Proactively Managing Credit Reporting Data

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The mandate that credit furnishers, like banks, provide accurate account data to credit reporting agencies can be overwhelming.

This information is disclosed in files that follow the standard electronic data reporting format called Metro 2®. To manage this tremendous task, banks should proactively focus on maintaining accurate Metro 2® records, which should mitigate any potential harm to consumers.

In addition to protecting consumers, accurate furnishing helps banks avoid unwanted regulatory scrutiny from increased consumer complaints and credit reporting disputes. Regulation V requires that furnishers establish and implement reasonable written documentation regarding the accuracy and integrity of consumer information furnished to consumer reporting companies (CRCs). In fact, the CFPB’s Supervisory Highlights in Spring 2022 cites this violation: “In reviews of credit card furnishers, examiners found furnishers’ policies and procedures had failed to specify how particular data fields, such as the date of first delinquency, should be populated when furnishing information about credit card accounts.”

It’s the responsibility of credit data furnishers to ensure accurate furnishing to CRCs, including that which is generated by third-party processors. Banks need a clear understanding of how well their systems of record map to their Metro 2® files and the ability to generate the right documentation to back them up.

As a senior executive in consumer reporting operations, I have my clients focus on three foundational data furnishing accuracy and control activities. First, we conduct a deep review of the Metro 2® furnishing file that is submitted to CRCs. Then we develop a detailed data mapping and conversion document to examine the system of record code that produces the file. Finally, we examine the organization’s upstream operational processes to identify trigger events and data that affect that file.

Four Areas to Examine Metro 2® Files for Accuracy
Banks should proactively focus on improving furnishing accuracy in four areas: the system of record’s limitations for compliant reporting, the internal logic in the system of record that inadvertently causes inaccuracies, inconsistencies among correlated fields and missing or inaccurate values in the fields. To avoid inaccuracies and potential regulatory red flags, review the activities below. Remember that these also apply to data generated by your third-party processors.

1. Examine your system for limitations that may hinder data compliance, including:

    • Inability to generate certain Metro 2® file segments.
    • Limited capture / storage of information (for example, 6 months versus 7 years).
    • Reporting of delinquent accounts greater than 7 years beyond the date of first delinquency.
    • Consolidation of data elements into one field requiring manual parsing (surname, first name, middle name)
    • Missing logic required to report Metro 2® fields (such as reporting spaces instead of the appropriate generation Code)
    • Not flagging required Metro 2® fields as mandatory (like a Social Security number).

2. Review logic that could result in inaccurate reporting, including:

    • Inaccurately counting days past due for account status assignment.
    • Lacking logic to report “last good payment” date after a payment reversal due to non-sufficient funds.
    • Mass overwriting of dates (such as date of account information).
    • Missing best practice controls (like if account is current and in bankruptcy, the date of first delinquency should not be blank).
    • Reporting the most recent actual payment amount value, rather than totaling all payments receiving during the reporting period.

3. Address inconsistencies among correlated fields, including:

  • Failure to update all relevant downstream data elements when manually overriding Metro 2® fields (such as account status).
  • Inaccurate or incomplete reporting when an account is closed (like date closed is not populated, current balance is greater than $0).
  • Inconsistent date progression (like if the date of account information is a date later than the timestamp of the file).
  • Inappropriate representation of Metro 2® fields related to account status (such as payment rating is not populated when required or payment history profile does not reflect the prior month’s account status).

4. Resolve missing and inaccurate field values, including:

  • Invalid assignment of portfolio type and/or account type values
  • Inaccurate values furnished for special comment code, ECOA, consumer information indicator and compliance condition code fields.
  • Ensure data accuracy now and for the future.

Now that you understand how to avoid the issues that can harm your consumers, drive credit disputes and draw regulatory scrutiny, take immediate steps to understand exactly how your data is mapping to Metro 2®. If your bank is struggling with capacity or expertise or is new to credit data furnishing, find a trusted expert to help implement both a proven technology data mapping solution as well as the knowledgeable operational support needed to execute it.

Increased Regulatory Scrutiny Renders Credit Furnishers Vulnerable

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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.