Tricolor Auto Acceptance’s multi-hued name may be particularly appropriate. According to an FTC lawsuit, the company’s violations of the Fair Credit Reporting Act were enough to make consumers see red, feel blue, and perhaps lose some green in the process.
The FCRA and related rules assign specific obligations to three groups involved in the credit reporting system: credit reporting agencies (CRAs), the companies that furnish them with information about consumers, and the companies that use those reports to make decisions about credit, employment, etc. The overarching goal is to promote accuracy and integrity at every step. Those qualities are so essential to the process that the FCRA requires companies to have reasonable written policies and procedures in place regarding the accuracy and integrity of the consumer information they furnish to CRAs.
If consumers believe that information on their credit report is inaccurate, they have a right to dispute it directly with the retailer, financial institution, or other company that reported it to the CRA in the first place. Why this set-up? It makes sense for consumers to raise the issue initially with the company they've already done business with – in legal parlance, the “furnisher.”
Once a consumer disputes the accuracy of that information, the Furnisher Rule requires the company to conduct a timely investigation and report back to the consumer. If it looks like the consumer is right, the company has to contact the CRA to correct the inaccuracy.
So how did Tricolor find itself on the law enforcement radar screen? Tricolor Auto Group has a chain of dealerships that finance the vehicles they sell. It transfers those loans to an affiliated company, Tricolor Funding. Although the loans remain in the hands of Tricolor Funding, defendant Tricolor Auto Acceptance is responsible for loan servicing, and regularly furnishes information to credit bureaus. According to the FTC, Tricolor has provided CRAs with details about 11,635 separate consumer accounts.
But the FTC says Tricolor didn’t have the required plan in place regarding the accuracy and integrity of the information it shares with CRAs. In addition, the complaint alleges that when consumers disputed the accuracy of information with Tricolor, the company didn’t honor its obligations under the Furnisher Rule. It simply passed the disputes on to a CRA without investigating and reporting back to consumers.
In addition to a civil penalty of $82,777, the settlement requires Tricolor to implement written policies and procedures and to investigate consumer disputes about the accuracy of account balance information it furnishes to CRAs.
What can furnishers do to help keep their procedures FCRA-compliant?
Sounds like a plan. The linchpin of the credit reporting system is the accuracy and integrity of information. A seat-of-the-pants approach just won’t do. That’s why the Furnisher Rule mandates that you implement written policies and procedures, that you review them periodically, and that you update them to ensure they’re still effective. What factors should you take into account? Appendix A to the Furnisher Rule lists some practical guidelines.
Don’t pass the buck. When consumers raise concerns about the accuracy of information you provided, don’t just pass the problem on to the credit bureaus. It’s your obligation to investigate those disputes and promptly get back to consumers with your results. Furthermore, don’t ignore disputes you think are frivolous or irrelevant. If that’s the conclusion you’ve drawn, you still need to notify the consumer about your determination. Looking for more compliance advice? Read Consumer Reports: What Information Furnishers Need to Know.
Approach your obligations intentionALLy – with an emphasis on the “all.” Many of Tricolor’s customers speak Spanish and for a period of time Spanish was the default language on the company’s website. The settlement serves as another reminder that the FTC is serious about its obligation to protect consumers in every community.