Categorizing Frivolous Disputes during Resolution: CFPB Proposed Rules
A Closer Look at CFPB Updates – Part 3
Recently on the blog, we’ve been examining a new proposed rule from the Consumer Financial Protection Bureau (CFPB) to amend the Fair Debt Collection Practices Act (FDCPA).
First, we shared an overview of the rule and what it means for data furnishers and their credit dispute resolution practices. Then, we highlighted the implications of the rule’s requirement for debt collectors to send customers validation notices with “tear-off” response forms.
Now, we want to focus on an additional change under the proposed rule: a frivolous option for indirect dispute responses.
Increased Responsibility for Data Furnishers
The CFPB proposed rule would allow data furnishers to classify indirect e-OSCAR disputes as frivolous disputes, rather than relying on credit reporting agencies for this classification.
This means if you receive a duplicate dispute (as defined by section 100.38(a)(1)) and the dispute does not include any additional material information, you can notify the consumer that the dispute is duplicative. Your notification should include reasons explaining the duplication and refer to the earlier response.
How It Impacts You
By permitting data furnishers to classify and eliminate frivolous indirect disputes from their workflows, this rule will require more thorough documentation from creditors to verify the debt. You will need to update your workflow to include confirming debt and communicating with consumers, and establish policies within your organization for how you disseminate this information.
Additionally, the rule could expose creditors’ violations of unfair, deceptive, or abusive acts or practices (UDAAP), meaning they will be more dependent on their third party partners for policy coordination and compliance documentation.
Sonnet Streamlines Credit Dispute Resolution
Palinode can help data furnishers successfully incorporate the validation notice requirement under the CFPB proposed rules with Sonnet, our automated credit dispute resolution system. Sonnet integrates with both direct and indirect dispute workflows to provide a consolidated view of all your data, making it easier to manage increasing volumes of disputes.
Additionally, using optical character recognition (OCR) technology, Sonnet will be able to process the “tear-off” forms submitted by consumers. It will automatically assign a dispute to both the consumer and the debt, and it will recognize dispute classification, so you won’t have to manually enter consumer responses or organize dispute files. Through automation and logic, Sonnet will efficiently help you investigate and respond to this type of dispute.
Palinode works with both first- and third-party data furnishers to meet compliance with current Fair Credit Reporting Act (FCRA) regulations, and our credit dispute platform, Sonnet supports all indirect dispute investigations initiated via e-OSCAR.
Manage e-OSCAR Disputes with Sonnet
When the revised rule goes into effect, you’ll need an efficient process for tracking frivolous disputes and facilitating customer communication. That’s where Sonnet can help. It will identify potential repeating and frivolous disputes and alert your staff. With these automated alerts, you’ll be able to incorporate new classification and communication steps into your credit dispute resolution workflow with ease.
We’d love to tell (and show) you more. Request a demo with our team to get a sneak peek inside Sonnet.