From what you have told us, the “credit repair and rescore” vendor offers two types of services. The vendor will (1) file disputes about inaccurate items to consumer reporting agencies and, (2) after a debt is paid, quickly obtain a new credit score (a “rapid rescore”). While we are not aware of any laws that expressly prohibit you from passing fees for these services on to your customers, we would advise against doing so, for the reasons described below. In addition, as the credit repair and rescore vendor is a third-party service provider, we note that your financial institution has a duty to monitor the vendor’s activities for compliance under all of the relevant consumer financial protection laws, including the Credit Repair Organizations Act.
Fees for Filing a Dispute
The Fair Credit Reporting Act (FCRA) does not expressly prohibit your institution from passing a fee on to a consumer for investigating a dispute. The FCRA only prohibits a “consumer reporting agency” from charging consumers for investigating a dispute. 15 USC 1681i(a)(1)(A). “Consumer reporting agency” is defined as an entity that regularly furnishes consumer credit information – other than information about their own credit transactions – to others. 15 USC 1681a(f). Most (but not all) financial institutions would not be considered to be consumer reporting agencies. See OCC Comptroller’s Handbook, Fair Credit Reporting, printed page 3 (page 5 of the PDF file).
The FCRA also prohibits a “reseller” from charging a fee for filing or investigating a dispute, and resellers must act on any investigations without charging a fee to the consumer. 15 USC 1681i(f)(2). A “reseller” is a consumer reporting agency that assembles and merges information from other agency’s databases — for example, a “trimerge” vendor likely would be considered a reseller. 15 USC 1681a(u).
Unless your institution furnishes credit information as a consumer reporting agency or reseller, the FCRA’s fee prohibitions do not expressly apply to your institution. However, based on the facts presented to us, we believe the vendor providing this service probably would be considered to be a reseller, in which case all of the FCRA’s fee prohibitions would apply to it. If your institution were to pass the reseller’s fee along to consumers, this very well could be viewed by the federal regulators and the courts as indirect charges of prohibited fees that also are subject to the prohibition.
Fees for Obtaining a Credit Rescore
We are not aware of any prohibition against passing a charge on to consumers for obtaining a rescore from a credit reporting agency after the consumer takes certain recommended actions. FCRA does not address services that quickly initiate new consumer credit reports.
However, we recommend checking with the consumer reporting agencies and resellers that you work with; it is possible that your agreements with one or more of them prohibit you from passing such fees on to consumers. We are aware of at least two rapid rescore providers with websites which state that TransUnion, Equifax and Experian prohibit consumers from being charged for a rapid rescore service (CIC Credit and Score Plus).
Monitoring a Credit Repair and Rapid Rescore Vendor
Even if no fees are passed on to your customers, your institution should closely monitor the credit repair and rescore vendor to ensure that it is complying with its responsibilities under the Credit Repair Organizations Act (CROA); as with any third party vendor, your institution has a duty to ensure that the vendor understands and is in compliance with all applicable laws. See OCC Bulletin 2013-29 (October 30, 2013); CFPB Bulletin 2012-03 (April 13, 2012). In addition, you must adopt risk management practices to monitor any vendor that engages directly with customers. OCC Bulletin 2013-29.
The CROA applies to any organization that sells, provides or performs any service in return for the payment of money for the purpose of improving the consumer’s credit rating. 15 USC 1679a(3). (Note that the CROA specifically excludes depository institutions from the definition of a “credit repair organization.” 15 USC 1679a(3)(B)(iii).) Because the vendor will be providing information to your customers with the purpose of improving the customer’s credit rating, we strongly recommend closely monitoring the vendor for compliance with the CROA. Among other requirements, the CROA requires that any contracts between a credit repair organization and a consumer must include several required disclosures, and consumers have certain contract cancellation rights. 15 USC 1679c15 USC 1679e.
In addition, the CFPB recently issued enforcement actions and bulletins focusing on communications related to debt collections and credit reporting. Specifically, one CFPB bulletin addresses compliance under the Fair Debt Collection Practices Act (FDCPA) and the prohibition on Unfair, Deceptive, and Abusive Acts and Practices (UDAAP). CFPB Bulletin 2013-08 (July 10, 2013). The bulletin warns creditors and other debt collectors against making deceptive statements about paying down debts and the resultant effect on a consumer’s credit score, credit report, or the likelihood of receiving more favorable credit terms. Such deceptive statements violate the FDCPA’s prohibition on false, deceptive or misleading representations in connection with the collection of any debt. 15 USC 1692e. While the FDCPA does not apply to banks and other creditors collecting their own debts, the CFPB bulletin explicitly states that the CFPB guidance applies to all creditors, not just to third-party debt collectors. Consequently, we believe that all communications regarding the “benefits” of paying down debts on a consumer’s credit report should be treated with extreme caution.