The Changing Climate for Consumer Reporting and Disputes Where do we go from here?

Transcription

1 The Changing Climate for Consumer Reporting and Disputes Where do we go from here? Copyright 2016, Proprietary Property of Bridgeforce Inc. 1

2 Discussion Topics Introductions and Session Overview Regulatory and Compliance Environment Update Emerging Trends and Hot Topics Bridgeforce Data Quality Scanner What We ve Learned Q&A Copyright 2016, Proprietary Property of Bridgeforce Inc. 2

3 Bridgeforce A Different Kind of Consulting Company B R I D G E F O R C E Who We Are Knowledge and Experience Multi-Regional Insight Execution Focused A specialized multinational consulting firm Serve clients in all aspects of the consumer and small business lending and payments space Solve complex problems across every line of business from sub-prime to super-prime Over 75% of Bridgeforce consultants have clientside leadership experience across the credit life cycle We believe that no other firm has the level of real-world experience that we do We have close working relationships with both US and European banks This gives us valuable insight into the interconnected regulatory movement and strategic trends across countries We take very hands-on roles in growing our clients capabilities With our practical experience and knowledge base, we are uniquely capable at helping clients address execution risk Copyright 2016, Proprietary Property of Bridgeforce Inc. 3

4 Relevant Experience for Today s Discussion What: Assessed end-to-end processes for Consumer and Small Business Reporting, Disputes, and Usage (including horizontal reviews). Created audit-ready policies and procedures for Consumer and Small Business Reporting related processes. Developed detailed field mapping & conversion documents to ensure reporting processes were appropriately documented and governed. Implemented multi-stage reporting data validation and controls for consumer data furnishers including development of a proprietary Data Quality tool for Metro 2 consumer reporting. Designed Centralized Governance Structure to ensure consistency and processes across all different areas of the organization. Who: Large and small banks, credit unions, specialty and nonbank lenders, and processors Copyright 2016, Proprietary Property of Bridgeforce Inc. 4

5 Poll Question Poll Question: Compared to the past, how much attention has your organization put towards consumer reporting and disputes compliance over the last 12 months? 1. Less effort 2. About the same 3. More effort Copyright 2016, Proprietary Property of Bridgeforce Inc. 5

6 Poll Question Poll Question: Which area has received more attention in your organization, reporting or disputes? 1. More attention on reporting 2. More attention on disputes 3. About the same on each Copyright 2016, Proprietary Property of Bridgeforce Inc. 6

7 Regulatory and Compliance Environment Update Copyright 2016, Proprietary Property of Bridgeforce Inc. 7

8 Regulatory and Compliance Update The CFPB has raised expectations for accuracy CRAs accept much greater documentation for consumer disputes than in the past and pass that to furnishers Multiple court decisions have found the increased information available greatly raises the duty for a reasonable investigation Copyright 2016, Proprietary Property of Bridgeforce Inc. 8

9 CFPB Actions Generated Pressure JULY 2012 Began supervising larger participants in the credit reporting industry AUGUST 2013 The three largest CRAs begin allowing consumers to upload, mail, or fax documents in support of allegations of disputed accuracy SEPTEMBER 2013 Published Bulletin stressing duty of every furnisher to review and consider all relevant information relating to the dispute, including documents received from CRAs FEBRUARY 2014 Published Bulletin stressing duties of furnishers to conduct reasonable, actual investigations of disputes received from CRAs DECEMBER 2014 Began requiring CRAs to report on: 1) furnishers with the most disputes, 2) industries with the most disputes, and 3) furnishers with the highest dispute rates relative to their peers Copyright 2016, Proprietary Property of Bridgeforce Inc. 9

10 Court Decisions Also a Major Force Since 2004, every U.S. Court of Appeals that considered the issue recognized a right of private action for claims brought under Section 623(b) of the FCRA alleging the failure by a furnisher to conduct a reasonable investigation of a notice of dispute received from a credit reporting agency (CRA) [F]irst and foremost a furnisher must review all information provided to it by a CRA regarding a dispute in order to comply with [FCRA] Section 1681s-2(b)(1)(B). Additionally, the nature and specificity of the information provided by the CRA to the furnisher may affect the scope of the investigation required of the furnisher. Boggio v. USAA Federal Savings Bank, 696 F.3d 611, 617 (6th Cir. 2012) Copyright 2016, Proprietary Property of Bridgeforce Inc. 10

11 Recent Court Decisions Daugherty v. Equifax Information and Ocwen Loan Servicing, 2015 WL (S.D. Va. 2015). Although Fourth Circuit precedent provides that a reasonable investigation for purposes of Section 623(b) of the FCRA does not require the data furnisher to consult external sources, the court found issues of material fact and denied summary judgment where: Ocwen had available for review additional information about potential inaccuracies with the Plaintiff s account [beyond what was provided by Equifax, including communications with the CFPB], had direct communications with the Plaintiff about the inaccuracies, had knowledge that the Plaintiff s credit report inaccurately showed that the Ocwen account was past due, and in at least one instance, that foreclosure proceedings had commenced. Daugherty, Slip Copy, pages 5-7 The Daugherty court rejected defendants reliance on Westra v. Credit Control of Pinellas, 409 F.3d 825 (7th Cir. 2005) for the position that Section 623(b) only requires consideration of the information that was received from the CRA with the dispute. Rather, a data furnisher must conduct a searching inquiry... Id. at 5-6. Copyright 2016, Proprietary Property of Bridgeforce Inc. 11

12 Recent Court Decisions (continued) Knowles v. Capital One Bank (USA), 2015 WL (M.D. Pa. 2015). The fact that the defendants had previously investigated the same allegations of inaccuracies in the course of handling a dispute received directly from the plaintiff did not render the dispute that plaintiff submitted through the CRAs frivolous or irrelevant: Defendants make two arguments in support of their contentions that Plaintiff's dispute was meritless... First, they claim that under the provided definition of a frivolous or irrelevant dispute, they had already considered the dispute and there is no evidence that Plaintiff had raised any new issues. This argument is tenuous. Under 1681s 2(a)(8)(F) (i)(ii), a dispute is frivolous or irrelevant if the consumer has already submitted the same or substantially similar dispute under 1681s 2(b). That subsection requires that the dispute be submitted through a CRA and not directly to the defendant furnisher. There is no doubt that Plaintiff submitted notice of a dispute through the CRAs only once; notice of a dispute given directly to a furnisher is inapplicable under this definition of frivolous or irrelevant. Knowles, Slip Copy., page 6 Copyright 2016, Proprietary Property of Bridgeforce Inc. 12

13 What this Means Those armed with knowledge and the right tools can successfully manage new regulatory requirements and changes to the industry. Copyright 2016, Proprietary Property of Bridgeforce Inc. 13

14 Emerging Trends and Hot Topics Copyright 2016, Proprietary Property of Bridgeforce Inc. 14

15 Compliance Expectations The Foundation Reporting Expectations Ensure Ensure compliant reporting practices across across the the business Report Report all all loans loans that that are are able able to to be be reported correctly in in compliance with with guidelines at at least least once once per per month month Perform validation of of consumer data data (both (both % distribution and and trade-line specific) at at multiple reporting stages stages Include consumer reporting and and file file criteria criteria in in core core system system regression testing testing plans plans Dispute Expectations Both Both direct direct and and indirect disputes are are logged logged and and worked in in a centralized group group Appropriate compliance codes codes are are in in use use by by the the dispute group group Responses Perform // letters letters validation address consumer s of consumer true true concerns data Direct Direct escalation channels to to a centralized Complaint Department exist exist Appropriate resolution of of all all disputes (ACDV (ACDV and and AUD) AUD) are are completed within within no no greater greater than than days days from from initial initial notification Dispute trends trends and and the the nature nature of of disputes are are closely closely monitored Process improvement teams teams identify and and address root root causes causes to to prevent future future occurrences across across the the enterprise Ensure ppropriate compliant resolution reporting of all practices disputes across (ACDV the and business AUD) (both are completed % distribution within and no trade-line greater than specific) 30 days at multiple from initial reporting notification stages Usage Expectations Documented permissible purpose is is required to to request individual consumer reports Appropriate use use of of inquiry type type (soft (soft vs. vs. hard hard inquires) Access is is limited to to only only authorized Individuals who who require it it to to complete their their functional activities, have have completed FCRA training, and and agree to to protect the the data data Appropriate tracking and and reporting to to ensure policies are are being followed Copyright 2016, Proprietary Property of Bridgeforce Inc. 15

16 Poll Question Poll Question: How are your disputes operations structured across the enterprise? 1. One group for each business line/source system 2. One group across the enterprise 3. Some business lines/source systems are consolidated, but multiple disputes operations exist across the enterprise 4. Each business line is responsible for execution, but a single oversight group exists across the enterprise Copyright 2016, Proprietary Property of Bridgeforce Inc. 16

17 Poll Question Poll Question: How are your reporting processes structured across the enterprise? 1. One owner for each business line/source system 2. One owner across the enterprise 3. Some business lines/source systems are consolidated, but multiple processes exist across the enterprise 4. Each business line is responsible for execution, but a single oversight group exists across the enterprise Copyright 2016, Proprietary Property of Bridgeforce Inc. 17

18 Consumer Disputes CFPB Consumer Response Group is seeing a high frequency of consumer relief from complaints when disputes were rejected or not resolved by the furnisher. Regulatory Hot Topics: Elimination of conditions for accepting disputes (standards of documentation etc.) Definitions for frivolous or irrelevant disputes Review and analysis of data on consumer disputes at least annually Investigation: how staff investigates, time or resource constraints Considerations for Success: Strong processes for ongoing root cause analysis, verification and sustainability of corrections Potential customer outreach for documentation and details to enable the investigation Dispute reporting function knowledge of FCRA requirements and audit of updated consumer reports for that compliance Focus on the Customer Experience Copyright 2016, Proprietary Property of Bridgeforce Inc. 18

19 Consumer Reporting Consumer reporting remains a top priority for the CFPB Regulatory Hot Topics: Comprehensive data validation process for files to CRAs to ensure accuracy and integrity Accurate reporting for bankruptcy and other complex account statuses (foreclosures, repossessions, deferred payments, etc.) Inconsistencies in reporting Special Comment Codes especially for Student Loans Consumer access to and understanding of their credit reports and credit scores Considerations for Success: Policies, procedures and process maps Audit-ready Metro 2 data mapping and conversion documents for each system of record Staff training and assessment adequacy File accuracy verification and CRA auditing Independent assessments (of data accuracy, separate from those who generate it) Copyright 2016, Proprietary Property of Bridgeforce Inc. 19

20 Poll Question Poll Question: What tools/processes do you use to enhance the accuracy of your reporting? Select all that apply. 1. Disputes root cause analysis 2. Monthly CRA error reports 3. Annual CRA audits 4. An automated data validation routines 5. None of the above Copyright 2016, Proprietary Property of Bridgeforce Inc. 20

21 Bridgeforce Data Quality Scanner Update Copyright 2016, Proprietary Property of Bridgeforce Inc. 21

22 Bridgeforce Data Quality Scanner Overview Last year, we introduced the Bridgeforce Data Quality Scanner which serves as a layer of control by automating certain best practice data quality audits. Compliance Management System Allows furnisher the ability to perform data reviews prior to transmitting the Metro 2 file Reviews each Metro 2 file against Metro 2 criteria and field definitions (250+ rules), reducing reject and error rates Reviews the entire Metro 2 file, identifying data discrepancies that would not be rejected by the CRAs Allows for month over month tracking for illogical changes to individual account data Provides discrepancy trend tracking / reporting Copyright 2016, Proprietary Property of Bridgeforce Inc. 22

23 Bridgeforce Data Quality Scanner How it Works and Live Demo Copyright 2016, Proprietary Property of Bridgeforce Inc. 23

24 Bridgeforce Data Quality Scanner How it has Helped (Case Study) The DQS gives us a consistent baseline measure of accuracy and a way to identify and resolve systemic issues more quickly than we have been able to in the past. The DQS has been a key tool in our Consumer Reporting Program. Copyright 2016, Proprietary Property of Bridgeforce Inc. 24

25 The Path Forward: Action Items & Wrap Up Copyright 2016, Proprietary Property of Bridgeforce Inc. 25

26 The Path Forward Action #1: Examine your Reporting Validation Process Data Furnishers Stage 1 Pre-transmission review of certain file statistics Stage 2 Quarterly evaluation of the reporting file criteria, data mapping, and conversion from the core system to the Metro 2 file Stage 3 Quarterly evaluation of the actual reporting file, to confirm that each of the fields are reporting in the correct byte # or position # on the file Stage 4 Inclusion of consumer reporting processes and file criteria in all regression testing plans Provide Data Validate Data Quality Consumer Reporting Agencies Stage 8 Quarterly evaluation of a sample of records to assess the data as it appears on the credit bureau to confirm the bureau has correctly mapped the data you provided Stage 7 Annual data audit with each CRA Stage 6 Quarterly/Monthly review of CRAgenerated statistics report (a.k.a. Reject & Error) Stage 5 Post-transmission confirmation Copyright 2016, Proprietary Property of Bridgeforce Inc. 26

27 The Path Forward Action #2: Review your CMS Copyright 2016, Proprietary Property of Bridgeforce Inc. 27

28 The Path Forward Action #3: Assess Your Disputes Process Have we looked at the disputes process from the customers viewpoint? Is it easy for customers to contact us related to their dispute? Are we conducting reasonable investigations? Are we incenting dispute agents in a manner that promotes desired behavior? When was the last time we updated our disputes procedures? Are the controls sufficient? Does the procedure ensure agents review all relevant information? What are the controls in place, and how are we monitoring those to ensure we are executing against our defined procedures? Success requires understanding how well the right customer experience is delivered, for each customer, and any failure s root causes Copyright 2016, Proprietary Property of Bridgeforce Inc. 28

29 The Path Forward Themes and Philosophies By taking action and keeping in mind today s core themes, this risk can be managed. Core Themes & Philosophies 1. Consumer Reporting Compliance is a journey, not a destination 2. Recognize that a more deliberate Consumer Reporting Compliance Program is required 3. Thoroughly assess your disputes process Copyright 2016, Proprietary Property of Bridgeforce Inc. 29

30 Questions? Copyright 2016, Proprietary Property of Bridgeforce Inc. 30

31 Contact Information Matt Scarborough (CEO) , Michelle Macartney (Managing Director) , Bridgeforce Inc. 101 Ponds Edge Drive, Suite 300 Chadds Ford, PA Copyright 2016, Proprietary Property of Bridgeforce Inc. 31