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Thursday, October 15, 2020

COVID, CARES ACT, and FCRA

QUESTION
We are involved in doing an annual update of the policy for the Fair Credit Reporting Act. During this review, we realized that we did not have a section for the CARES Act. Our compliance department provided guidance all along in implementing the requirements, but nobody had yet updated the policy itself.

We are writing to you to get some guidance on the important areas to cover in our FCRA policy with regard to the CARES Act. I realize you can’t discuss every possibility, but some general guidance would really be appreciated.

What are some important FCRA compliance areas that must be implemented in regard to the CARES Act?

ANSWER
In my view, policy documents should be reviewed annually and updated periodically as changes occur in applicable laws, rules, best practices, regulations, and implications of case law – federal and state. It seems you’re on the right track, inasmuch as you are doing an annual update, which, in this instance, helps to show the need for an additional section.

Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).[i] It was a $2.2 trillion economic stimulus bill passed by the 116th U.S. Congress. It was signed into law by the President on March 27, 2020, in response to the economic challenges caused by the COVID-19 pandemic in the United States. We have outlined it at length in our complimentary Business Continuity Plan with Pandemic Response.

Thus, Congress passed the CARES Act to minimize the impact of the COVID-19 pandemic. The CARES Act places essential requirements on companies that furnish information to consumer reporting agencies about consumers affected by the COVID-19 pandemic.[ii]

Briefly described, the CARES Act initially included spending of $300 billion in one-time cash payments to individual Americans (with most single adults receiving $1,200 and families with children receiving more), $260 billion in increased unemployment benefits, the creation of the Paycheck Protection Program that provides forgivable loans to small businesses with an initial $350 billion in funding (later increased to $669 billion by subsequent legislation), $500 billion in aid for large corporations, and $339.8 billion to state and local governments. Lawmakers refer to it as Phase 3 of Congress's coronavirus response.[iii]

On April 1, 2020, the CFPB issued a document with a title worthy of a gargantuan Elizabethan treatise: 

Statement on Supervisory and Enforcement Priorities 
Regarding the Fair Credit Reporting Act
and Regulation V
in Light of the CARES Act.[iv] 

In this issuance, the CFPB sought to inform furnishers of their responsibilities under the CARES Act amendments to the Fair Credit Reporting Act (FCRA), stating that the “Bureau expects furnishers to comply with the CARES Act.” Under the CARES Act’s amendments to the FCRA, a consumer whose account was not previously delinquent is current on their loan if they have received an “accommodation” and make any payments the accommodation requires. 

Therefore, the CFPB has issued substantive guidance on consumer reporting during the COVID-19 pandemic. It issued its own FAQs to address the responsibilities companies have under the CARES Act and the Fair Credit Reporting Act (FCRA) when they furnish information to consumer reporting agencies about consumers impacted by the crisis.[v] The FAQ was meant to be a “Compliance Aid” – which is CFPB Newspeak for Consult a Compliance Professional.

Here are a few important provisions to put into the new FCRA section relating to the CARES Act. I provide some citations for you to reference in your research and policy development.

Enforcement
Furnishers must report as current certain accounts for consumers affected by the pandemic. The CFPB expects furnishers to comply with the CARES Act, and it is enforcing the FCRA, as amended by the CARES Act, and its implementing regulation, Regulation V.

Violations of the FCRA
The FCRA requires furnishers and consumer reporting agencies to conduct investigations of disputes within specified timeframes. Furnishers and consumer reporting agencies remain responsible for conducting reasonable investigations of consumer disputes in a timely fashion. CFPB expects furnishers and consumer reporting agencies to make good faith efforts to investigate disputes as quickly as possible when they are impacted by COVID-19.

Accommodations
The CARES Act addresses accommodations to consumers impacted by COVID-19. An accommodation includes any payment assistance or relief granted to a consumer who is affected by the COVID-19 pandemic during the period from January 31, 2020, until 120 days after the termination of the COVID-19 national emergency declared by the president on March 13, 2020 under the National Emergencies Act.[vi] Such an accommodation includes, for instance, agreements to defer one or more payments, make a partial payment, forbear any delinquent amounts, or modify a loan or contract.[vii]

Pandemic Accommodations
Under the CARES Act, there is a requirement that furnishers provide accommodations to consumers impacted by the pandemic. The CARES Act requires accommodations for two specific types of loans: (1) consumers with a federally backed mortgage loan (as that term is defined in the CARES Act) may obtain a forbearance from their mortgage servicer upon request, and the borrower’s attestation of a financial hardship due to the COVID-19 emergency;[viii] and (2) the CARES Act provides automatic suspension of principal and interest payments on federally held student loans through September 30, 2020.[ix]

Reporting Obligations
If the credit obligation or account was current before the accommodation, during the accommodation the furnisher must continue to report the credit obligation or account as current. If the credit obligation or account was delinquent before the accommodation, during the accommodation the furnisher cannot advance the delinquent status.

Reporting Considerations
If furnishers are reporting information about a credit obligation or account that is current, they should consider all of the trade line information they furnish that reflects a consumer’s status as current or delinquent. For instance, information that a furnisher provides about an account’s payment status, scheduled monthly payment, and the amount past due may all need to be updated to accurately reflect that a consumer’s account is current consistent with the CARES Act.[x]

Special Comment Codes
Reporting of accommodations simply by using a special comment code to report a natural or declared disaster or forbearance is not permitted. Furnishing a special comment code indicating that a consumer with an account is impacted by a disaster or that the consumer’s account is in forbearance does not provide consumer reporting agencies with the information required by the CARES Act and, therefore, furnishing such a comment code is not a substitute for complying with the requirements.

Product Line Reporting
A furnisher may want to report all of their consumers’ accounts or all of their consumers’ accounts in a particular product line as in forbearance. However, the CFPB cautions against this approach, as it may increase the risk of inaccurate reporting and customer confusion.[xi]

Reporting Delinquencies and Terminations 
The consumer reporting protections of the CARES Act continue to apply to the time period that was covered by the accommodation after the accommodation ends. Assuming payments were not required or the consumer met any payment requirements of the accommodation, a furnisher cannot report a consumer that was reported as current pursuant to the CARES Act as delinquent based on the time period covered by the accommodation after the accommodation ends. A furnisher also cannot advance the delinquency of a consumer that was maintained pursuant to the CARES Act based on the time period covered by the accommodation after the accommodation ends.

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group

__________________________________________
[i] Pub. L. 116-136
[ii] The CFPB previously issued a statement informing lenders that they must comply with the credit reporting requirements of the CARES Act. The CFPB released FAQs on June 16, 2020, to “ensure that consumers receive the credit reporting protections required by the CARES Act.”
[iii] Phase 1 was an $8.3 billion bill spurring coronavirus vaccine research and development (the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020), which was enacted on March 6, 2020. Phase 2 was an approximately $104 billion package largely focused on paid sick leave and unemployment benefits for workers and families" (the Families First Coronavirus Response Act), which was enacted on March 18, 2020.
[iv] https://files.consumerfinance.gov/f/documents/cfpb_credit-reporting-policy-statement_cares-act_2020-04.pdf
[v] The FAQs can be accessed at https://files.consumerfinance.gov/f/documents/cfpb_fcra_consumer-reporting-faqs-covid-19_2020-06.pdf
[vi] CARES Act, Pub. L. 116-136, section 4021, codified at FCRA section 623(a)(1)(F)(i)(I), 15 U.S.C. 1681s-2(a)(1)(F)(i)(I)
[vii] Idem
[viii] See Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act, April 3, 2020, CFPB, FRB, FDIC, NCUA, OCC, CSBS https://files.consumerfinance.gov/f/documents/cfpb_interagency-statement_mortgage-servicing-rules-covid-19.pdf. See also The Bureau’s Mortgage Servicing Rules FAQS related to the COVID-19 Emergency, CPFB, April 3, 2020 https://files.consumerfinance.gov/f/documents/cfpb_mortgage-servicing-rules-covid-19_faqs.pdf
[ix] For more information on the CARES Act requirement to suspend payments for Federally held student loans, see CARES Act, Pub. L. 116-136, section 3513.
[x] See FCRA section 623, 15 U.S.C. 1681s-2; 12 CFR part 1022, subpart E
[xi] Idem