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If a bank receives a dispute about information it provided to a consumer reporting agency regarding a mortgage payment, does the bank follow the QWR/NOE timing requirements of Regulation X or the timing requirements of Regulation V’s §1022.43 for direct disputes?

Section 1024.36 of Regulation X (Real Estate Settlement Procedures Act) provides that borrowers may send a Qualified Written Request (QWR) or Notice of Error (NOE), to their mortgage servicer to request information about the servicing of their mortgage loan and to assert that the servicer has made an error, including an error in reporting information to a credit bureau. In addition, §1022.43 of Regulation V (Fair Credit Reporting Act) allows borrowers to submit a direct dispute to a bank or a servicer (furnisher) about the accuracy of any information in a consumer report and about an account that the furnisher has or had with the consumer.

If a bank receives a dispute about information it provided to a consumer reporting agency regarding a mortgage payment, does the bank follow the QWR/NOE timing requirements of Regulation X or the timing requirements of Regulation V’s §1022.43 for direct disputes?

My bank is struggling with this because the requirements are different. For example, for a QWR/NOE, the bank must provide a 5-day acknowledgement letter, which Regulation V does not require. In addition, Regulation V requires a furnisher to respond within 30 "days" (which appears to be calendar days) and Regulation X requires 30 days excluding Saturdays, Sundays, and legal public holidays.

A notice disputing the accuracy of information provided to a credit reporting agency is likely to be both a Regulation V direct dispute and a Regulation X QWR, in which case the bank may have to comply with both regulations. Footnote 98 of the Supplementary Information to the final mortgage servicing rule states: "Notably, a notice of error may also constitute a direct dispute under Regulation V, which implements the Fair Credit Reporting Act, if it complies with the requirements in 12 CFR 1022.43." (Federal Register 10739)

Banks should first review the correspondence to determine whether the dispute involves an assertion that information reported inaccurately. For example, if the dispute involves the servicer’s failure to properly apply a payment to principal, interest, escrow, or other charges as agreed by contract, it might be a QWR or NOE but not a Regulation V direct dispute. However, if the misapplied payment resulted in an information being reported inaccurately to a credit-reporting agency, it may also be a Regulation V direct dispute.

However, note that both Regulation V and Regulation X (§1024.35(c)) allow banks to require that borrowers submit QWRs and direct disputes to a designated address and, if the borrower does not send the notice to the designated address, the bank does not have to comply with the regulation’s response requirements.

Thus, banks may set up their process so that Regulation V direct disputes go to one address and QWRs go to a different one. That allows for a clean process whereby the bank should know how to respond to the borrower’s correspondence. (February 2021)

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