Oct. 6: CFPB Updates This Week

Consumer Financial Protection Circular 2023-03

Adverse action notification requirements and the proper use of the CFPB’s sample forms provided in Regulation B

Question presented
When using artificial intelligence or complex credit models, may creditors rely on the checklist of reasons provided in CFPB sample forms for adverse action notices even when those sample reasons do not accurately or specifically identify the reasons for the adverse action?

No, creditors may not rely on the checklist of reasons provided in the sample forms (currently codified in Regulation B) to satisfy their obligations under ECOA if those reasons do not specifically and accurately indicate the principal reason(s) for the adverse action. Nor, as a general matter, may creditors rely on overly broad or vague reasons to the extent that they obscure the specific and accurate reasons relied upon.

The Equal Credit Opportunity Act (ECOA), implemented by Regulation B, makes it unlawful for any creditor to discriminate against any applicant with respect to any aspect of a credit transaction on the basis of race, color, religion, national origin, sex (including sexual orientation and gender identity), marital status, age (provided the applicant has the capacity to contract), because all or part of the applicant’s income derives from any public assistance program, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act…

CFPB Announces Advisory Committee Appointments
The Consumer Financial Protection Bureau (CFPB) announced the appointment of new members to the Consumer Advisory Board, Community Bank Advisory Council, Credit Union Advisory Council, and Academic Research Council.

The Dodd-Frank Wall Street Reform and Consumer Protection Act charges the CFPB with establishing a Consumer Advisory Board to provide advice on a variety of consumer finance issues. Members of the Consumer Advisory Board represent the various districts of the Federal Reserve System. Each member appointed to the Consumer Advisory Board was recommended by a president of a Federal Reserve Bank.

The Community Bank Advisory Council and Credit Union Advisory Council advise and consult the CFPB on financial issues related to community banks and credit unions. The Academic Research Council engages on the strategic research planning process and research agenda, and it provides feedback on research methodologies and collection strategies.

Members of the advisory boards and councils do not receive a salary, nor are they eligible to officially represent the CFPB or the Federal Reserve System. Their selection does not connote endorsement of their organizations…

At the Consumer Financial Protection Bureau, consumer complaints help drive our work. They give us insight into what individuals and families are experiencing in the financial marketplace: the problems they face, what’s happening at certain companies or with financial products, and the places where we might need to focus our supervisory and enforcement efforts. Each week, we send more than 20,000 complaints to companies for response, and last month, we published our four millionth complaint.

We’re using those complaints to improve consumers’ lives. More than half of the complaints in our Consumer Complaint Database are about consumer reporting. In the last year, the CFPB has received an increasing number of complaints related to consumer reporting compared to prior years. The most common complaints are about inaccurate information, but consumers have increasingly reported improper use of their credit reports. The CFPB recently kicked off a rulemaking process to address some acute risks that consumer reporting poses for American families, including removing medical debt from credit reports and preventing misuse and abuse by data brokers.

Complaints also help consumers get resolution to the problems they encounter. But don’t just take our word for it. Here are just a few examples of what consumers are saying…

The law requires companies to delete disputed unverified information from consumer reports

Credit reports are used to make decisions that affect every facet of peoples’ lives. Credit reports compiled by consumer reporting companies are used by lenders, insurers, employers, landlords, and others—yet these reports frequently contain errors. By one estimate, one in five Americans has an error on at least one credit report. Accordingly, it is critical that people have a meaningful opportunity to correct inaccuracies on their reports. That’s why Congress—when it passed the Fair Credit Reporting Act (FCRA)—required credit reporting companies, and the companies that give them information, to respond appropriately when notified of errors.

As the federal government agency charged with implementing and administering the federal consumer financial laws, the CFPB is committed to ensuring that companies meet the obligations put on them by Congress in the law. For that reason, yesterday the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC), which both enforce fair credit reporting laws, filed an amicus brief in the U.S. Court of Appeals for the Second Circuit in Suluki v. Credit One Bank, to help ensure that companies that provide information to credit reporting companies comply with the law. Specifically, they must tell credit reporting companies to remove information that they cannot verify after someone identifies the information as wrong…