Collector - May 2020 - 20

For decades, credit reporting in the
U.S. was handled by community bureaus,
sometimes formed by debt collection
agencies as a benefit to local merchants
who wanted to trade information on the
consumers to which they extended credit.
Credit decisions were based less on data
and more on someone's observations about
a person's career, payment history and/or
character. The system was hyperlocal and
often inconsistent.
Considering Americans' increasing
infatuation with revolving credit, it became
critical for credit bureaus to have a nationwide
presence. That led to massive consolidation
in the industry, leaving us with "the big
three"- Equifax, Experian and TransUnion-
as well as specialized providers for things
like payday loans, background checks and
utility and telephone accounts. In the early
1990s, CRAs adopted data-driven, risk-based
scoring models to help more uniformly gauge
consumers' creditworthiness.
Lawmakers first stepped into the credit
world in 1968, passing the Consumer Credit
Protection Act. This law targeted creditors,
mandating loan disclosure requirements and

of ACA
members say
they furnish data
to credit reporting


helping to ensure consumers knew the true
cost of credit.
The star of the show, the FCRA, was signed
in 1970 by President Richard Nixon and went
into effect the following year. In its original
form, the FCRA imposed requirements
on CRAs and entities that used consumer
reports-not furnishers. There was some
confusion on this, but the intent of the law
was born out by a few cases in the 1980s.
In 1996, Congress passed the Consumer
Credit Reporting Reform Act, which
extensively amended the FCRA to address
inaccuracies in credit reporting, including
how entities should handle disputes.
Critically, it also granted the Federal Trade
Commission power to bring actions against
businesses that furnish information to CRAs,
such as debt collectors.
This is the moment when ACA members
scrambled to wrap their arms around their
new responsibilities under the FCRA. The
association created a committee to review
the amendment and monitor its effect on
members. The pages of Collector magazine
were awash with compliance and advocacy
information related to the FCRA.
Congress expanded the FCRA again in
2003 when it passed the Fair and Accurate
Credit Transactions Act (FACT Act),
addressing growing identity theft and data
security concerns. This amendment also gave
consumers the right to dispute information
directly with data furnishers.
The FCRA was further amended in 2018
when Congress passed the Economic Growth,
Regulatory Relief and Consumer Protection
Act, requiring credit bureaus to provide free
fraud alerts for consumers, extending the
minimum amount of time CRAs must keep
an initial fraud alert on a consumer's file,
adding protections for veterans' credit and
changing the model forms in Regulation V.
And then the coronavirus pandemic
hit the U.S., and the world as we know it
changed. In March 2020, Congress amended
the FCRA under the Coronavirus Aid,
Relief, and Economic Security (CARES) Act,
imposing new requirements on furnishers
making accommodations to consumers
affected by COVID-19.

The FCRA that we know today is a far cry
from what it was back in 1970. But as David
Anthony, partner at Troutman Sanders LLP,
pointed out, much of the FCRA's expansion
was inevitable as the credit market exploded
and technology evolved.
"Historically, statutes lag behind reality,"
Anthony said. "The FCRA wasn't written
with the idea that everyone would be
Venmo-ing each other like they are today."
For decades, the FTC was the sole entity
responsible for oversight and enforcement
of the FCRA. That changed in 2010, when
the Consumer Financial Protection Bureau
took over most of the FCRA rulemaking
and examination responsibilities, though
the FTC and CFPB still work together on
enforcement. The FCRA is also enforced at
the state level by attorneys general and, to
some degree, by private litigation.

Let's talk about that private litigation.
Among the big three consumer statutes-
the FCRA, FDCPA and Telephone
Consumer Protection Act-only FCRA
lawsuits were up in 2019 from the previous
year. In fact, FCRA litigation has more than
tripled from 2009 to 2019, according to data
from WebRecon.
There are many reasons behind this
dramatic rise in litigation. In the 10 years
since the U.S. pulled out of the Great
Recession, credit demand grew by leaps and
bounds. Technology has made this itch very
easy to scratch. If you want to apply for a
credit card or mortgage-or read your credit
report, for that matter-you just have to pull
out your smartphone.
Consumers are simply more informed
about credit now. In a 2003 survey
commissioned by the Consumer Federation
of America (as reported by, only
2% of Americans said they knew their credit
score. Today, according to a recent survey
by GoBankingRates, approximately 65% of
respondents say they know their credit score.
While that's good news, Kim Phan,
partner at Ballard Spahr LLP, pointed out
there is a dark side to that knowledge.


Collector - May 2020

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