Rising consumer debt, the potential specter of recession and an intensified regulatory focus on credit reporting and disputes management are creating a perfect storm for companies that provide credit, including banks.

And yet, from my vantage point as an expert in credit dispute operations technology, I see troubling gaps in how furnishers conduct their credit dispute management operations. Weak credit dispute management will be a liability for banks. My advice to leaders of operational risk and portfolio operations business lines? Shore up your operations now before the inevitability of a rising tide of disputes overwhelms you.

Some effects of a slowing economy that hint at a potential recession are already affecting consumer pocketbooks. Rising consumer prices continue to curtail spending as consumers prioritize groceries and gas over other expenses, most notably debt repayment.

Add spiraling interest rates to that mix, and it should come as no surprise that consumer debt has ballooned to new highs that surpass pre-Great Recession levels. This comes as the job market is expected to eventually trend downward and tools that cash-strapped consumers use, like buy now, pay later, become more popular. These worrisome indicators all point to a significant reboot in the consumer credit score cycle. Here’s what that shift looks like:

  • Lenders look to adjust credit risk.
  • Loan pricing tightens.
  • Interest rates increase as credit scores decrease.
  • Cost of funds increases for consumers with lower credit scores.
  • Consumers take a greater interest in their credit score.
  • Furnishers see dispute volumes increase.
  • Consumers get frustrated and turn to credit repair organizations (CROs).

Yes, we’ve been down this road before and weathered it. But this time could be different.

A Renewed Focus on the FCRA
What is unique to this 2022 cycle, compared to the last cycle that spanned 2009 to 2014, is the notable change in the federal government’s interest in consumer protection. During the last cycle, fewer consumers had the savviness or empowerment to understand credit reporting and scores; additionally, the Consumer Financial Protection Bureau had just been created. Today however, the CFPB is strong, established and primed to act.

Even prior to the war in Ukraine and inflation materialized, CFPB Director Rohit Chopra had already begun laying out his thesis on stronger consumer credit protections – one that includes a far more intentional focus on credit furnishing and dispute provisions within the Fair Credit Reporting Act, or FCRA. The CFPB has clearly signaled that FCRA adherence is its top priority and that this time around, furnishers will be held to account.

Efficiency will protect and help your bank manage the increased volume of disputes expected in an era of stronger consumer credit protections. Let’s examine where those disputes are coming from. Disputes originating from credit repair organizations are the top concern for credit providers. A poll from a recent Consumer Data Industry Association conference shows that 74% of the respondents identified CROs as the “biggest pain point” in their operations. Additionally, the market size for these services is expected to grow by 9.5% this year.

That’s a clear signal for every organization to shore up its credit dispute management and credit furnishing today. Organizations need to be able to demonstrate accurate furnishing standards and adherence, produce relevant policies and procedures that encapsulate reasonable investigation for credit reporting disputes and, above all, adequately demonstrate evidence that “what was said would be done and what was actually done” match. To do anything else is to unnecessarily invite increased regulatory scrutiny at a time when credit furnishers are most vulnerable.

How well prepared is your bank for this increased regulatory scrutiny? If you’re not sure, reach out to a trusted expert to help evaluate and implement the technology and regulatory guidance needed to help accurately and efficiently resolve credit reporting issues before they become disputes.


Michael Orefice