Human Trafficking and the FCRA

Last week the CFPB proposed regulations implementing a federal law which amends the Fair Credit Reporting Act (FCRA) to help victims of human trafficking recover from their abuse by helping them gain access to credit.  As currently proposed, the regulation does not impose any new obligations on credit unions but I would certainly make sure that anyone in your credit union who accesses credit reports, or furnishes information to Credit Reporting Agencies (CRAs) is aware of these pending changes.

Section 6102 of the National Defense Authorization Act amended the FCRA by adding a new section 605C which generally prohibits CRAs from including information in credit reports resulting from “any adverse item of information about a consumer that resulted from a severe form of trafficking in persons or sex trafficking if the consumer has provided trafficking documentation to the consumer reporting agency.” Credit unions are furnishers of information contained in credit reports and users of this information, under the FCRA, but are not credit reporting agencies.

CRAs are going to be responsible for collecting the appropriate documentation and ensuring that they update an individual’s credit report.  The obligations of CRAs will be triggered by the receipt of “…a determination that a consumer is a victim of trafficking made by a Federal, State, or Tribal governmental entity or a court of competent jurisdiction or documents filed in a court of competent jurisdiction indicating that a consumer is a victim of trafficking; and government documentation demonstrating that an individual has been victimized by trafficking.” 

Once an individual’s identity has been established, the CRAs will be responsible for using this, or additional, information provided by the victim to remove adverse information from a credit report.  As currently drafted, precisely how this responsibility is going to be performed should be further clarified, but again, a credit union is not responsible for performing this obligation.

One aspect of the regulation that could involve your credit union, involves the receipt of a notification that a credit report contains information affected by human trafficking.  Specifically, the Bureau is seeking comment on whether a CRA should be required to notify a furnisher about the consumer’s submission to prevent a CRA from furnishing a consumer report containing any adverse item of information about a consumer that resulted from trafficking.

Presumably, this would include a mandate that furnishers update their policies and procedures to ensure that they cease providing the impacted information to the CRAs.  We will have to wait and see what is in the final regulations.