Consumers, Regulators and You — Are You Meeting Your FCRA Responsibilities?

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Consumers, Regulators and You: Are you meeting your FCRA responsibilities?

February 10, 2015

2©2015 Experian Information Solutions, Inc. All rights reserved.Experian Public.

Consumers, Regulators and YouModerator

Michael Sisk is a New York-based journalist who has covered business and the financial markets for 15 years, including stints as the investor editor at Red Herring, editor-at-large at American Banker, and contributing editor at Bank Technology News. His articles have appeared in numerous publications, including American Banker, Barron's, Crain's New York Business, Inc., Institutional investor, Strategy + Business and Worth. Michael has co-written and edited three books; the most recent was Merge Ahead: Mastering the Five Enduring Trends of Artful M&A (McGraw-Hill 2009).


Consumers, Regulators and YouSpeakers

Tony Hadley, Senior Vice President of Public Policy, ExperianTony Hadley is Senior Vice President of Public Policy for Experian, where he has led the regulatory agenda relating to consumer reporting, financial markets, direct marketing and advertising, e-commerce, and privacy for 15 years. He advises the Experian Global Risk Management Council on such activities in the Americas, EMEA and Asia Pacific. Tony represents Experian before a number of trade groups and alliances. These include the Direct Marketing Association's (DMA), the Consumer Data Industry Association, the Internet Advertising Bureau, the Internet Alliance, the U.S. Chamber of Commerce, the American Financial Services Association, the Consumer Bankers Association, and the U.S. Chamber of Commerce. Tony is Chairman of the National Business Coalition on E-commerce and Privacy.

Carmen Hearn, Senior Director Consumer Information Services, ExperianCarmen Hearn leads the product marketing team within Consumer Information Services that has responsibility for acquisitions, Experian Data Integrity ServicesSM and the Experian Credit EducatorSM product. Carmen joined Experian in January 2014. She has held several leadership roles within the financial services industry, including Capital One, HSBC / Household and Providian. Carmen has more than 25 years senior level experience overseeing the use and reporting of consumer / credit data, as well as consumer / business data needs pertaining to risk management. She also has provided thought leadership and played key roles related to compliance and audit across multiple verticals, which included auto, cards, consumer finance, mortgage, private-label cards, retail banking, small business and commercial lending. Carmen has sat on several advisory and industry council boards and has been a guest speaker in both the United States and abroad on the merits of credit scoring, consumer credit data and automated underwriting. She holds a bachelor’s degree in English from the University of California at Los Angeles and currently resides in Irvine, CA.


Consumers, Regulators and YouAgenda

The regulatory landscape

Understanding data furnisher rules

How Experian can help

Credit reporting and the consumer

1

2

3

4


The regulatory landscape

Tony HadleyExperian


Consumers, Regulators and YouRegulatory priorities in the credit reporting ecosystem

Data accuracy

Disputeresolution

Credit score transparency

Debt collections


Consumers, Regulators and YouWhat’s driving the focus on data accuracy?

2.2%of credit files contained a material error that would move a consumer to a different score band reflecting a higher risk

5.2%of consumers are affected by a material error, reflecting that consumers have three reports and not all reports contain an error

21% of credit reports contained an error that did not materially affect their score

26% of credit reports were alleged to containan inaccuracy


Consumers, Regulators and YouCFPB’s consumer complaint system

Credit reporting complaints:

Incorrect information on a report (76%)

Consumer reporting agency investigation (8%)

Inability to obtain report and score (8%)

Problems with credit monitoring or identity protection services (4%)

Improper use of credit report (3%)

Semi-Annual Report of the Consumer Financial Protection Bureau, December 2014

October 1, 2013 – September 30, 2014

Mortgages21%

Creditcards 8%

Debt collectors36%

Bank account

9%

Creditreporting

17%

Other9%


Procedures to assure maximum possible accuracy

Cooperation with data furnishers

Disclosures of consumer reports

Communications to consumers

Consumers, Regulators and YouImproving the accuracy of consumer reports


Consumers, Regulators and YouCFPB’s consumer complaint system, debt collection

Continued attempts to collect debt not owed

Communicationtactics

Taking or threatening an illegal action

Disclosure verification

of debt

False statements or representation

Improper contact or sharing of info

Semi-Annual Report of the Consumer Financial Protection Bureau, December 2014


Debt collector’s actions as “data furnishers”

Unverified debt

Consumer disputes

Paid debt

Medical debt

Other paid debt

Consumers, Regulators and YouDebt collection practices in the credit reporting ecosystem

More regulationsto come?


Consumers, Regulators and YouTransparency of credit reports and scores has been a top priority of policy makers

FACTA (2003)

Free annual disclosure

Score disclosures by mortgage lenders

Educational score disclosures by credit reporting agencies

Risk-based pricing notices (January 2011)

Score disclosures by creditors (July 2011)

With risk-based pricing notice

With adverse action notice

CFPB study on score disclosures

Scores on statements initiative


Understanding data furnisher rules

Carmen HearnExperian


The regulatory environment continues to be a hot topic in the media today driven largely by efforts to protect the consumer

► Violation of rules put in place to protect the consumer have resulted in heavy fines to various size banks and lenders alike

Understanding rules for data furnishers can help organizations avoid heavy fines and remain compliant

Consumers, Regulators and YouUnderstanding data furnisher rules

Duty of furnishers

Obligations under the Fair Credit Reporting Act (FCRA)

Section 623: Responsibilities of furnishers of information to credit reporting agencies Provide accurate information Prohibited from reporting information with known errors Provide notice of a dispute Duty to investigate and respond to a dispute

Regulation V (part 1022): Responsibilities policies and procedures concerning the accuracy and integrity of furnished information Furnishers must implement written policies and procedures to ensure the accuracy

and integrity of information furnished to the credit bureau Policies and procedures must be appropriate relative to furnisher’s size, complexity

and nature of business Policies and procedures must be reviewed periodically to ensure continued effectiveness

Accuracyguidelines

1

2


As seen in proprietary exam letters, and based on feedback from clients, four key themes have emerged as a focus from examiners

► Proactively implementing sound data reporting and governance across an organization can help to be prepared for an exam

Consumers, Regulators and YouPreparing for an exam

General processto furnisher data

Datareporting

Policies andprocedures

Disputemanagement

Types of data submitted Types of data repositories used If / how third parties are used How negative information

is submitted

Software used to trackdisputes and data captured

Number of disputes Reason for disputes (by LOB) Number of times a disputes results in

correction, modification, deletion or block

Samples of submitted data Occurrences where information

was rejected by a credit bureau How data reporting is

monitored / audited

Reporting practices Accuracy and integrity

Disputes Third parties

Internal training on FCRA rules

FOCUS FOCUS


Recent regulatory changes have created an urgency to further expedite our ability to ‘clean up’ the credit eco system and to focus on the consumer

On December 11, 2014 the Consumer Financial Protection Bureau (CFPB) announced that they will now require credit reporting agencies (CRA’s) to provide accuracy reports on data furnishers that identify key risk areas for consumers

Consumers, Regulators and YouRecent CFPB announcement

New reporting requirements

Furnisherswith the most disputes

Industrieswith the most overalldisputes

Furnisherswith high overalldisputes relativeto industry


In addition to the overall expense associated with the heavy fines and consent orders, millions of customers have been impacted

Together with our data providers, we have an obligation to the consumer to minimize their exposure to negative and harmful situations

Consumers, Regulators and YouCustomers impacted by regulatory findings

Financialservicesprovider

250Kcustomersimpacted

CFPB FINDINGS:

Deceptive practices

Retailbank

2Mcustomersimpacted

CFPB FINDINGS:

Deceptive practices

Creditcardprovider

3.5Mcustomersimpacted

CFPB FINDINGS:

Deceptive practices

Financialservicesprovider

185Kcustomersimpacted

CFPB FINDINGS:

Servicing mis-conduct

Mortgageloanservicer

1Mcustomersimpacted

CFPB FINDINGS:

Violation of FCRA and inaccurate data

Just under…

7Mcustomersimpacted


Each industry has its own set of challenges such as:

Scope of products

Cost of doing business

Data management

Technology advancement

Operational efficiencies

Customer experience

There are a common set of best practices that can help to turn recent commentary and regulatory findings into actionable information to ensure a positive customer experience

Consumers, Regulators and You Best practices


Maintaining a full 360 degree view of data reporting, from raw data submissions to the consumer credit profile, is critical to ensuring regulatory compliance and minimizing reputational and financial risk

Consumers, Regulators and YouBest practices

Better data

Reduce disputes

Customer retention and loyalty

Positive customer experience

Minimize regulatory risk

Internal training

Proactive and prepared for exam

Data quality reporting

Enterprise approach to data quality

Data governance

Full360°view


While an organization may have specific and unique challenges based on the industry and markets they serve, there are commonalities that all data providers exhibit from a product, reporting and regulatory perspective

Consumers, Regulators and YouChallenges within the industry

Report data on monthly basis | Report in Metro 2 format | Regulated by the FTC, OCC, FCRA, CFPB | Dispute management obligations

Unique

Common

Auto Credit card Collections Mortgage

Third party processors

Repossessions

Medical debt

Missing originating information (third party collections)

Identification and contact information problematic

New rules ability to pay

Server requirements

Loan modification

Higher disputes

External partnerships

Authorization systems

Higher transaction volumes


Evaluating your organizations engagement in these three core areas can help to address pressure from consumers and regulatory agencies

Consumers, Regulators and YouHow do you know?


How Experiancan help


While data reporting is voluntary, data furnishers must adhere to complete and accurate reporting of consumer credit data as mandated in the current Fair Credit Reporting Act (FCRA)

Experian offers reporting tools and metric packages and provides insight and analysis into consumer tradeline and dispute data

Consumers, Regulators and YouExperian’s data quality tools and packages

Data Integrity ServicesSM

Data reporting toolsCustom data review

packages

Metric Report™*

Annualized metric report**

DataArc™ DataArc Plus™DataArc

Custom™

* Offered to select clients currently** Not yet offered, currently being built


DataArc Plus™ / DataArc Custom™ provides data furnishers insight into their Metro 2 data submissions, fatal errors, disputes and peer benchmarking

The data is delivered in an interactive dashboard that allows for filtering and isolating certain data points and metrics


Drill into data disputes by portfolio, account type, dispute reason

Ability to analyze which portfolio is generating the most data disputes and what the reason of those dispute are

Pull targeted dispute samples on the data that you are interested in

Pull dispute information by dispute reference number or by account number

Obtain information on how many disputes are not responded to

12 months of dispute information available for trending

Sample dispute dashboard


Peer dashboards provide a means to benchmark your statistics against a similar peer group Compare peer dispute metrics including: DNR rate, dispute rate, and dispute reason



Consumers, Regulators and YouExperian Data Integrity ServicesSM What our clients are saying…

“

”

… if we hadn’t engaged Experian, we might have implemented routines that would have caused downstream negative impact and potential additional consumer harm.

Top-10 financial institution

The data, delivery, consultation and thought leadership were very detailed. We confirmed positive aspects of our reporting and identified recommendations for best-in-class changes.

Top-10 financial institution(Card division)

This was an excellent exercise and an investment no other bureau has undertaken with us, ever. The insight we gained was very valuable.

Collection agency


Credit reporting and the consumer


Consumers, Regulators and YouHeadlines

To attract new relationships and retain current ones, researchers say banks and credit unions should

focus on one thing: improving the customer experience they offer.

— The Financial Brand, Satisfaction Barometer Reveals Consumers Banking Desires and Drivers, January 2014

“”


Lenders should consider that in light of the heavily regulated environment, reporting accurate and complete credit data has significant benefits to the consumer

Our joint obligation is to create a healthy credit eco system and support the choices consumers make as part of their financial journey

Consumers, Regulators and YouConsumer benefit of reporting


Consumers, Regulators and YouConsumer benefit of reporting

Most decisions to grant credit – including mortgage loans, auto loans, credit cards, and private student loans – include information contained in credit reports as part of the lending decision. These reports are also used in other spheres of decision-making, including eligibility for rental housing, setting premiums for auto and homeowners insurance in some states, or determining whether to hire an applicant for a job.”

“

— Consumer Financial Protection Bureau, Key Dimensions and Processes in the U.S. Credit Reporting System, December 2012

“Credit reports play an increasingly important role in the lives of American consumers…”


Consumers, Regulators and YouConsumer benefit

c. 35m businesses

globally

Educated ConsumersThrough financial literacy and accessto their credit file, consumers mayBetter understand their credit reportand dispute less

Customer disputesComplete and accuratedata will reduce disputes

Accurate credit scoreIncomplete or missing data may have an impact to score, or result in no score at all

TransparencyAllows consumer to evaluatemistakes of the past to correctgoing forward and become more desirable to a lender

Expanded credit offeringsAbsence of credit may deem customer as ‘high-risk’ and limit offers

Customer experienceMore relevant, meaningful conversation and experience with lender

Reduced costs

‘Low risk’ consumerswill have lower interestrate products and fees

Non-credit needsConsumer can provide Credit report for job or rental application

60% of the Society for Resource Management's member employers used credit reports to screen applicants for at least some of their positions¹

Consumer benefits of a complete and accurate credit report

“

”

¹ The Society for Human Resources Management, SHRM Research Spotlight: Credit Background checks, 2010.


There is currently a gap in awareness within the industry and for the consumer regarding the impact of an accurate and complete credit report

Financial institutions have the opportunity to communicate directly with consumers to create awareness leveraging social media

► Consumers can also share and inform each other creating further engagement

Consumers, Regulators and YouEducating the consumer

GapConsumer

BenefitConsumer awareness

¹ CivicScience, “Insight Report: Social Media Now Equals TV Advertising in Influence Power on Consumption Decisions”, Oct 2014

”

”

43% of U.S. Internet users said that social media “chatter” had the most influence on what they bought... Up 22 percentage points year over year... Those who were most likely to be influenced by comments or recommendations on social media were ages 18 to 29.¹

Accurate and complete credit report

Financial Institution and Social Media

“ Positive customer experience

Trust

Loyalty

Brand recognition

Benefits


Next steps


Download:

New Experian perspective paper “The Impact of Consumer Data Reporting” at http://www.experian.com/consumerimpact

Visit:

Data Integrity Services Website at http://www.experian.com/dataintegrityservices

CFPB Website at http://www.consumerfinance.gov/

Sign up for:

Experian News Blog posts http://www.experian.com/blogs/news

Request more info:

http://now.experian.com/data-accuracy

Consumers, Regulators and YouNext steps

http://www.experian.com/consumerimpact

http://www.experian.com/consumerimpact

http://www.experian.com/dataintegrityservices

http://www.experian.com/dataintegrityservices

http://www.consumerfinance.gov/

http://www.experian.com/blogs/news

http://now.experian.com/data-accuracy?wt.srch=cis-regwebinar-registrants

http://now.experian.com/data-accuracy?wt.srch=cis-regwebinar-registrants

Consumers, Regulators and You — Are You Meeting Your FCRA Responsibilities?

Economy & Finance

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