Do You Report Consumer Credit? Don’t Get Into Trouble Doing It
If you are a business and you are making loans to others, or you are relying on payment from clients or customers, you may rely on the power of credit reporting to compel others to pay what they owe you. The ability to report a negative mark to someone’s credit report is a powerful tool—but it’s also one that can get you in deep trouble if you don’t wield that power carefully.
Fair Credit Reporting Laws
Under the Fair Credit Reporting Act (FCRA), you, as someone furnishing information about another to the major credit reporting agencies (CRAs, which are Equifax, Experian, and TransUnion) are called a “furnisher.” The FCRA doesn’t just govern the CRAs, but it also governs you—and you can also be sued under the FCRA, in certain circumstances.
Note that if you pull credit, to check people’s credit, the FCRA puts a whole separate set of obligations on you, and you can get in trouble for not doing that properly as well.
Challenges to What’s Reported
If you report someone to a CRA, and they contest or challenge what you have reported, the CRA will let you know, usually electronically. You have 30 days to conduct an investigation into the dispute. You don’t have to conduct any investigation at all—just know that if you don’t investigate, the CRA will remove the negative item you reported from the consumer’s credit report.
However, if you do confirm the negative mark as accurate, you should be able to show, if questioned, the steps you took to investigate the consumer’s complaint. This usually involves verifying identification (that is, making sure you didn’t mix up consumers with similar names, birthdays, etc), and verifying what you reported to the CRA was true.
The FCRA does require that the consumer give enough detail in the dispute, to allow you to do an investigation into the dispute. Additionally, you do not have to investigate any dispute, which is frivolous, or a duplication of a prior dispute by the consumer.
As a furnisher under the FCRA, you also have an obligation to report something as “disputed,” if in fact it is disputed by the consumer. If you know that a consumer disagrees or disputes what you are reporting, the CRA should have a mechanism for you to mark the account as disputed.
If you report negative information to a CRA, you also have an obligation to tell the consumer in writing that you have reported the information.
Damages for Violations
The FCRA generally only allows consumers to recover actual damages. That can be a good thing for you, if a consumer doesn’t have any real damages.
However, where there are real damages, the amount can be significant—someone who has a 30 year mortgage on a $1 million home that is being assessed a higher interest rate because of your reporting error can have a lot of damage from a credit error.
Reporting credit carries risk. We can help you do it the right way. Call the West Palm Beach business litigation attorneys at Pike & Lustig today to help you.