CARES Act Amends FCRA: Furnishers, Be Wary of Retroactive Obligations When Reporting Consumer Accounts


April 2020

April 15, 2020

What’s Changing?

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), enacted on March 27, 2020, amends the Fair Credit Reporting Act ("FCRA") to require that when a furnisher of credit information offers payment relief or other accommodations to a consumer affected by COVID-19, and the consumer satisfies the accommodation, the furnisher must report the consumer account as current. If an account was delinquent prior to any accommodation offered, the furnisher may continue to report the account as delinquent, unless and until an accommodation is offered and is satisfied.

At its core, this means that when offering an accommodation, pursuant to the consumer’s repayment, the lender may be required to report the account to the credit reporting agencies as having the same (or better) status than it had prior to the accommodation.

What’s an Accommodation?

The CARES Act defines “accommodation” to include “an agreement to defer one or more payments, make partial payments, forbear any delinquent amounts, modify a loan or contract, or any other assistance or relief granted to a consumer who is affected by the coronavirus disease 2019 (COVID-19) pandemic.” Thus, the broad definition includes any alteration to a consumer payment agreement offered to someone affected by COVID-19.

On April 1, the Consumer Financial Protection Bureau ("CFPB") issued guidance regarding the Fair Credit Reporting Act and Regulation V in light of the CARES Act.  The Guidance encourages (but does not require) furnishers to “offer payment flexibility, including allowing consumers to defer or skip payment.” Accordingly, collection companies are being asked to consider extending the time for follow up calls and more flexibly applying hardship requirements for a payment accommodation. As such, the CARES Act does not mandate that collection companies make accommodations.

Time Frame For These Changes

These amendments are effective retroactively, to January 31, 2020. This means that furnishers may need to update information furnished in February or early March of this year, prior to enactment of the CARES Act, where accommodations were offered during that time period. These protections are in place until the latter of: a. 120 days after enactment of the CARES Act, or b. 120 days after the declaration of COVID-19 as a national emergency is terminated.

How Should Furnishers Be Reporting?

In the event that a furnisher agrees to make an accommodation of one or more payments, the CARES Act instructs the furnisher to apply the following procedure:

  • If the account was current prior to making the accommodation: continue to report the account as current during the accommodation period.
  • If the account was delinquent prior to making the accommodation: continue to report the account as delinquent. However, if the consumer brings the account current during the period of the accommodation, report the account is current.

This does not apply to charged-off accounts.

Furnishers should also follow recommendations issued by the Consumer Data Industry Association ("CDIA") in the Metro-2 Credit Reporting Resource Guide (Metro-2). On March 9, 2020, the CDIA referred furnishers to its previous Metro-2 guidance (or “FAQs”) for reporting related to consumer accounts that were affected (FAQ 58) or placed in forbearance (FAQ 45) as a result of a natural or declared disaster.

Specifically, the CDIA recommends furnishing special comment “AW” for any consumer account affected by a natural or declared disaster. Specific instructions on furnishing special comment “AW” are available in CDIA/Metro-2 FAQ 58.

Responding to Disputes

“The FCRA generally requires that consumer reporting agencies and furnishers investigate disputes within 30 days of receipt of the consumer’s dispute.” However, the “30-day period may be extended to 45 days if the consumer provides additional information that is relevant to the investigation during the 30-day period.”

The CFPB’s April 1 Guidance allows consumer reporting agencies and furnishers to take longer than established deadlines to investigate consumer disputes where significant operational disruptions related to COVID-19 impacted the consumer reporting agency or furnisher’s ability to timely investigate the consumer disputes.  The CFPB states that it will consider the individual circumstances of the consumer reporting agency or furnisher, including COVID-19 related “reductions in staff, difficulty intaking disputes, or lack of access to necessary information.” The CFPB states that it will not bring an enforcement action where the consumer reporting agency or furnisher made a good faith effort to investigate the dispute as quickly as possible.

What Are the Consequences for CARES Violations?

The CARES Act expands obligations of furnishers set forth in FCRA section 1681s-2. The CARES Act does not create new claims under the FCRA. Rather, furnishers’ conduct (and potential liability) continues to be measured under the standards of “willful noncompliance” (section 1681n) or “negligent noncompliance” (section 1681o) with the FCRA’s obligations.

To avoid liability, furnisher’s should make a good faith attempt to modify their furnishing procedures, including retroactively where appropriate, in circumstances where the furnisher agreed to an accommodation.  

What To Watch Out For

  • Be wary of granting unintended accommodations. Any alteration from set payments (time, amount, or some other performance) will likely be treated as an accommodation.
  • Be mindful of the CFPB’s guidance encouraging collection companies to work with consumers with respect to payment arrangements and frequency of communications to seek repayment of consumers’ accounts.
  • Such accommodations are likely to lead to increased consumer disputes, by consumers who believe their accounts should be reporting as current under these amendments. While the CARES Act provides increased flexibility in furnishers’ timing of responding to disputes and treating disputes as frivolous, increased disputes are likely to form the basis of future litigation and should therefore be handled with care and as much precision as current circumstances allow.
  • Furnishers should use special comment AW for any consumer account affected by COVID-19. Please review CDIA /Metro-2 FAQ 58 for specific information on furnishing special comment AW.

*The foregoing discussion does not address new requirements under section 4022 of the CARES Act, which involves federally backed mortgages.

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