When a consumer disputes an account, they are challenging the accuracy, completeness, or validity of the reported information. Under the Fair Credit Reporting Act (FCRA), furnishers have strict obligations to investigate disputes promptly and ensure the disputed status is reflected accurately on the credit report.
Why Accurate Dispute Reporting Matters
Failing to report an account as disputed when required can:
- Violate the FCRA and lead to regulatory penalties
- Mislead potential lenders reviewing the credit report
- Undermine consumer trust in the credit reporting system
Steps for Reporting a Disputed Account
1. Identify the Type of Dispute
There are generally two types:
- Direct Dispute — The consumer contacts the furnisher directly to challenge the information.
- Indirect Dispute — The consumer contacts a credit bureau, which forwards the dispute to the furnisher via an Automated Consumer Dispute Verification (ACDV).
2. Use the Correct Consumer Information Indicator
Metro 2® provides specific codes for disputed accounts:
- Code “A” — Account in dispute under the FCRA
- Code “X” — Account in dispute under the Fair Debt Collection Practices Act (FDCPA)
These codes signal to anyone reviewing the report that the account’s accuracy is under review.
3. Maintain Accurate Balance and Payment Reporting
While the dispute is under investigation:
- Continue reporting the balance amount, scheduled payment, and payment history accurately
- Do not remove negative history unless verified as incorrect
- Avoid reporting the account as “current” if delinquent
4. Promptly Update After Resolution
Once the investigation is complete:
- If the information is correct, remove the dispute code but retain accurate payment history
- If the information is incorrect, update the tradeline to reflect the corrected status, balance, or payment history
- Notify all credit bureaus to which the inaccurate information was reported
FCRA Compliance Requirements
The FCRA requires furnishers to:
- Investigate disputes within 30 days of receipt (45 days if the consumer provides additional information)
- Correct or delete any information found to be inaccurate or incomplete
- Report the results of the investigation to the consumer and applicable credit bureaus
Failing to follow these steps can expose furnishers to legal liability.
Impact on the Consumer’s Credit Report
- Transparency — Lenders see that the consumer is challenging an item.
- Temporary Caution for Lenders — Many lenders may delay decisions until disputes are resolved.
- Potential Score Impact — While the dispute notation itself doesn’t affect scoring, corrected information could change the credit score.
Conclusion
When a consumer disputes an account, the furnisher must update the tradeline to reflect the dispute status, investigate promptly, and report the results accurately. Proper coding using Metro 2® dispute indicators ensures compliance with the FCRA while maintaining transparency for all parties involved.