CFPB Proposed Rule on Adverse Information in Consumer Reports of Human Trafficking Victims

The Consumer Financial Protection Bureau issued a proposed rule to enact the provisions of the Debt Bondage Repair Act which prohibits Consumer Reporting Agencies from providing consumer reports that contain any negative items of information about a survivor of trafficking from any period the survivor was being trafficked.

Human trafficking exists across the U.S. and affects hundreds of thousands of victims and families. While there are no good estimates for the number of victims being trafficked in the U.S., in 2020 alone, one victim support organization received over 50,000 contacts.

Victims of trafficking are forced to engage in commercial sex work or to work in other legal and illicit sectors, including hospitality, agriculture, janitorial services, construction, landscaping, restaurants, factories, adult dependent and childcare, salon and massage services, retail services, fairs, and carnivals, peddling and begging, drug smuggling and distribution, and domestic work.

While being trafficked, many victims suffer from financial abuse, which is a common tactic used by traffickers to further exploit victims. Survivors and support organizations report that traffickers employ financial abuse as a means to earn money and as a method of control. After destroying their victims’ credit history and racking up charges in their names, traffickers know their victims will be unable to rent an apartment, purchase a car to go to work, or even find a job with a living wage.

The consequences of financial abuse often follow survivors as they attempt to rebuild their financial lives.

Under the proposed rule:

  • Survivors will be able to submit documentation to CRAs showing that they are survivors of trafficking;
  • CRAs will need to block adverse information in consumer reports after receiving a survivor’s submission of documentation. In addition, CRAs will need to notify a survivor of actions taken in response to a submission, retain evidence of the survivor’s submission for seven years, and establish written policies and procedures to remain in compliance with the rule.

The proposed rule will apply to all CRAs, including specialty CRAs focused on areas like employment screening, tenant screening, check and bank screening, personal property insurance, medical, low-income and subprime, supplementary reports, utilities, retail, and gaming. Generally, the definition of a CRA would not apply to a credit union unless the credit union provides credit information (other than their own experience with a member) to third parties (other than affiliates).

The CFPB is also requesting comments on whether CRAs should inform furnishers of information when they received documentation of trafficking from a survivor. And if so, this may then lead to the furnishers not providing any negative information for the time the victim was begin trafficked.

Question of the Week

Q. How long does the credit union have before closing an account after a member dies?

A. The account itself may remain open indefinitely. However, after the death of a member, information reporting to the IRS should not use the deceased member’s SSN beginning the reporting period the calendar year after the member died. For example, if the member died during 2015, the funds should not continue to be reported under the deceased’s SSN beginning on Jan. 1, 2017. Note, however, that it is not the credit union’s responsibility to obtain an EIN for the estate; this is the personal representative’s responsibility. The credit union can continue to report under the deceased member’s SSN until informed of the EIN or, in the event ownership of the funds is in doubt, until the account has reached dormancy.

Related Links

IRS Publication 356

Compliance Alerts

National Credit Union Administration

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Financial Crimes Enforcement Network

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Office of Foreign Assets Control

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Posted in Compliance News, Compliance News, Compliance Question.