution about using “fringe data,” including social media data.In a panel discussion, Michael Turner, founder and President of the Policy and Economic Research Council (“PERC”), drew a distinction between “proven payment data,” including payments for utilities, media, and rent, and unproven “fringe data” or “unstructured data,” including information from social media. Turner, along with a number of other panelists, believed that reporting proven payment data would be beneficial for consumers. Francis Creighton, President and CEO of the Consumer Data Industry Association (“CDIA”), noted that consumers are currently experiencing the “downside” impacts of the reporting of negative information about the non-payment or late payment of obligations for utilities, media, and rental housing, but are not receiving the “upside” benefits of reporting on the positive payment histories on those recurring obligations. Consumer advocates, such as Ed Mierzwinski of U.S. Public Interest Research Group (“PIRG”), expressed skepticism regarding the use of certain alternative data, such as utility payment data, and the ability of the industry to ensure the accuracy of such data.
- (2) Role of Technology: Mithal also noted that there was some consensus that technology, including Artificial Intelligence (“AI”) and pattern recognition, may improve the quality and accuracy of consumer report information. Mithal stated that there appeared to be less consensus regarding the use of technology in data matching, with some panelists expressing the view that manual review is still necessary to ensure maximum possible accuracy. Mithal also noted that some panelists expressed the view that the CFPB should exercise its supervisory authority to examine CRAs and furnishers’ use of technology in consumer reporting.
- In general, industry panelists spoke favorably about the prospects for AI and other technologies. For example, Eric Ellman, Senior Vice President, Public Policy and Legal Affairs at CDIA, discussed the use of technology in dispute intake, including filtering credit repair disputes from legitimate consumer disputes. Chi Chi Wu of the National Consumer Law Center expressed skepticism about relying on AI and other technologies for data matching and dispute investigations.
- (3) Accuracy: Mithal concluded by discussing the accuracy of consumer reporting more generally, and stated that some panelists believe that the regulators should issue specific guidance in this area. Mithal also noted that panelists discussed both the importance of data accuracy with respect to consumer reports and furnished data, including ways in which CRAs may oversee furnishers.
- In general, industry panelists pointed to substantial improvements made in recent years with regard to the accuracy of consumer reports, with repeated emphasis on improvements brought about by the National Consumer Assistance Plan (“NCAP”), an outgrowth of a multi-state attorney general settlement with the three nationwide CRAs in May 2015. Turner discussed improvements between the early and more recent studies of data accuracy. Consumer advocates stressed continuing problems with data accuracy, including the reappearance of derogatory information on consumer reports.
Additional themes from the panels include:
- Market Interest in Ensuring Accuracy: Many industry panelists emphasized that CRAs and furnishers benefit from an accurate and reliable consumer reporting system. These panelists explained that it is not beneficial to the market for CRAs or furnishers to provide inaccurate information, which could lead to financial institutions making incorrect credit or employment decisions. Creighton pointed to the financial crisis as an example of the risks associated with providing credit to consumers who cannot afford it. Mierzwinski disputed these accounts, pointing to certain studies that found high rates of inaccuracies on consumer reports and claiming that CRAs should invest more in technology. Representatives from the nationwide credit bureaus disagreed and described significant investments in technology to improve data accuracy and monitor furnishers.
- Encouraging Smaller Furnishers to Furnish: Elisabeth Johnson-Crawford, the Chief Technical Officer at Credit Builders Alliance (“CBA”), explained that CBA’s members would like to furnish information about their clients, who are typically low-income individuals seeking to build good credit. Johnson-Crawford described the standard Metro-2 format used for reporting information to the three nationwide CRAs as complex and a potential barrier for smaller companies to furnish information. Johnson-Crawford also discussed her members’ reliance on software vendors for furnishing data, and stated that regulators should provide additional incentives for these software vendors to ensure the accuracy and integrity of credit reporting data. Johnson-Crawford emphasized that, in light of the regulatory environment, smaller furnishers are hesitating to furnish data to CRAs unless they are sure they can do it correctly.
- Credit Repair Companies: There was a general consensus amongst panelists that the rise of credit repair companies is a negative factor in the credit reporting ecosystem. According to panelists, some credit repair companies are charging consumers high fees in exchange for submitting a large volume of disputes to CRAs for the purpose of removing accurate but negative information from consumer reports. Some panelists called for regulatory intervention to address this issue.
- Supervisory Highlights: Several panelists referenced the Supervisory Highlights Consumer Reporting Special Edition that the CFPB released on December 10, which includes key findings from the Bureau’s supervisory work with CRAs and furnishers. Some panelists praised the publication as a way for furnishers and CRAs to benchmark their own policies and procedures with respect to credit reporting, and to learn lessons from the mistakes of others. Wu cited the report’s findings that some CRAs are still relying on furnishers for reinvestigations without conducting an independent review. However, the CFPB found that examiners “have also observed significant improvements in [FCRA and Regulation V protections], including continued investment in FCRA-related CMS.”
The FTC and CFPB are accepting comments on a wide range of topics affecting the accuracy of consumer reports until January 10, 2020. Comments may be submitted electronically or in writing. The FTC and CFPB did not discuss how they might use the workshop discussion and comments received.