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RECAP: Changes to the Fair Credit Reporting Act in the Wake of the Unprecedented COVID-19 Pandemic

With over 22 million Americans currently out of work, the COVID-19 pandemic has proven to be both a global health crisis and a period of economic instability. Over the past few weeks, a number of new regulations have been enacted to ease the financial strain so many Americans are feeling.  Here, we focus specifically on the new credit reporting landscape and what credit reporting agencies and data furnishers should know:

Fannie Mae, Freddie Mac and VHA Loans

With the expectation that millions of homeowners would be unable to make their mortgage payments due to the COVID-19 pandemic, in mid-March Fannie Mae, Freddie Mac and the Veterans Administration announced significant policy changes for credit reporting COVID-19 affected loans, including suppression.

Fannie Mae, for example, issued a Lender’s Letter on March 18, 2020 directing servicers to suspend credit reporting “during an active forbearance plan, or a repayment plan or Trial Period Plan where the borrower is making the required payments as agreed, even though payments are past due, as long as the delinquency is related to a hardship resulting from COVID-19.”

 The Veterans Administration issued a similar bulletin directing servicers to suspend adverse credit reporting for “affected” loans.

The CARES Act

Section 4021 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, amended the Fair Credit Reporting Act by adding a new subsection entitled “Reporting Information During COVID-19 Pandemic” to the existing section on “responsibility of furnishers”[1]

Pursuant to the CARES Act, furnishers must report credit information for consumers receiving an accommodation during the “covered period.”  The “covered period” is either period beginning on January 1, 2020 and ending on the later of (i) 120 days after the enactment of the CARES Act or (ii) 120 days after the termination of the national emergency declared on March 13, 2020.

Under the new subsection,

[I]f a furnisher makes an accommodation with respect to 1 or more payments on a credit obligation or account of a consumer, and the consumer makes the payments or is not required to make 1 or more payments pursuant to the accommodation, the furnisher shall—

(I) report the credit obligation or account as current; or

(II) if the credit obligation or account was delinquent before the accommodation—

(aa) maintain the delinquent status during the period in which the accommodation is in effect; and

(bb) if the consumer brings the credit obligation or account current during the period described in (aa), report the credit obligation or account as current.

While the language of the CARES Act fails to specify, it would be wise for furnishers to assume that the new subsection applies retroactively and implement these changes to any account for which an accommodation was made on or after January 31, 2020.  Note, however, that these changes do not apply to charged-off accounts.

CFPB Policy Statement

On April 1, 20120, the Consumer Financial Protection Bureau (CFPB) issued a non-binding policy statement  outlining the responsibility of credit reporting companies and data furnishers during the COVID-19 pandemic.  In the statement, the CFPB stated that it expects creditors to comply with the CARES Act but acknowledged that this pandemic “poses operational challenges for consumer reporting agencies and furnishers” that “could impede” their ability to timely comply with their reporting obligations.

The CFPB announced that it would take a “flexible supervisory and enforcement approach” with data furnishers and the credit reporting agencies during the pandemic and would support furnishers’ voluntary efforts to provide payment relief.”

The CFPB also advised that while FCRA generally requires that consumer reporting agencies and furnishers investigate disputes within 30 days of receipt of the dispute, that 30-day period could be extended to 45 days, if the consumer provides additional, relevant information during the 30-day period.

Consumer reporting agencies and furnishers should tread carefully here because despite the CFPB’s flexible approach to investigations, the CARES Act does not extend the deadline to investigate and respond to consumer disputes.

Further, the CFPB stated that “furnishers and consumer reporting agencies … may take advantage of statutory and regulatory provisions that eliminate the obligation to investigate disputes submitted by credit repair organizations and disputes they reasonably determine to be frivolous or irrelevant. The CFPB also noted that it would consider the “significant current constraints on furnisher and consumer reporting agency time, information, and other resources in assessing if such a determination is reasonable.”

The Attorneys General

The CFPB’s stance on FCRA enforcement during the COVID-19 pandemic did not go unnoticed by the nation’s Attorneys General.  On April 13, 2020, the Attorneys General sent a letter to Director Kraninger outlining their opposition to the CFPB’s policy statement.

Consumer Data Industry Association

The Consumer Data Industry Association (CDIA), the trade organization for the various consumer reporting agencies in the United States, issued a series of guidance to assist furnishers with reporting information in accordance with the CARES Act and CFPB policy statement. The guidance can be found on the CDIA’s website.

Additional House and Senate Bills

As we reported here, there have been several credit reporting-related bills introduced in the House and the Senate since the onset of the COVID-19 pandemic. For example, on March 17, 2020, Senator Sherrod Brown (D-Ohio) and Senator Brian Schatz (D-Hawaii) introduced the “Disaster Protection for Workers’ Credit Act” which seeks to place a four-month moratorium on all negative credit reporting and a longer moratorium for those affected by COVID-19.

On April 7, 2020, Representative Katie Porter (D-CA) introduced the Medical Debt Relief Act of 2020 to amend the FCRA to “institute a one-year waiting period before medical debt will be reported on a consumer’s credit report and to remove paid-off and settled medical debts from credit reports that have been fully paid or settled, among other things.”

In the last month at least three additional bills have been introduced from both sides of the aisle. We continue to monitor this regulatory landscape and will provide updates as they become available.

[1] Section 4021 of the CARES Act amends Section 623(a)(1) of the FCRA (15 U.S.C. § 1681s-2(a)(1)).

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