One of the handful of mandatory elements in the Red Flag guidelines, which focus on FACTA Sections 114 and 315, is the implementation of Section 315. Section 315 provides guidance regarding reasonable policies and procedures that a user of consumer reports must employ when a consumer reporting agency sends the user a notice of address discrepancy.
A couple of common questions and answers to get us started:
1. How do the credit reporting agencies display an address discrepancy?
Each credit reporting agency displays an “address discrepancy indicator,” which typically is simply a code in a specified field. Each credit reporting agency uses a different indicator. Experian, for example, supplies an indicator for each displayable address that denotes a match or mismatch to the address supplied upon inquiry.
2. How do I “form a reasonable belief” that a credit report relates to the consumer for whom it was requested?
Following procedures that you have implemented as a part of your Customer Identification Program (CIP) under the USA PATRIOT Act can and should satisfy this requirement. You also may compare the credit report with information in your own records or information from a third-party source, or you may verify information in the credit report with the consumer directly.
In my last posting, I discussed the value of a risk-based approach to Red Flag compliance. Foundational to that value is the ability to efficiently and effectively reconcile Red Flag conditions…including addressing discrepancies on a consumer credit report.
Arguably, the biggest Red Flag problem we solve for our clients these days is in responding to identified and detected Red Flag conditions as part of their Identity Theft Prevention Program. There are many tools available that can detect Red Flag conditions. The best-in-class solutions, however, are those that not only detect these conditions, but allow for cost-effective and accurate reconciliation of high risk conditions. Remember, a Red Flag compliant program is one that identifies and detects high risk conditions, responds to the presence of those conditions, and is updated over time as risk and business processes change.
A recent Experian analysis of records containing an address discrepancy on the credit profile showed that the vast majority of these could be positively reconciled (a.k.a. authenticated) via the use of alternate data sources and scores. Layer on top of a solid decisioning strategy using these elements, the use of consumer-facing knowledge-based authentication questions, and nearly all of that potential referral volume can be passed through automated checks without ever landing in a manual referral queue or call center. Now that address discrepancies can no longer be ignored, this approach can save your operations team from having to add headcount to respond to this initially detected condition.