CFPB Cautions Consumer Reporting

CFPB Cautions Consumer Reporting Agencies About Removing Junk Data From Consumer Reports

The Consumer Financial Protection Bureau (CFPB) has recently taken a stance against the reporting of “junk data.” In new guidance issued to background screening companies, the CFPB has clarified that they are obligated to filter for and screen “junk data” so it does not reach third parties.

In its guidance, the CFPB stated that these companies are responsible under the Fair Credit Reporting Act (FCRA) for instituting policies and procedures to “reliably detect and remove inconsistent or impossible information from consumers’ credit profiles.”

Junk data includes impossible information, such as debts undertaken before an individual is born, conflicting information, or any other facially impossible information. In emphasis of this guidance, the CFPB’s advisory opinion focused on two particular types of inaccurate information, including:

  • Impossible Information: The CFPB stated that, in some cases, such information reported by background screening companies includes credit cards opened by young minors or trade lines indicating that a consumer is deceased.
  • Inconsistent Information: In some cases, the CFPB states that consumer reports include multiple pieces of information that cannot be simultaneously true. Examples include accounts paid in full but showing a balance simultaneously; accounts reported as delinquent before they opened.

The CFPB has stated that these pieces of facially inaccurate data can still significantly affect consumers. For example, it can impact their ability to gain employment, housing, or credit. Furthermore, the Bureau claims that background screening companies are in a firm position to detect these inaccuracies and remove them before they harm consumers.

Unfortunately, the CFPB reports that these errors may be relatively common. For example, in its advisory opinion, the Bureau pointed to a 2012 study by the Federal Trade Commission. The Bureau found that more than 34% of consumers could find at least one error in their credit reports.

These errors may severely impact populations like foster children, who often suffer from identity theft. Unfortunately, they are especially vulnerable due to disseminating their information across several adults and databases. This situation can result in adverse information reaching background screening companies before they pass into adulthood.

The CFPB has made it clear that background screening companies have an obligation under the FCRA to detect and remove such facially impossible information. This obligation helps protect consumers, especially the most vulnerable, to ensure their consumer reports include only accurate information.

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