The Consumer Federal Protection Bureau put companies that supply information to consumer reporting companies on notice to follow federal regulations governing consumer disputes.

A bulletin sent out Wednesday from the watchdog agency details how companies that provide data to consumer reporting companies — such as lenders and collection agencies — must comply with the Fair Credit Reporting Act.

These companies, also known as furnishers, must investigate consumer disputes forwarded by consumer reporting companies, review any documents that the consumer provided with the dispute and correct any inaccurate information after the investigation.

The bulletin comes after the system used by the three major bureaus to transfer disputes to lenders was upgraded. In December, the CFPB found the system couldn’t forward any supporting documents consumers submitted with their online dispute.

“Credit reports play a critical role in the lives of consumers,” said CFPB Director Richard Cordray in a press statement. “Given the importance of these reports, consumers need to know that their documents are being reviewed when they dispute what they believe is a mistake on a report. Today’s bulletin helps ensure that the right people will be doing just that.”

Lenders use credit reports (a type of consumer report) to approve and establish terms of credit, such as interest rates and loan amounts. Insurance companies use credit reports to set premiums, while landlords and utility companies check credit reports to determine security deposits. Employers may also pull credit reports as part of the hiring process.

A study released February by the Federal Trade Commission found that 1 in 20 credit reports contain a material error that could result in a higher interest rate or bigger insurance premium.

More than half of the information supplied to the three major credit bureaus — Experian, Equifax and TransUnion — comes from just 10 major financial institutions, according to a CFPB report last December. Almost three-quarters of the data are supplied by the top 50 financial institutions. In all, the agencies receive information from 10,000 sources.

The credit reporting industry should take the CFPB notice seriously, given the agency’s enforcement actions last year against American Express, Discover and Capital One, says John Ulzheimer, credit expert at It also sued a debt collector in August for violating federal consumer laws.

“This is not a toothless dog we’re talking about,” he says. “And what they are demanding is not unreasonable.”

Instead, the bulletin clarifies steps that should be taken under the FCRA, he says, making it easier for companies to comply.

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