Increased consumer debt, a looming recession and the CFPB’s intensified focus on credit reporting and disputes management all add up to a perfect storm for credit furnishers. Credit dispute management and credit furnishing is about to become a really big deal for creditors, argues Bridgeforce's Michael Orefice. Those who do not shore up operations now should expect financial penalties and sanctions resulting from regulatory audits.
The world has become a very small place.
Turn on the news and see the complexities of our interdependent global economy laid bare across mainstream media. Gas prices, wheat prices, supply chain problems, war in the Ukraine, monkeypox, drought, wildfire, Covid, inflation, stagflation, and any number of problems all pointing to a global recession. At the same time, private space travel, fully autonomous driving, permanent remote work, break-through medical research, and even fission energy, are closer to reality now than ever before. Our lives and the information we experience every day, in a word, is confusing.
What’s not confusing, however, is how much stuff costs. The price of pretty much everything is increasing faster than you can read this article and there is already a knock-on effect of curtailed spending as consumers prioritize groceries and gas over everything else. Interest rates are up as the Fed tries to cool down the white-hot spending fueled by pandemic relief. Consumer debt has ballooned to new highs surpassing pre-Great Recession levels and Buy Now Pay Later (BNPL) is exploding. The bedrock of a market economy is the job market and the very fashionable ‘gig’ economy is showing signs of having fewer gigs.
The consumer credit score cycle is about to reboot
Here’s how it works:
- Lenders look to adjust credit risk
- Loan pricing tightens
- Interest rates increase as credit scores decrease
- Cost of funds increases for consumers with lower credit scores
- Consumers take a greater interest in their credit score
- Credit repair organization (CRO) volume rises
- Furnishers see dispute volumes increase
Why this reboot is different: a focus on the FCRA
Now, what is unique to this 2022 cycle (the last cycle went for 2009-2014) is the notable change in the federal perspective on consumer protection. During the last cycle, consumers weren't as saavy to credit reporting and scores. Also, the CFPB was new, having just been created in 2011. Today the Bureau is more established and primed to act. Prior to the war in the Ukraine and even before the real inflationary concerns of massive spending materialized, Rohit Chopra published his doctrine including a far more intentional focus on the credit furnishing and dispute provisions within the FCRA.
The regulatory agency has clearly signaled that FCRA adherence is a top priority and that furnishers will be held to account.
Dispute volumes will spike and so will regulatory risk for lenders
Here's what it means for you.
Disputes originating from Credit Repair Organizations are teh number one concern for furnishers. A poll from a recent CDIA conference showed than 74% of respondents identified CROs as the "biggest pain point" in their operations. Additionally, the market size for these services is expected to grow by 9.5% in 2022. In case all of this isn’t sending a clear enough signal about credit dispute management and credit furnishing, the time to get the house in order is NOW.
Organizations who cannot demonstrate appropriate furnishing standards and adherence, produce relevant policies and procedures encapsulating reasonable investigation for credit disputes, and, above all, adequately demonstrate that ‘what was said would be done and what was actually done’ match should expect financial penalties and sanctions resulting from regulatory audits.
To learn more about FCRA adhearance and credit dispute management practices that will protect you from regulatory risk, see "How Accurate is Your Metro 2 Furnishing," from Bridgeforce Insights.
About the author: Michael Orefice is an industry expert with Bridgeforce and advisor to many financial services companies, software providers, and service organizations. He is an expert in transformation helping solution providers deliver relevant capabilities while designing innovative business and technology investment strategies catered to today’s rapidly changing environment. Michael is a frequent webinar panelist, blog writer, and SME in collections, digital engagement, and virtual agent interaction.
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