What are the proper procedures for reporting closed accounts, and how should accounts closed at the consumer’s request be flagged to ensure compliance with FCRA and Metro 2® guidelines?
Accurately reporting closed accounts is essential for maintaining the integrity of consumer credit files and ensuring compliance with federal regulations. Whether an account is closed by the creditor, paid in full, or closed at the consumer’s request, the Fair Credit Reporting Act (FCRA) and Metro 2® guidelines provide clear instructions for data furnishers.
Definitions and Context
A closed account is any credit account that is no longer available for use, either because it has been paid in full, transferred, sold, or closed by the consumer or creditor. The way these accounts are reported can affect a consumer’s credit score and their ability to obtain future credit. Special attention must be given to accounts closed at the consumer’s request, as this status carries specific compliance requirements.
Step-by-Step Instructions and Reporting Standards
1. Determine the Reason for Closure
- Paid in Full or Settled: If the account is paid in full or settled, report the appropriate Account Status Code (e.g., 13 for paid/closed account with zero balance).
- Closed at Consumer’s Request: If the consumer requests closure, this must be specifically indicated using the correct codes.
- Closed by Creditor: If the creditor closes the account, indicate this in the Special Comment field if applicable.
2. Use the Correct Account Status and Codes
- Account Status Code: Use Code 13 for paid or closed accounts with a zero balance. For revolving or open accounts, ensure the account is no longer available for use.
- Date Closed: Report the date the account was closed to further purchases or use (Field 26 in Metro 2®).
- Special Comment Codes: Use “M” for “Account closed at credit grantor’s request” or “CI” for “Account closed due to inactivity,” as appropriate.
- Compliance Condition Code (CCC): Use XA to indicate “Account closed at consumer’s request.” This code should be reported each month as long as the condition applies, or at least once until another CCC or the XR (removal code) is reported.
3. Update Other Relevant Fields
- Current Balance: Should be zero for paid or settled accounts.
- Payment History Profile: Continue to report accurate payment history up to the date of closure.
- Date of Last Payment: Report the date the final payment was received.
4. Special Scenarios
- Transferred or Sold Accounts: Use the appropriate Special Comment Code (e.g., “O” for transferred, “AH” for sold) and update the Date Closed.
- Inactive Accounts: If an account is closed due to inactivity, use Special Comment Code “CI” and report the Date Closed.
Compliance Requirements
The FCRA requires that closed accounts be reported accurately and promptly. Metro 2® guidelines (see Exhibit 6, Exhibit 8, and related FAQs in the CRRG) provide the technical framework for reporting closure reasons and dates. Failure to use the correct codes or to update records in a timely manner can result in compliance violations and consumer harm.
Impact on Consumers
Properly reporting closed accounts ensures that consumers’ credit files accurately reflect their credit management. Accounts closed at the consumer’s request are generally viewed more favorably by lenders than those closed by the creditor. Accurate reporting also prevents confusion or disputes over account status.
Conclusion
Reporting closed accounts—especially those closed at the consumer’s request—requires careful attention to FCRA and Metro 2® standards. By using the correct Account Status, Special Comment, and Compliance Condition Codes, and by updating all relevant fields, data furnishers can ensure compliance, protect consumers, and support the integrity of the credit reporting system.