Amy Drushal authored the article “Protecting Your Institution from Fair Credit Reporting Act Litigation,” published in the May/June 2018 edition of the American Bankers Association’s Bank Compliance magazine. Given the uptick in frivolous claims brought by plaintiffs under the FCRA, financial institutions must be prepared to protect themselves from Fair Credit Reporting Act (FCRA) litigation. While it is sometimes more sensible for a financial institution to pay a settlement in these types of claims rather than litigate, these settlements add up, and individual nuisance claims at a few hundred or thousand dollars accrue into hundreds of thousands of dollars in settlements of frivolous claims.
“There is no way to stop frivolous claims. There will never be. But, in my opinion, an institution can protect against being a victim of frivolous claims by being proactive, diligent and observant,” explained Drushal. “Lawsuits can often result from sloppy practices or preventable mistakes by employees. These actions, while likely not violations of the law per se, look bad and end up being the subject of lawsuits.” While there may not be a strategy to completely halt frivolous claims, there are practices institutions can implement to better protect themselves from unnecessary lawsuits, including:
- Ensure the institution’s credit reporting practices are compliant with the rapidly changing FCRA laws. Train employees to comply with these changes and designate someone to watch for Consumer Financial Protection Bureau bulletins in order to make changes or updates to credit reporting formats.
- Train employees on how to properly conduct a “reasonable investigation” under the Furnisher Rule by having them review all relevant underlying documents related to the dispute, and ensuring they are actually moving forward with the investigation.
- Implement policies and follow procedures under the FCRA. These procedures could include ensuring information is checked and supported by records, auditing operations for adherence with applicable laws and regulations, overseeing vendors involved in providing products and services, requiring maintenance of records for a reasonable time and preventing re-aging and duplicate reporting.
Because FCRA litigation is not disappearing anytime soon, institutions must be prepared to comply with the highly complex FCRA requirements. “Failure to do so exposes the institution to civil liability, including class actions and regulatory attention by the Bureau and/or your prudential Federal Regulatory authority, and the Federal Trade Commission.”
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