CFPB Releases CARES Act FAQs for Consumer Reporting

June 23rd, 2020 | Angela Preston, Senior Vice President and Counsel, Corporate Ethics and Compliance with Ryan Hannan, Compliance Associate

On June 16, 2020, the Consumer Financial Protection Bureau (the “Bureau”) issued Consumer Reporting FAQS Related to the CARES Act and COVID-19 Pandemic (the “FAQs”) as a Compliance Aid to provide guidance on consumer credit reporting in light of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The CARES Act, signed by the President on March 27, 2020, addressed the economic impact of the COVID-19 pandemic at the federal level, in part by requiring furnishers of credit information to provide relief and accommodation to affected consumers’ accounts. More information on how the CARES Act impacts credit reporting, and its implications for consumer reporting agencies and employers can be found here.

Focus on Consumer Credit Reporting

The FAQs address the CARES Act’s consumer credit reporting requirements and confirm the Bureau’s intentions regarding their promotion and enforcement of its provisions. Some of the clarifications derived from the FAQs include the following highlights:

• On April 1, 2020, the Bureau issued a Policy Statement clarifying expectations that furnishers comply with the CARES Act, and that furnishers and consumer reporting agencies investigate disputes within specified timeframes, and make good faith efforts to do so as soon as possible. The Policy Statement further clarified that in the absence of COVID-19 related impediments, the standard Fair Credit Reporting Act (FCRA) requirements apply.
• Where the CARES Act compels accounts to be reported as “current,” the Bureau will not hesitate to enforce these requirements, in addition to the FCRA and local laws, but will consider circumstances and good faith efforts
• Furnishers who violate dispute requirements will be evaluated on a case-by-case basis to assess their efforts and circumstances. The Bureau offers a flexible approach, but confirmed that the dispute deadlines will be observed, and that enforcement actions may be taken
• Accommodations are described as either required or voluntary payment assistance or relief granted to a consumer affected by the pandemic, including agreements to defer one or more payments, partial payments, forbearance of delinquent amounts, and loan or contract modification
• Furnishers are required to offer forbearance on federally backed mortgage loans if the consumer suffered financial hardship due to the pandemic, and automatic suspensions of principal and interest payments are applied to federally held student loans. In cases where such accommodations are not required, the Bureau still recommends that financial institutions work with borrowers to provide relief
• If a credit obligation or account was current prior to an accommodation, it must continue to be reported as current during the accommodation. If the obligation or account was delinquent prior to the accommodation, the furnisher may not advance the delinquent status. This does not apply to obligations or accounts that creditors have charged off.
• When reporting obligations or accounts as current pursuant to the CARES Act, furnishers must continue to follow the FCRA’s requirements related to the accuracy and integrity of the information. Furnishers reporting to consumer reporting agencies should consider all trade line information that reflects a status as current or delinquent
• Furnishers may not use a special comment code to report disasters or forbearances, as the Bureau states this is not an acceptable substitute per the requirements of the CARES Act
• Only the accounts that have been placed in forbearance should be reported as such in order to prevent inaccuracies and confusion
• After a CARES Act accommodation ends, furnishers must continue to apply the reporting protections to the period during which they were active

More Information:

To learn more about the impact of the CARES Act on credit reporting, and its implications for consumer reporting agencies and employers click here. You can also visit our Compliance Updates page for videos and updates mapping the everchanging regulatory landscape.

The information contained herein is for informational purposes only.  Clients are encouraged to consult with their legal counsel on the impact of this new law.  Sterling is not a law firm, and none of the information contained in this notice is intended as legal advice.

This and other important legislative updates can be found on the Sterling website: https://www.sterlingcheck.com/resources/compliance-updates/

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