This content was published prior to the combination of Dentons Sirote. Learn more about Dentons Sirote. 

In today’s blog post, we continue to examine the impact of the COVID-19 pandemic on the consumer finance industry.  Specifically, this post looks at how your credit reporting obligations are affected.  

Frequent readers of our blog know that the Fair Credit Reporting Act (FCRA) is the key federal credit reporting law, covering both credit bureaus and users of credit reports. Section 623 of FCRA deals with companies or “furnishers” that report to credit bureaus, and Section 623(a) generally states that a furnisher must report accurate information. During this pandemic, these requirements of FCRA continue to apply, with one important change. 

The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law last week adds an additional provision to Section 623(a) of FCRA. Section 4021 of the Act, titled “Credit Protection During COVID-19,” amends FCRA to provide that if a creditor makes an accommodation to a consumer as a result of the COVID-19 pandemic, the creditor must continue to report the account as current.  If the account was delinquent prior to the accommodation, the creditor should continue to report the account as delinquent unless the consumer brings the account current. The amendment to FCRA does not apply to charged-off accounts. An “accommodation” includes agreements for deferred and partial payments, forbearance, modifications, and other assistance for consumers affected by the COVID-19 pandemic.  These FCRA amendments will continue to apply until 120 days after the national emergency declaration terminates.  

In other words, a furnisher cannot negatively report regarding a consumer solely as a result of a COVID-19 related accommodation. This is an important change because it allows creditors to work with borrowers without negatively affecting the borrower’s credit history. There have been other, more aggressive proposals in Congress, and our blog will continue to monitor any successful legislative developments. 

Additionally, over the last few weeks, the credit reporting industry has issued guidance in response to the pandemic. The credit bureaus have reporting codes for forbearance and deferral programs and for natural and declared disasters and other national crises, and these codes generally do not negatively impact a consumer’s credit score. The Consumer Data Industry Association (CDIA), the trade association for credit reporting companies, has published information regarding credit reporting during the COVID-19 pandemic, including specific Metro 2 guidance on reporting information on consumers for (1) accounts affected by natural and declared disasters, and (2) accounts in forbearance from a natural or declared disaster, or for other reasons.  

The Consumer Financial Protection Bureau (CFPB) and other federal agencies have also published information to address consumer financial concerns. The CFPB’s coronavirus landing page provides resources and advice from the Bureau.  On March 22nd, the CFPB and other federal agencies issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. Generally, the agencies are encouraging financial institutions to work with consumers who are affected by the pandemic. 

Along those same lines, at the end of last week, the CFPB and other federal agencies issued an additional joint statement encouraging banks, savings associations and credit unions to offer responsible, small-dollar loans to consumers and small businesses in response to COVID-19.

At this point, the federal agencies are relying on creditors to take initiative and work with consumers to alleviate the financial pressure of the pandemic. It remains to be seen whether Congress will eventually take a more aggressive approach.

We will continue to monitor developments in the consumer finance industry, especially with respect to credit reporting. Take care of yourselves and your families in this increasingly difficult time.