CFPB proposal amending Regulation V does not consider bad actor misuse
In response to the CFPB’s advanced notice of proposed rulemaking (ANPR) on potentially amending the definitions of “identity theft” and “identity theft report” in Regulation V, America’s Credit Unions’ Regulatory Advocacy Counsel John Vatian highlighted concerns with the proposed rule.
While America’s Credit Unions is fully supportive of the CFPB’s goal of protecting victims of economic abuse, the primary concern is the potential for the proposed rule to be exploited by bad actors who could cause disruption to the current credit reporting system. Credit unions want to protect their members from coerced debt, but exploitation of self-reporting mechanisms by bad actors could cause widespread harm by reducing trust in credit reports and placing complex administrative burdens on small credit unions who must conserve resources to effectively serve their communities.
“We urge the CFPB to carefully consider the potential unintended consequences that may arise from shifting the burden of liability too heavily onto financial institutions. As envisioned in the petition for rulemaking submitted by the National Consumer Law Center, a self-attestation mechanism, while convenient for legitimate victims of coerced debt, could lead to manipulation of credit reports by bad actors,” Vatian explained. “America's Credit Union members have reported that bad actors are misusing the FCRA dispute process, flooding credit unions with disputes in hopes of causing a missed response, which would result in the removal of negative information from the person’s credit report.”
America’s Credit Unions encourages the CFPB to consider how it can use existing resources to educate consumers to better identify coerced debt situations and seek help from appropriate law enforcement channels if they are victims.