The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) amended the Fair Credit Reporting Act (FCRA) to add new reporting requirements that apply during the pandemic.
The Consumer Financial Protection Bureau (CFPB) released guidance on April 1 and June 16 addressing the CARES Act requirements and other important reporting obligations during the pandemic, emphasizing its focus on credit reporting accuracy and handling disputes, and noting it will not hesitate to take enforcement action against those who violate the law.Importantly, the CFPB reported that credit reporting complaints tops the list of grievances it receives from consumers. There were 21,945 credit reporting complaints made to the CFPB in the month of May alone. Other regulatory agencies also receive large numbers of credit reporting complaints.
In addition, FCRA court actions filed in the past 12 months have increased, and that number is expected to grow as consumers increasingly seek credit access to recover from the fallout of the pandemic. Many recent FCRA court actions against financial institutions claim that inaccurate information was furnished to credit reporting agencies (CRAs).
Because of the current risks, financial institutions should conduct a thorough review of their credit reporting practices and procedures to ensure compliance, particularly with respect to issues of significance during the pandemic. In this regard, the CFPB’s Guidance on June 16 focused on the FCRA amendments under the CARES Act and other important provisions in the FCRA in light of the pandemic.
“Accommodations” Under the CARES Act
An “accommodation” is defined to include an agreement to defer one or more payments, make partial payments, forbear any delinquent amounts, modify a loan, or grant other relief.
If a financial institution makes such an accommodation to a consumer with respect to one or more payments on an account, and the consumer makes the payments as the accommodation requires (or if no payments are required), the financial institution should:
- Report the account as current if it was current when the accommodation was made;
- Maintain the account as delinquent if it was delinquent when the accommodation was made and not advance the delinquent status (e.g., if an account is 30 days past due at the time of the accommodation, a financial institution should not thereafter report the account as 60 days past due during the accommodation);
- If an account is brought current during the accommodation, including if the accommodation itself brings the account current (e.g., a loan modification eliminates a delinquency), report the account as current;
- Avoid reporting an accommodation through a special comment code, as this does not satisfy the CARES Act requirement to report an account as current or to avoid advancing the delinquency as described above.
An accommodation includes relief that is granted voluntarily or pursuant to a legal requirement (e.g., under the CARES Act, consumers with a federally-backed mortgage loan may obtain a forbearance from their mortgage servicer).
The CARES Act reporting provisions addressing how a financial institution reports an account with an accommodation does not apply to accounts that have been charged-off.
Reasonable Investigation of Disputes
Financial institutions should conduct reasonable investigations of consumer disputes in a timely fashion.
Accuracy and Integrity of Information that financial institutions provide to CRAs
Financial institutions should ensure all of the trade line information they furnish that reflects a consumer’s status as current or delinquent is correct. Such information includes information on an account’s payment status, scheduled monthly payment, and the amount past due. Furnishers are encouraged to confirm they understand the data fields used by CRAs for reporting purposes so as to facilitate accuracy.
As Benjamin Franklin famously said, “An ounce of prevention is worth a pound of cure.” A financial institution would be wise to take time now to ensure its credit reporting practices are compliant with the law during the pandemic (and beyond). Preparation and compliance now may help avoid future legal or regulatory issues that would be far more difficult and costly to address.