What are the proper steps for reporting and resolving consumer disputes in credit reporting, and how do the FCRA and Metro 2® standards ensure compliance and consumer protection?
Dispute reporting is a cornerstone of fair and accurate credit reporting. Both the Fair Credit Reporting Act (FCRA) and the Metro 2® format establish clear requirements for how data furnishers and consumer reporting agencies (CRAs) must handle consumer disputes. Proper dispute management not only ensures compliance but also upholds the integrity of the credit reporting system and protects consumer rights.
Definitions and Context
A dispute arises when a consumer challenges the accuracy or completeness of information on their credit report. Under the FCRA, consumers have the right to dispute any item, and data furnishers are obligated to investigate and respond in a timely manner. The Metro 2® format provides specific codes and processes for flagging, investigating, and resolving disputes.
Step-by-Step Instructions and Reporting Standards
1. Receiving and Acknowledging a Dispute
- Direct Disputes: When a consumer submits a dispute directly to the data furnisher, the furnisher must acknowledge and begin an investigation.
- Indirect Disputes: Disputes received via a CRA (through systems like e-OSCAR®) must also be investigated promptly.
2. Reporting the Dispute Status
- Compliance Condition Codes (CCC): Use CCC XB to indicate that an account is currently in dispute under the FCRA and the investigation is ongoing.
- Other Codes: Use XC if the investigation is complete but the consumer disagrees with the result. Use XH to indicate that a previous dispute has been resolved.
- Combination Codes: Codes like XD and XE are used when an account is both closed at the consumer’s request and in dispute.
3. Investigation and Resolution
- Timely Investigation: The FCRA requires that disputes be investigated and resolved within 30 days (with a possible 15-day extension if additional information is provided by the consumer).
- Verification: Data furnishers must review all relevant information, correct any inaccuracies, and update or delete information as appropriate.
- Notification: Once the investigation is complete, the furnisher must notify the CRA of the results and update the Compliance Condition Code accordingly.
4. Updating or Removing Dispute Codes
- Remove XB/XD/XF: Once the investigation is complete, remove the dispute code by reporting XR (removal code) or update to XC/XH/XG as appropriate.
- Retention: The dispute code should remain on file only as long as the dispute is active. Furnishers should have clear internal policies for updating or removing these codes.
5. Special Considerations
- Multiple Disputes: If a consumer submits multiple disputes, each must be handled and reported separately.
- Legal Requirements: The FCRA prohibits furnishers from reporting information that is known to be inaccurate or that cannot be verified.
Compliance Requirements
The FCRA (Section 623) and Metro 2® guidelines (see Exhibit 8 and related FAQs in the CRRG) require data furnishers to:
- Accurately flag accounts in dispute.
- Complete investigations within statutory timeframes.
- Update or correct information as needed.
- Remove or update dispute codes promptly after resolution.
Failure to comply can result in regulatory action, consumer lawsuits, and reputational harm.
Impact on Consumers
Proper dispute handling ensures that consumers are not unfairly penalized by inaccurate or unresolved negative information. It also provides a transparent process for correcting errors, which can significantly affect credit scores and access to credit.
Conclusion
Dispute reporting and resolution are essential for maintaining the accuracy and fairness of the credit reporting system. By following FCRA and Metro 2® guidelines—using the correct codes, investigating promptly, and updating records—data furnishers can ensure compliance, protect consumers, and support the integrity of the credit ecosystem.