Consumer reporting and FCRA requirements challenge many furnishers and are hot button areas for regulators. Centralized credit furnishing is a smart way to overcome these challenges by operationalizing reporting for better efficiency and compliance.
As a firm with deep knowledge of consumer reporting operations, we help organizations improve data furnishing accuracy and control all the time. Our clients have taken different approaches to organizing themselves to generate Metro 2® files with the highest possible quality. For instance, some furnishers are single product focused with straightforward ownership and management of furnishing responsibilities.
Other furnishers have multiple products and here is where we’ve seen differences in approaches. In some cases, each product owner has responsibility for its own data furnishing. This results in a siloed furnishing approach. Others take a central ownership approach to furnishing responsibilities whereby critical activities such as the pre-transmission and the post-transmission controls for the Metro 2® file and overall ownership of furnishing are managed under one furnishing Center of Excellence (COE).
You will have to consider a few elements to really know if you’re ready to build a furnishing center of excellence (COE). First look at consumer expectations. If you aren’t meeting them, your complaints and dispute volumes will likely rise. Then, look internally at your operations.
Consumers have a basic expectation: if they choose to do business with you and use one of your products, then they expect that you will report their data correctly to the consumer reporting companies (CRCs) each month. Inaccuracies can lead to downstream impacts. For instance, if consumer information is wrong, it could affect the ability to get credit, insurance or employment. Not to mention the countless hours it may take your customer/member to fix the inaccuracy.
Downstream impacts from inaccuracies affects furnishers too. For example, consumer reporting dispute volume and complaints might increase. Then, consumers could take their business elsewhere. Ultimately, exposure to regulatory risk is elevated. All this fallout comes with a financial cost since complaints and disputes handling increase operating expenses. Also, regulatory risk may come with fines and at minimum, internal time and cost to address findings.
Accurately reporting a consumer to the CRCs seems like a simple ask. But it isn’t, when considering the complexity of account scenarios (e.g., bankruptcy, settlements) and the timing of those in comparison to generating a Metro 2® file to the CRCs. Ultimately, it requires strong organization and execution to deliver on this fundamental ask month over month. So, you must ask yourself, are you meeting consumer expectations?
At a basic level, data furnishers should be able to design control routines that identify inaccuracies and ensure follow through with appropriate mitigation actions across all systems of record. So, if you question your organization’s ability to manage those two areas, ask yourself some questions to find out if you are at the point where a COE can solve your existing problems.
If the answer is yes to two or more of these questions, then a potential solution may be to move your furnishing responsibilities into a formal COE.
Establishing a COE comes with a fair share of planning to help transform into an organizational structure. Therefore, there are bigger considerations to help make sure you are ripe for that kind of change. When working with clients, we always start with a planning session where key stakeholders agree on a mission statement and foundational objectives that will address current areas of risk and define future success.
In our COE planning session, we ask direct questions that build the initial structure for the COE.
Balancing the current environment of consumer data furnishing while also building a new COE brings challenges. You must accomplish the challenging task of changing the plumbing without turning off the water.
A center of excellence will increase the quality and accuracy of credit reporting. At the same time, a COE reduces the potential regulatory exposure of not adhering to FCRA. You cannot underestimate the transformational change establishing a COE makes to your business.
After taking the many steps to organize and establish a successful COE, this is what it should look like and why.
Full ownership of FCRA policies, procedures and training that drives consistency with furnishing practices.
Lines of business siloed by product breeds inconsistency. Accordingly, you risk varied processes and documentation when handling different account scenarios (e.g., deceased, settlement, bankruptcy). However, centralizing the activity means that every situation is handled the same way—protecting you and building efficiency.
Effective management of all CDIA CRRG® bulletins or regulatory updates for evaluation of impact upstream or downstream to the business.
A central location to consume all important bulletins or regulatory updates helps generate awareness and creates discipline to ensure you are compliant with all FCRA and Metro 2® requirements.
Sound change-control process that promotes collaboration between line of business operations and the COE team for any modifications to data fields.
A change to a data field in a processing system may be logical for the business. However, the impact of that change on consumer data furnishing can be often overlooked. This can inadvertently create unintentional issues of data accuracy.
Formalized issues management and remediation efforts that create operational efficiency as well as a standardized process for handing consumers.
It takes precious resources and time to resolve an issue causing consumer data furnishing inaccuracies. Solutions may even depend on a vendor fix, which can also take time. A COE provides a formal issue management process to decipher activities such as internal steps to take for consumers impacted while waiting for a vendor change.
Oversight of quality controls and audits to the furnishing files provides the vision into—and consistency of—data monitoring, reducing the chance for furnishing inaccurate data.
A COE will record how your Metro 2® file is created. Then you’ll have an audit ready data mapping and conversion document for each core system. Serving as the liaison to CRAs, the COE delivers pre- and post-transmission controls of your Metro 2® file.
If you are not sure how ready you may be to start your center of excellence, contact us. We will work with you to thoughtfully plan, assess and make sure that you have everything in place to launch your transformation around data furnishing.
Call us, or you can attend our upcoming webinar series (March 7 and March 22, both 2pm ET) to learn how to make your furnishing and disputes operations run effectively, efficiently and compliantly. Consumer reporting and disputes experts, Michelle Macartney and Dianna Cooper will share the trends that work in the industry. Also, they’ll show how to get started on a journey to your own best-in-class program for centralized credit furnishing with elements such as team selection, controls, centralization and building a center of excellence.