I.          The Coronavirus Aid, Relief, and Economy Security Act. (CARES) Act:

The CARES Act amends the Fair Credit Reporting Act to provide guidance for furnishers during the COVID-19 pandemic. Specifically, the CARES Act requires furnishers who make “an accommodation with respect to 1 or more payments on a credit obligation or account of a consumer” to “report the credit obligation or account as current,” where the consumer “makes the payments or is not required to make 1 or more payments pursuant to the accommodation.”

Where the credit obligation or account was delinquent before the accommodation, the furnisher may “maintain the delinquency status which the accommodation is in effect” and if the consumer brings the account current during the accommodation period, the account should be reported as current.

These requirements do not apply to credit obligations or accounts that have been charged-off. The CARES Act defines an “accommodation” broadly to include “an agreement to defer 1 or more payments, make a partial payment, forbear any delinquent amounts, modify a loan or contract, or any other assistance or relief granted” to a consumer affected by COVID-19 “during the covered period.” The “covered period” is defined as “the period beginning on January 31, 2020” and ending on the later of 120 days after the date this section was enacted or 120 days after the date the national emergency, originally declared by the President on March 13, 2020, terminates.

It is important to note that the credit reporting for “accommodations” that were made prior to the CARES Act being enacted, but after January 31, 2020, may need to be adjusted in order to bring these accounts into compliance with the direction set forth herein.   

II.        CFPB’s Statement On Credit Reporting

On April 1, 2020, the CFPB issued a statement “highlighting furnishers’ responsibilities under the CARES Act” and informing furnishers of the Bureau’s “flexible supervisory and enforcement approach” during the COVID-19 pandemic.

As an initial matter, the CFPB reiterated its prior guidance for financial institutions to work with their borrowers who are unable to meet their contractual obligations and its view that loan modifications were positive steps that can assist in mitigating the effects the COVID-19 pandemic has on the public. The CFPB further encouraged furnishers to continue furnishing credit information during this crisis because such information is beneficial to consumers, users, and the economy.

While the CFPB expects furnishers to comply with the CARES Act, it states it “supports furnishers’ voluntary efforts to provide payment relief, and it does not intend to cite in examinations or take enforcement actions against those who furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing.”

The CFPB also recognized the affect the COVID-19 pandemic may have on a furnisher’s operations, including those tasked with responding to consumer credit disputes. Specifically, the CFPB recognized that reductions in staff or other operational challenges may make it difficult for furnishers to respond to disputes within the requisite timeframes set forth in the FCRA. In evaluating compliance, the CFPB stated that it will consider a furnisher’s “individual circumstances and does not intend to cite in an examination or bring an enforcement action against a consumer reporting agency or furnisher making good faith efforts to investigate disputes as quickly as possible, even if dispute investigations take longer than the statutory timeframe.” The CFPB also reminded furnishers that “they 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.”

III.       Executive Orders And Guidance From The States

Individual States are also taking it upon themselves to restrict or modify the impact negative credit reporting can have on their citizens as a result of COVID-19. For example, the New York Department of Financial Services issued guidance on March 19, 2020 which urged regulated entities to refrain reporting late payments for a period of 90 days. New Jersey Governor Phil Murphy recently announced an initiative to prevent financial services companies from reporting negative notations, such as late payments, to the credit reporting agencies, for borrowers who were taking advantage of COVID-19 related relief.  

So far, it appears that the most definitive guidance on credit reporting has come from the CARES Act, but we will continue to monitor the executive orders and guidance from the States.