Algorithm Approved, Lawsuit Pending: Fintech's Inescapable FCRA Exposure

How Fast Credit Decisions, BNPL Reporting, and Alternative Data Still Trigger Federal Accuracy Obligations

Let's talk about the magic trick at the heart of modern fintech lending.

A soft glow. A progress bar that takes exactly 0.9 seconds - long enough to feel like something real is happening, short enough to feel effortless. Then: Approved. Or, delivered with the same cheerful font and rounded corners: We're unable to offer you credit at this time.

The UI is frictionless. The consequences are not.

Because behind that pastel-coded decision is the same old machinery that has governed consumer credit since 1970: the Fair Credit Reporting Act. The FCRA doesn't care about your color scheme. It doesn't care whether you call yourself a lender or a "financial wellness platform" or a "checkout experience layer." If you're using consumer data to decide who gets money, and on what terms, the law has entered the chat.

And right now, a lot of fintech companies are acting like it hasn't.

"We're a Tech Company" Is Not a Legal Defense

Here's the core principle that gets conveniently buried under growth metrics and pitch decks: the FCRA applies to conduct, not branding.

The statute triggers when a company uses a consumer report, obtains data from a consumer reporting agency, or furnishes information that will later influence someone's eligibility for credit, housing, employment, or insurance. There is no carve-out for apps with good typography. There is no exemption for "we move fast." There is no asterisk that says "unless your HQ has a ping pong table."

If you're pulling consumer data to make a credit decision, even a millisecond one, FCRA obligations can attach. Full stop.

Consider Momnt Technologies, an Atlanta-based embedded lending platform that arranges consumer loans for home improvement contractors, healthcare providers, and other merchants at the moment of sale. Momnt's pitch is exactly what the modern fintech playbook promises: API-based infrastructure, ML/AI-informed decision engines, alternative data sources, real-time loan offers tailored to each borrower — all delivered within seconds while a contractor stands in someone's kitchen. The experience is seamless. The regulatory exposure is not.

Every time Momnt's platform renders a credit decision, the FCRA's accuracy, furnishing, and adverse action obligations activate, regardless of how elegant the interface looks on an iPad. And when those obligations go unmet, when a report is inaccurate, a dispute goes nowhere, or an adverse action notice says nothing useful, the result isn't just a compliance gap. It's the kind of harm that drives a Momnt Technologies lawsuit.

Momnt isn't unique in this. It's representative. Point-of-need lenders, embedded finance platforms, BNPL providers — the entire category operates at the intersection of consumer data and credit eligibility. That is precisely where the FCRA lives. And where the FCRA lives, litigation follows.

This matters enormously right now because the BNPL and embedded lending market has grown into something regulators can no longer squint past. According to Federal Reserve data, 15% of U.S. adults used BNPL in 2024, up from 14% in 2023 and 12% in 2022. That's not a niche product anymore. An estimated 86.5 million Americans used BNPL services in 2024, and projections put that figure at 91.5 million in 2025. When errors scale, the damage scales with them.

The BNPL Paradox: "No Credit Impact" Until There Is One

Buy now, pay later was marketed with a very specific promise: the casual, commitment-free alternative to scary credit cards. No interest. No hard pull. No credit drama. Just four easy payments and a dopamine hit at checkout.

Then the reporting started. And the inconsistencies followed.

The CFPB found that 66% of BNPL users carry multiple BNPL loans simultaneously, and 33% are borrowing from multiple lenders at once. Meanwhile, nearly one in four BNPL users (24%) have made a late payment, up from 18% in 2023, according to Federal Reserve data and among 18- to 29-year-olds, that figure jumps to 32%.

Here's the compliance landmine: those late payments don't always get reported accurately. Some accounts appear on credit files; others don't. Some report late when payments weren't. Some vanish entirely, until they resurface in a background check six months after a "resolved" dispute. The CFPB spent years emphasizing that once credit data enters the reporting ecosystem, accuracy obligations follow it. Convenience does not suspend consumer protection law.

The current regulatory picture adds an ironic twist. In March 2025, the CFPB announced plans to withdraw its 2024 interpretive rule that would have subjected BNPL products to credit card regulations under TILA - part of a broader rollback under the current administration. For BNPL providers, that's a sigh of relief. For consumers, it means one less layer of mandatory protection. The FCRA, however, didn't go anywhere. And state regulators in California and New York have made clear they're happy to fill whatever federal void opens up.

The Numbers Are Not Subtle

If you want to understand where the system is breaking down, skip the press releases and look at the complaints data.

In 2024, credit reporting complaints increased 182%, while the monthly average for the top issue, "Incorrect information on your report", rose 247% compared to the prior two-year average, according to the CFPB's Consumer Response Annual Report.

Read that again. Not 12%. Not 30%. 247%.

FCRA lawsuits have risen 147% since 2014, and year-to-date comparisons show complaints increasing from 3,694 in 2024 to 4,542 in 2025 - a 23% jump. Meanwhile, industry analysts report that 15-25% of trade lines submitted to credit bureaus without automated controls contain errors.

One in four. That's not a bug. That's a feature of moving fast without caring about accuracy.

Four Places Where the "Innovative" System Fails People

1. Identity Matching Gets Treated Like a Vibes-Based Science

Many fintech underwriting models depend on thin identifiers: email + device, name + ZIP, last four + location. Efficient? Absolutely. Legally defensible when it misidentifies someone? Not even close.

When data from one person bleeds into another's file, the classic mixed file problem, the resulting denial isn't just frustrating. It's potentially unlawful. The FCRA requires reasonable procedures to assure maximum possible accuracy, and "close enough" does not satisfy that standard. Someone gets denied because a system decided that another person's delinquency was similar enough to theirs. No human reviewed it. No human will.

The CFPB itself has highlighted how credit reporting companies have repeatedly tried to argue in court that they're not required to provide consumers the source of certain personal information in their reports, including phone numbers, Social Security numbers, and addresses. TransUnion, notably, has argued this in active litigation. The CFPB responded with an amicus brief explaining, patiently, that the law says otherwise.

2. "We Don't Use the Big Three" Does Not Mean "We're FCRA-Free"

Fintech companies love to boast that they don't rely on Equifax, Experian, or TransUnion. What they often don't add: they're using identity databases, banking-data aggregators, and behavioral risk-scoring vendors, many of which function exactly like consumer reporting agencies and may well be regulated as such.

The FCRA governs what a data source does, not what it calls itself. If it assembles consumer information to evaluate eligibility, it may be a CRA in practice, even if its marketing materials say "analytics platform." Consumers can't see what data was used, can't dispute it through any meaningful channel, and can't stop it from reappearing in future decisions. The ecosystem is fragmented by design, and the process is optimized for speed, not due process.

3. Furnishing Errors Travel Farther Than Anyone Admits

A reporting mistake doesn't stay contained to the original transaction. It migrates. Into credit files. Into tenant screening. Into insurance underwriting. Into background checks that affect job offers. A $200 error on a 6-week installment loan can quietly follow a consumer into every future application that asks, "Can we trust this person?"

In January 2025, the CFPB filed a lawsuit against a nationwide consumer reporting agency for alleged FCRA violations, claiming its investigation of consumer disputes was inadequate, specifically criticizing the intake, processing, investigation, and customer notification processes. The Bureau also alleged the company reinserted inaccurate information on consumers' credit reports after purportedly resolving disputes.

That last part is worth sitting with. The errors came back after consumers disputed them. Not because of a technical glitch. Because the process was broken by design.

4. Adverse Action Notices That Explain Absolutely Nothing

When an automated system denies you credit, federal law requires a notice that actually explains what happened: which information was used, which consumer reporting agency provided it, and what your rights are.

What consumers typically receive instead is something like: "Your application was declined based on internal model criteria."

Which is the legal-compliance equivalent of a doctor saying, "Something is wrong with your body." Technically not false. Completely useless. The FCRA requires lenders to provide specific reasons tied to credit report data, identify the CRA that provided the report, and, if a credit score was a factor, share the key reasons why that score influenced the decision. Vague boilerplate doesn't cut it. But vague boilerplate is what most people get.

Without a meaningful adverse action notice, consumers can't dispute the underlying error. They can't stop the next lender from making the same wrong decision. They can't even tell whether the denial was based on their actual credit history or someone else's.

The Regulatory Mood: Lighter Touch at the Federal Level, No Lighter Consequences

The current administration has made no secret of its intent to ease up on financial regulation. The CFPB has retracted multiple guidance documents and scaled back enforcement initiatives. For fintechs lobbying for breathing room, this looks like a win.

Except: the FCRA is a statute, not a guidance document. Congress passed it. Courts enforce it. Private plaintiffs can bring it. And the law's private right of action means that consumers themselves, and their attorneys, don't need the CFPB to be aggressive in order to pursue claims.

FCRA lawsuits increased year over year, rising from 1,674 in Q1 2024 to 1,816 in Q1 2025, and have risen consistently for a decade. The litigation trend line doesn't change because one administration prefers lighter regulation. If anything, reduced federal enforcement often accelerates private litigation.

State regulators are watching closely too. California's DFPI and New York's DFS have both signaled they intend to fill the federal enforcement gap. The regulatory patchwork may get messier before it gets cleaner, but the core obligations under FCRA aren't going anywhere.

What the Data Doesn't Show

Here's what never appears in a fintech company's metrics dashboard:

The apartment that went to someone else because a background check flagged the wrong record. The job offer that dissolved after an HR screening pulled a mixed file. The rate lock that expired while a dispute was "under review." The person who kept getting denied and assumed, reasonably, that it was their own fault.

There is no push notification that says: A data error changed the trajectory of your life.

But the law recognizes that harm. Lost opportunity constitutes real damages. Emotional distress is compensable under FCRA. Repeated denials based on inaccurate information are not abstract injuries, they are documented, measurable consequences that courts have consistently recognized.

Bad data is quiet. The damage isn't.

What You Can Actually Do When "The App" Gets It Wrong

If a fintech credit decision harmed you and consumer report data was involved, the practical path usually looks like this:

Demand specifics. Don't accept vague denial language. Federal law entitles you to know which consumer reporting agency was involved and what information influenced the decision. Push until you get a real answer.

Get the underlying report. If the decision relied on a CRA, including a specialty data provider, background screening company, or banking-data aggregator, you are entitled to a free copy. Request it. Read it.

Dispute formally and document everything. Submit disputes in writing to both the CRA and the furnisher. Keep records of what you sent, when, and what response you received. If the error gets "corrected" and then reappears, that's a separate violation.

Watch for systemic patterns. Repeated denials from multiple lenders, inexplicable account information, or debt you don't recognize can indicate a mixed file, identity confusion, or a data-matching error, not a problem with your actual credit history.

Know when the normal process is too slow for the harm. A dispute takes 30 days. A job offer doesn't. A rate lock doesn't. An apartment doesn't. The legal system provides remedies specifically for situations where the standard process failed.

How Consumer Attorneys Can Help When the Algorithm Gets It Wrong

Fintech has genuinely changed how credit feels. The experience is faster, smoother, and designed to reduce friction at every step. Platforms like Momnt have built real infrastructure to bring affordable financing to consumers who might otherwise be shut out — a roofing job, a medical procedure, a home repair that can't wait. None of that changed what credit does, which is determine who moves forward and who doesn't, often based on data that was never verified, matched to the wrong person, or furnished by a company that hasn't looked at it since it was uploaded.

When that happens to you, the dispute portal isn't always enough. A 30-day investigation window doesn't pause a job offer. It doesn't hold an apartment. It doesn't freeze a rate lock. And when the "correction" reappears on your file three months later, which happens more often than any company's PR team would like to admit, you're back to square one with less time and more damage.

That's where Consumer Attorneys comes in.

Consumer Attorneys represents real people in FCRA claims against the companies, fintechs, legacy bureaus, specialty data providers, and furnishers alike, that cut corners on accuracy, ignored disputes, or used consumer data in ways the law simply doesn't permit. The cases we handle include:

Mixed files and wrong-person matches. Your name, someone else's delinquency. A system said close enough. The law does not agree.

Improper furnishing and re-insertion of disputed data. A paid account still showing as charged off. A short-term loan marked late when it wasn't. Corrected errors that quietly came back. These aren't clerical inconveniences - they're violations with consequences.

Inadequate dispute investigations. If a CRA or furnisher ran a "sham investigation", the CFPB's own language in a January 2025 lawsuit, and your dispute went nowhere meaningful, that's actionable.

Meaningless adverse action notices. If you were denied and the explanation told you nothing useful, you may have been denied your right to understand and challenge what happened.

Specialty CRA and alternative data violations. The company that said "we don't use the big bureaus" may be using something just as regulated and far less transparent. If their data was wrong and you paid for it, there's a path forward.

The FCRA provides for actual damages, statutory damages in cases of willful violations, punitive damages, and attorney's fees, which means that in many cases, pursuing a claim costs you nothing out of pocket.

Consumer Attorneys doesn't exist to slow down innovation. We exist to ensure that speed doesn't become a license to be sloppy with people's financial lives. If a data error changed the direction of something that mattered, a job, a home, a rate, an opportunity, you deserve to know what happened and to have someone in your corner who knows how to hold the right party accountable.

The law provides remedies. We enforce them. And unlike the app that denied you, we'll actually tell you why.