Consumer Data Furnishing Errors: 5 Reasons They Persist and How to Avoid Them

Financial organizations working to improve consumer reporting accuracy continue to see the same furnishing errors month over month. Find out how your organization can correct consumer data furnishing errors for good.

Five Reasons Keeping You from Accurate Consumer Reporting

With the regulatory scrutiny on consumer reporting, it seems incongruous that many furnishers struggle and continue to report inaccurate data month over month. If you are one of these furnishers, you are not alone. Let us provide some insight that can help you through your quest for accurate reporting.

Why Consumer Data Furnishing Errors Persist

1. No clear knowledge of how your Metro 2^® file is created

We have seen many furnishers avoid painful furnishing examinations simply by producing a Metro 2^® data mapping and conversion document. This document describes how values are derived field-by-field from the system of record to the Metro 2^® file for reporting. Understanding how your file is produced offers some additional benefits such as:

• Isolating areas to focus root cause investigation when errors are discovered through automation tools.
• Identifying when legacy system limitations may impact consumers’ reporting. The risk of inaccurate reporting, especially when consumer harm may be a factor, may convince your organization to raise the ceiling on system enhancement budgets.

Include your data mapping and conversion document in scheduled annual review routines. This ensures that all system and process changes are reflected within the document as appropriate and have not affected the accuracy of the document. Being armed with this documentation and updating it routinely provides clear evidence that your organization knows how the Metro 2^® file is created. You’ll also have an effective control in place to routinely review the document for changes to maintain accuracy.

2. Absence of data quality automation

While it’s easy to find an automated solution, many organizations aren’t using a data validation tool to help drive down error rates. With so much regulatory scrutiny around accurate reporting, why don’t more furnishers consider investing in a data quality automation tool? It has been reported that furnishers who use a data validation tool have seen up to 90 percent drop in errors in their Metro 2^® files month over month.

Bridgeforce Data Solutions offers the Data Quality Scanner^® solution to quickly and consistently identify errors. This regulator-recognized tool can be used before or after transmitting your Metro 2^® and other NSCRA file formats to the consumer reporting agencies. With over 390+ risk-ranked rules, the Data Quality Scanner^® solution allows organizations to quickly identify impacted accounts, execute root cause analysis and expedite enhancements to resolve consumer reporting issues.

3. Inadequate root cause analysis

Errors that recur after being investigated and fixed are a typical symptom of conducting inadequate root cause analysis. We’ve found eight specific obstacles that keep furnishers from conducting root cause analysis that results in successful outcomes:

Eight areas to avoid during root cause analysis:

• Relying on opinion vs. fact of the investigation
• Formulating a hypothesis before gathering all facts
• Failing to identify resources or expertise to conduct analysis
• Assigning blame vs. identifying the process points of failure
• Curing symptoms vs. addressing the root cause
• Restricting the analysis
• Engaging the right partners across the enterprise

If any of these instances sound familiar, you can tap into a proven approach to shift your mindset: The 5 Whys. Bear in mind that conducting an end-to-end examination requires a partnership commitment across multiple business areas to facilitate a seamless and timely analysis.

Collaborate using the “5 Whys” approach to begin analysis. This may take an hour or weeks to complete. Root cause analysis is an art more than a science and through the art of collaboration you will be successful.

4. Substandard policies and procedures

The CFPB expects all furnishers to have effective written procedures relating to the generation of the Metro 2^® file. In fact, the CFPB Summer Supervisory Highlights for 2023 shared the continuing Regulation V violations of the requirement to establish and implement reasonable written policies and procedures. This theme is evident through various enforcement actions issued by the CFPB. Having effective, well written procedures ensures furnishing practices are performed consistently and accurately.

Use these tips to ensure that your procedures are—or will be—effective:

Policy – An effective policy should describe the processes your organization is executing to ensure compliance of all requirements outlined in 12 CFR Part 1022 Fair Credit Reporting (Regulation V). Evaluate your FCRA policies against the regulation itself to ensure all requirements are included. Then work with your process owners to verify there are processes and controls that can also tie back to the requirements outlined in the policy.

Task and Procedure Inventory – Inventory all tasks that generate and furnish your organization’s Metro 2^® file as well as any tasks and self-audits occurring after furnishing data. Each of these tasks needs an effective procedure to document how the task is being performed and the expected outcome. Develop and implement new procedures for any tasks that don’t already have an associated procedure.

Effective Procedure Format – Furnishing procedures should include all the key components required to be effective such as purpose, scope, definitions, procedure detail, when and where to report, what to report, how to report, QC and data quality validation, record retention, and exceptions? Having effective procedures tells the reader that you have insight on the “What, When, Why and How” of your operation. Be prepared to prove it through your procedures!

Monitoring and Repeatability – Work with your team members to assess the tasks against the procedure to ensure what is documented is what is really occurring when the task is performed. Lean on your subject matter experts to make important updates to the procedures to keep them aligned with the work that is being completed, including any hand offs. Repeatability will be a priceless attribute when handing a procedure over to an internal auditor, or a regulator as part of an audit or exam.

5. Ineffective or lack of controls

There are two types of controls. Preventive controls help you catch potential errors before furnishing the data file to the consumer reporting agencies. The other type, Detective controls, identify potential errors after furnishing files.

All control breaches need to go through investigation, but when an error is identified, the following three steps must also be completed. Without taking these steps, even if the control identifies findings, how effective is your control?

Root Cause – Determine if there is truly an error or if the breach is a false positive.

Self-Identified Issue – If there is a confirmed error, you may need to begin the formal process of documenting root cause, developing an action plan and working with key stakeholders to determine what’s required to resolve the error.

Resolution – Resolve the issue through process enhancements or through a systemic solution.

Effective controls are an important part of a successful consumer data furnishing operation.

Examples of effective consumer data furnishing controls:

1. Using an automated data quality tool like Bridgeforce’s Data Quality Scanner, you can identify potential errors before the Metro 2^® file is transmitted to the consumer reporting agencies. These errors can be investigated and may also be remediated before release of the file.
2. You may have a Key Risk Indicator using furnished volume for each product versus reject volumes for each product. If reject volume accounts for 0.5% of your furnishing volume, the top risks need to be identified. Those risks will need to go through root cause evaluation to determine why they are a top risk, and how to resolve the risk to bring reject volume into a “green” threshold.

Are You Ready to Stop the Cycle of Errors?

Now that we’ve shared the top five reasons consumer data furnishing errors persist and shown you steps to stop the cycle, where do you fall? If any of these areas need to be assessed, revised or polished, we can help. We’ve managed all types of consumer reporting management from Metro 2^® data mapping, to building an FCRA center of excellence, to helping clients prepare for regulatory exams. If you’re ready to fix any of your persistent challenges, contact us.

[Editor’s note: this article was written by Dianna Cooper, former Senior Program Manager at Bridgeforce]