Fair Credit Reporting Act (FCRA)

Written By ESR News Blog Editor Thomas Ahearn

On November 4, 2021, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion to affirm that consumer reporting agencies (CRAs) that use “name-only matching” for records are not using “reasonable procedures to assure maximum possible accuracy” as required by the federal Fair Credit Reporting Act (FCRA).

“This advisory opinion focuses on one method of matching being used in the industry, known as ‘name-only matching.’ This method is especially likely to lead to inaccuracies in consumer reports,” CFPB Director Rohit Chopra said in a Statement Regarding the Advisory Opinion to Curb False Identity Matching.

“Name-only matching occurs when a consumer reporting agency uses only first and last name to determine whether a particular item of information relates to a particular individual, without using other personally identifying information such as address, date of birth, or Social Security number,” Chopra said.

According to the advisory opinion, accuracy in consumer reports is of vital importance to the consumer reporting system since they play an important role in the lives of American consumers. CRAs assemble consumer information into reports that are used by many types of businesses to make decisions about consumers.

Inaccurate information in consumer reports can have significant adverse impacts on consumers, particularly prospective job seekers struggling to recover from the impacts of the COVID-19 pandemic. For example, job seekers with inaccurate information in their consumer reports may be denied employment opportunities.

Enacted in 1970, the FCRA regulates consumer reporting. Because of the importance of accuracy of consumer reports to businesses and consumers, the FCRA requires CRAs to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.”

Consumer complaints received by the CFPB reflect significant concern about inaccuracies in consumer reports. In 2020 alone, companies provided responses to more than 191,000 such complaints, which represented approximately 68 percent of credit or consumer reporting complaints responded to by companies that year.

Inaccuracies in consumer reports can occur during the “matching” process. One method of matching – “name-only matching” – is particularly likely to lead to inaccuracies in consumer reports since the CRA is using only a first and last name to determine whether a particular item of information relates to a particular consumer.

“Name-only matching” errors are common because many consumers have the same names. The U.S. 2010 census revealed 2.4 million respondents with the last name of Smith, 1.9 million with the last name of Johnson, 1.6 million with the last name of Williams, and more than 1 million with the last name of Brown, Jones, and Miller.

The CFPB is issuing this advisory opinion to remind CRAs that their matching practices must comply with their obligation to “follow reasonable procedures to assure maximum possible accuracy” under section 607(b) of the FCRA and that the practice of “name-only matching,” in particular, is far from sufficient to meet that standard.

The CFPB will be working closely with the Federal Trade Commission (FTC) to root out illegal conduct in the background screening industry. Background screening companies that violate the FCRA can be liable for significant civil penalties, restitution for victims, damages, and other relief, according to the advisory opinion.

In December 2020, a tenant screening company that provides background checks to property management companies agreed to pay $4.25 million as part of a settlement with the FTC over allegations it failed to follow reasonable procedures to ensure the accuracy of its reports about potential tenants in violation of the FCRA.

Also, in December 2020, the CFPB issued a consent order that imposed a $4.75 million civil money penalty against an originator and servicer of nonprime auto loans and leases that furnished information to CRAs to address alleged violations of the FCRA through failing to implement reasonable procedures to ensure accuracy.

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