Furnishing Best Practices
By: Badri Sridhar, FTI Consulting and Dan Hayes, FTI Consulting
Furnishing accuracy remains a high-risk issue, similar to the other requirements of the Fair Credit Reporting Act (FCRA), as the CFPB has increased examination and enforcement of the various provisions of the FCRA.
Our team specializes in FCRA regulatory and risk management solutions to drive operational efficiencies and compliance for institutions reporting information to one or more consumer reporting agencies (CRAs). Detailed below are best practices regarding furnishing accuracy with a view towards reducing potential consumer harm, regulatory risk, and possible subsequent litigation.
Policy, Procedure, and Training Review
It’s essential for data furnishers to understand the required components for FCRA-related policies and procedures under Section III of Appendix E to Part 1022 – Interagency Guidelines Concerning the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies (“Appendix E”). This Section lists 13 separate components that should be addressed, including use of standard data formats, record retention, deletion of records and periodic evaluation of a company’s own practices.
Organizations can benefit from an assessment of existing policies and procedures against the requirements detailed in Appendix E. This assessment should include confirmation that these policies and procedures are adhered to during the normal course of business. Policies and procedures should also be reinforced through proper training and the use of job aids or similar tools to help guide employees.
Furnishing Quality Control
Another important component of Appendix E is implementation of quality control processes pertaining to the data that is sent to the CRAs. The CFPB, in particular, has made it clear through recent communications and previous enforcement actions that there is an expectation that furnishers will perform self-audits and monitoring to ensure the accuracy and integrity of data transmitted to CRAs. Controls should be in place for both pre- and post-transmission of credit reporting data.
For pre-transmission quality control, there are a range of third-party tools including FTI’s EvaluData that can be deployed to compare fields within the furnishing file and identify illogical conditions (e.g., accounts with an amount past due but a current account status). Whether conducted internally, or through the use of a third-party tool, this type of monitoring can be a very effective way to perform some level of quality control on every single account furnished.
For post-transmission quality control, it is highly recommended to review a sample of reported accounts and recalculate each data field reported for that month. Discrepancies between the recalculated data fields and the furnished data fields for each tradeline should be identified, reconciled and an investigation performed to determine the root cause. If the root cause is a potential system, technology or process issue that could lead to other accounts being impacted, those issues should be prioritized and resolved accordingly. If it is a one-off item, such as a manual processing error, this can be addressed through training and the development or enhancement of controls.
Credit Reporting Change Management
Finally, given that organizations undergo constant change, it is important to develop processes to determine the downstream impact to credit reporting and accommodate through updates to policies and procedures, technology, staffing, and training. Changes that have downstream impacts on credit reporting include changes to technology (e.g., new servicing system, tools for credit reporting, new vendors, etc.), new product offerings or business rules which require changes to how consumer data is furnished in certain scenarios, and changes to the credit reporting guidance and regulatory requirements. It is highly recommended to engage with key stakeholders early and often when changes with downstream credit reporting impacts are expected.
Taking it a step further, there should also be thorough monitoring around change management activities including before and after the impacted change, to understand the effectiveness and update change management processes as needed. Given the complexity, change management activities often have unintended negative consequences, and therefore it is wise to strive for process improvement in this area.
Maintaining an end-to-end FCRA business requirements document (BRD) is also a critical best practice as organizations address more complex credit reporting situations such as bankruptcy, charge-offs and account transfers. In addition to providing insight when evaluating the impact of changes, a BRD provides transparency around furnishing logic and business rules for regulators and other third parties such as external auditors.
Collectively, the development and enhancement of furnishing related documentation and quality control processes in addition to a proactive approach to credit reporting change management can improve the accuracy and integrity of information furnished, reduce the likelihood of consumer harm, and subsequently reduce the risk of litigation and regulatory action.
FTI Consulting is an independent global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. Individually, each practice is a leader in its specific field, staffed with experts recognized for the depth of their knowledge and a track record of making an impact. Our professionals have extensive experience with consumer reporting, auto loans, mortgages, student lending, short-term lending, military lending, origination, servicing, debt collection and other consumer lending-related activities.
 12 C.F.R. Appendix E to Part 1022 (2012)
 “CFPB Supervisory Highlights Spring 2022”, Section 2.2.7, https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-26_2022-04.pdf
 “Enforcement actions,” Consumer Financial Protection Bureau (accessed May 16, 2022), https://www.consumerfinance.gov/enforcement/actions/?title=data&from_date=&to_date= (search “data” in the “Search by keyword(s)” dialogue box under the heading “Filter enforcement actions”).