What happened
On June 16, 2020, the Bureau of Consumer Financial Protection (CFPB) released a Compliance Aid in the form of ten FAQs (FAQs) on consumer reporting related to the CARES Act and the COVID-19 pandemic. The FAQs follow the Fair Credit Reporting Act (FCRA) policy statement issued by the CFPB on April 1 (the Statement).
While the FAQs generally are consistent with the Statement, they also suggest a more aggressive enforcement posture. For instance, in the Statement, the CFPB indicated that it did not intend to cite in an examination or bring an enforcement action against a consumer reporting agency (CRA) or furnisher which makes good-faith efforts to investigate disputes as quickly as possible, even if they take longer than the statutory time frame. While not in direct contradiction to the Statement, the FAQs caution that the CFPB will not be providing CRAs or furnishers with unlimited time before taking action.
Seven of the ten FAQs focus on accommodations made to consumers by creditors and how they affect reporting. For obligations or accounts that are current before the accommodation, furnishers must continue to report them as current. If an obligation or account is delinquent prior to the accommodation, furnishers must not advance the delinquent status. If a delinquency is brought current by the accommodation or by payments from the borrower, then the furnisher must report the credit obligation or account as current.
The FAQs also caution furnishers to ensure that all tradeline information is updated to accurately reflect that a consumer’s account is current consistent with the CARES Act. The FAQs also encourage furnishers to understand the data fields used by the CRAs to whom they report, and reiterate that using a special comment code for disasters is not an adequate substitute for complying with these accommodation reporting requirements.
Finally, the FAQs state that forbearances should not be reported on accounts for which consumers neither have requested a forbearance nor are delinquent, and that the consumer reporting protections associated with accommodations continue to apply even after the accommodation ends. Unless a consumer fails to meet some payment requirements during the accommodation, a furnisher cannot report an account that was current prior to the accommodation as delinquent, nor can it advance the delinquency of an account for the time period during which there was an accommodation.
Why it matters
The effects of COVID-19 on consumer credit are unfolding on a daily basis. The CFPB continues to protect consumers who are taking advantage of government-sponsored programs, and so are reminding CRAs and furnishers of their roles and responsibilities in responding to the pandemic. CRAs and furnishers should keep in mind that Compliance Aids are intended to provide practical advice and suggestions but are not binding like regulations and official interpretations.
Manatt’s consumer financial services team continues to advise clients on these credit reporting issues. If you require assistance, please contact the authors or any other member of the team.