The CARES Act: Reporting Information During COVID-19 Pandemic
April 9th, 2020 | Angela Preston, Senior Vice President and Counsel, Corporate Ethics and Compliance
Impact on employers related to dependency on credit reports
On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act or CARES Act (the “Act”) to address the economic impact of the COVID-19 pandemic at the federal level.
Included in the Act (Section 4021) are amendments to the Fair Credit Reporting Act (FCRA). In this section, the Act amends FCRA Section 623, Responsibilities of Furnishers of Information to Consumer Reporting Agencies, by adding subsection (F), Reporting Information During COVID-19 Pandemic. This requires furnishers of credit information to consumer reporting agencies (credit bureaus) to provide the following treatment to consumers’ accounts if they are subject to deferrals, partial payments, or forbearance agreements in relation to the COVID-19 pandemic:
- Consumers are entitled to have their account reported as “current” by the furnisher if the deferral, partial payment or forbearance agreement occurred within the “covered period,” which includes the time period beginning January 31, 2020, and ending 120 days after the date of enactment of the CARES Act (March 27, 2020) or 120 days after the date which the national emergency declared by the President on March 13, 2020.
- If an account was delinquent before the agreement with the consumer, the furnisher may still report the delinquency. If the consumer brings their delinquent account current, the furnisher must report the account as current.
- These requirements do not apply to accounts that have been charged-off.
Considerations for CRAs
These amendments do not impact a CRA’s access to or ability to fulfill requests for credit reporting. The primary obligations lie on furnishers of the information who report account statuses to the nationwide credit bureaus. CRAs and employers do need to consider how these changes could affect consumers who may dispute accuracy of their credit reports. If disputes are received related to credit information in this timeframe, the credit bureaus will need to provide information regarding the status of the information in relation to the relevant time period to confirm that the new laws were followed.
Impact on regulated and non-regulated employers
Potential impact to employers will vary based on their dependence on credit reports for making hiring decisions. Employers who are under a regulatory requirement to use credit reporting in their hiring decisions may want to consider impact, as there is no exemption from the rules for regulated employers. It is unclear if credit accounts will be coded to reflect a status of “current,” with a caveat that the status is related to COVID-19 pandemic. Similarly, it is unclear if “current” accounts are coded as such to indicate that they are accommodating the consumer.
There is no prohibition in the amendments on employers using the information to make adverse employment decisions. Nonregulated employers who use credit for employment purposes based solely on internal policy are less likely to be impacted as their use of credit and financial information is not mandated by law. Employers should consult with their legal counsel on how to handle these situations on a case-by-case basis.
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For more information on how Sterling can help you navigate during this time of uncertainty, read our COVID-19 information overview.
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