When a consumer disputes the accuracy or completeness of information on their credit report, furnishers are required to take immediate action to ensure the disputed account is clearly marked and that the dispute is resolved in a timely, legally compliant manner. Properly flagging an account in dispute ensures transparency, protects the consumer’s rights, and fulfills the reporting requirements of the Fair Credit Reporting Act (FCRA).
What Triggers a Dispute?
Disputes may arise from:
- Incorrect balance or payment information
- Accounts fraudulently opened or misattributed
- Payment history errors
- Status code disagreements (e.g., charged-off vs. current)
A dispute can be submitted directly to the data furnisher or forwarded from a credit reporting agency (CRA) via an Automated Consumer Dispute Verification (ACDV) request.
Steps for Reporting an Account in Dispute
1. Immediately Add the “Account in Dispute” Indicator
Upon receiving a consumer dispute, the furnisher must:
- Set the Compliance Condition Code to:
“XB – Consumer disputes, investigation in process”
This code must be applied as soon as possible to any tradeline under investigation. It ensures that the account is flagged across all three major CRAs during the dispute period.
2. Do Not Remove or Alter Existing Data Until Verified
While the account is in dispute:
- Do not delete the account unless the investigation confirms that the data was inaccurate or improperly attributed.
- Continue to report balances, status, and payment history normally—unless it is determined they are incorrect.
Post-Investigation Actions
After the dispute has been resolved:
- If the consumer was correct, update the tradeline with accurate information and remove the dispute code.
- If the account is found to be accurate, remove the “XB” code and continue reporting the original data.
- If the consumer continues to dispute the account but the investigation is complete, use the appropriate status such as:
- “XC – Consumer disputes, investigation completed, data accurate”
- “XH – Consumer disputes, investigation completed, data inaccurate”
Be sure to respond to the CRA within 30 days of receiving the dispute, as required by the FCRA.
FCRA Compliance Obligations
Under the FCRA:
- Furnishers must conduct a reasonable investigation of all disputes.
- All disputes must be resolved within 30 days, or 45 days if the consumer provides additional documentation.
- During the investigation period, furnishers are prohibited from reporting the account in a way that is misleading or incomplete.
Impact on the Consumer’s Credit Report
- Flags the Account as Under Review
Marking the account as disputed prevents lenders from making credit decisions based on data the consumer contests. - Preserves Consumer Rights
This process ensures the consumer has a chance to correct errors that may be affecting their credit score. - Avoids Legal Penalties
Improper or incomplete dispute handling can expose data furnishers to civil liability under the FCRA.
Conclusion
Dispute reporting is a critical part of maintaining fair and accurate credit records. By promptly flagging accounts in dispute, thoroughly investigating the claim, and following proper resolution protocols, furnishers ensure compliance with the FCRA and protect both consumers and the integrity of the credit reporting system.