3. How To Respond To A Credit Dispute presented by: Fesia A. Davenport, Chief Deputy Director and Chaino Seaborne, Child Support Officer III County of Los Angeles Child Support Services Department September 21, 2011 3:30 p.m. – 5:00 p.m.

4. What Will We Discuss Today?  Credit Reporting Overview  Major Credit Reporting Statutes  Credit Reporting Cases  State Regulations  State Policy  What does it all mean?  Why should you care?  Reasonable Investigation walk-thru

5. Credit Reporting In A Nutshell  Requirement to Report  Required to report by law.  Reporting Limitations  Must investigate the accuracy of the information initially reported.  Must conduct an investigation into a consumer’s dispute of reported information.  Potential liability for failure to conduct an investigation.

6. Credit Reporting Statutes  Fair Credit Reporting Act (FCRA - 1970) and Fair and Accurate Credit Transactions Act (FACTA - 2003)  Codified at 15 USCA 1681 et seq. (1970)  Governs credit reporting: Defines relevant parties and imposes limitations Provides remedies for failure to comply

7. Fair Credit Reporting Act (FCRA)  FCRA (as amended by FACTA) applies to “furnishers” of information.  Furnisher is the information source – entity that provides the credit information to credit reporting agencies (CRA).  Question: Are LCSAs a furnisher of information?

8. FCRA – Duty to Give Notice of Dispute  Duty To Give Notice of Dispute If the completeness or accuracy of any information furnished to any CRA is disputed by the consumer, the person may not furnish the information to the CRA without notice that the information is disputed. How does one report information as disputed? Are there alternatives?

9. FCRA - Duty to Conduct Investigation  Duty to Conduct Investigation After Receiving Notice of Dispute: After receiving notice of a dispute from a CRA, the furnisher must conduct an investigation with respect to the disputed information. FACTA changed this, now LCSA must act if dispute is received directly from the consumer.

10. FCRA - Duty to Conduct Investigation  Conduct an investigation into the disputed information.  Review all relevant information provided by the CRA or by the consumer directly.  Report results to the CRA and consumer directly depending on dispute method.

11. MBNA Case – Reasonable Investigation  MBNA Case, 9 th Circuit, 2009 Facts  Gorman purchased satellite TV system using MBNA Visa.  System delivered used and defective  Gorman refused delivery and requested refund from vendor.  Gorman notified MBNA that he was disputing the charge.

12. MBNA Case – Reasonable Investigation  MBNA Case Continued MBNA requested additional information. MBNA charged off account after he stopped paying. MBNA reported the charge off to the CRAs. Gorman disputed information with CRAs. CRAs provided dispute information to MBNA. MBNA confirmed information after reviewing the account records and its notes.

13. MBNA Case Continued  Lawsuit Gorman sued MBNA for libel and damages resulting from the amount of money that he could have billed if he did not have to deal with the disputed credit information.  Arguments Gorman: MBNA failed to conduct a sufficient investigation. MBNA: FCRA does not require any particular investigation - anything will do. Court held: “reasonable investigation” required

14. Reasonable Investigation – What Does it Look Like  Undefined in FCRA  Case-by-case basis  Other 9 th Circuit decisions provide some guidance: Thomas v. U.S. Bank (2007) Cope v. MBNA (2006)  What should an LCSA do? Look to State policy as starting point. Everything in your power to resolve the dispute.

15. State Policy and Regulation  22 CCR § 116140 Provides basic duty to investigate.  CSS Letter 11-01 provides more detail Confirm all payments made. Compare current order to charging instructions. Verify that relevant intercepts applied. Confirm arrears converted correctly. Review payment history, emancipation, etc.

16. State Policy and Regulation  No duty to investigate a direct dispute if reasonably determined that dispute is frivolous or irrelevant. Beware: Don’t make this determination lightly. Use in limited cases.  If dispute is determined frivolous or irrelevant, the consumer must be notified of this determination no later than five business days after making determination.

17. What Does It All Mean?  “Reasonable investigation” is a term of art  There is no bright line test  Proceed with caution  If inaccuracy can be detected from LCSA’s records, then must correct even if consumer/NCP failed to provide information.

18. Summary  LCSAs must provide notice to consumer/NCP before reporting information to CRAs  If NCP timely disputes information, then any reported information must reflect that the information is disputed. No private cause of action for failure to comply with this requirement.

19.  NCP may dispute information through CRAs or directly with LCSA.  LCSA must conduct a reasonable investigation.  LCSA must respond within certain timeframes: 30 days/5 days. Liability for failure to conduct reasonable investigation. Summary

20. Lessons Learned  What might a court focus on in a FCRA/FACTA lawsuit? Make sure your policy at least appears reasonable. Don’t let a judge or jury decide after the fact.  What might the claims in a civil lawsuit look like? Reduced credit score. Declined loan with favorable interest rate. Lost employment opportunities.

21. What does it all mean?

22. NCP was told to file a dispute with the credit bureaus. FACTA had no requirement for data furnishers (LCSA’s) to conduct reasonable investigation, unless the dispute came through the CRA’s. In the Past……… How to Respond to a Credit Dispute

23. Disputes may now be filed directly with LCSA’s. A response is given directly to NCP. No longer refer NCP to the CRA’s to file disputes. Disputes filed with CRA’s will be handled via e-OSCAR®. Disputes must include Account and participant identifiers An explanation of the dispute Supporting documentation Review case and provide results to NCP with in 30 calendar days**. Conduct a reasonable investigation. Any inaccuracies must be reported to the CRA’s via e-OSCAR®. Today…… CSS-11-01 How to Respond to a Credit Dispute

24. Reasonable Investigation* Confirm all payments posted accurately. Compare current court order to charging instructions. Relevant intercepts are in place. Modifications where applied. Confirm arrears converted accurately. Review payment history. Verify emancipation date. Depending on the issues raised by the NCP, reasonable investigations may include, but not be limited to, the above activities

25. Reasonable Investigation Inaccuracies must be corrected and reported to CRA’s. Notifications to CRA’s are done via e-OSCAR®. Data furnishers (LCSA’s) are not required to investigate frivolous or irrelevant disputes received directly. If dispute is frivolous, data furnishers must provide a determination to the NCP within 5 business day.

26. How to Respond to a Credit Dispute Now that we understand the statutes and what a reasonable investigation entail for Credit Reporting, lets put it to work:

27. How to Respond to a Credit Dispute

28. So where can we find the information on CSE? How to Respond to a Credit Dispute

32. CHILD SUPPORT 1700.00 How to Respond to a Credit Dispute

36. Suppressing Credit Reporting on CSE On occasion, your reasonable investigation may require more than 30 days to respond. Suppressing credit reporting on CSE allows more time to research. How to Respond to a Credit Dispute

37. 36 Using the drop down menu for suppression list there are four options to suppress the credit reporting: ACCOUNT CASE COURT CASE PARTICIPANT Suppressions should be set at the CASE and COURT CASE levels. Prior to suppressing an NCP’s credit, staff should verify LCSA has Case Management Responsibility (CMR). Select CASE/COURT CASE from the drop down menu. How to Respond to a Credit Dispute

38. 37 Case closed, 1/1/11 CSE reflects case still active The end date for the Suppression Period must remain blank to allow time for a thorough investigation. How to Respond to a Credit Dispute

39. 38 Once the credit reporting has been suppressed at the case level we are ready to suppress the credit reporting at the court case level by clicking “Add”. How to Respond to a Credit Dispute

40. e e - Electronic O - Online S - Solution for C - Complete and A - Accurate R - Reporting How to Respond to a Credit Dispute

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45. How to Respond to a Credit Dispute

46. NCP Mr. or MS. I Promise I’ll Pay 123-45-6789 Mr. or MS. How to Respond to a Credit Dispute

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49. On occasion, the credit report of an NCP may need to be deleted. DELETE How to Respond to a Credit Dispute

54. Summary

55. The End THANK YOU Fesia_Davenport@cssd.lacounty.gov Chaino_Seaborne@cssd.lacounty.gov