The Coronavirus Aid, Relief, and Economic Security Act (CARES) was signed into law on March 27th, 2020. This monumental stimulus bill, which provides sweeping relief measures for Americans impacted by the COVID-19 outbreak, lays out additional rules for members of the credit reporting community.
The CARES Act has amended Section 1681s-2(a)(1) of the Fair Credit Reporting Act, modifying it to include the following information:
[I]f a furnisher makes an accommodation with respect to 1 or more payments on a credit obligation or account of a consumer, and the consumer makes the payments or is not required to make 1 or more payments pursuant to the accommodation, the furnisher shall—
(I) report the credit obligation or account as current; or
(II) if the credit obligations or account was delinquent before the accommodation—
(aa) maintain the delinquent status during the period in which the accommodation is in effect; and
(bb) if the consumer brings the credit obligation or account current during the period described in item (aa), report the credit obligation or account as current.
The law states that consumers may defer loan payments or receive loan assistance (called “accommodations”) during the pandemic if certain conditions are met. If the furnisher (The lender/financial institution) applies these accommodations on one or more of the consumer’s payments, they should continue to report the account as “current” if they have fulfilled the terms.
However, if a consumer was delinquent on an account before the accommodation took place, the delinquent status should be upheld, unless they bring the account current during the accommodation period. If this occurs, the account should be updated to reflect that it is current. Lenders should note that these regulations do not apply to accounts that are charged off.
The responsibilities for furnishers are in effect up until 120 days after the end of the COVID-19 national emergency. This means lenders should expect to adhere to these regulations well into the fall.
On April 1st, the Consumer Financial Protection Bureau released a statement outlining expectations for lenders with regards to the legislation. It reinforces that lenders must comply with the CARES act, and that consumers benefit when lenders report accurate details about these arrangements to the credit bureaus.
The CFPB also noted that, in response to resource and staff constraints caused by the pandemic, it will provide flexibility to lenders and credit bureaus with regards to the time necessary to investigate disputes. It stated that it does not intend to bring enforcement action against firms who exceed the deadlines to investigate these disputes, so long as they make good-faith efforts to address them as quickly as possible.
Experian also provided several recommendations to lenders, urging them to “Follow the CDIA guidelines to report consumers' accounts affected by natural and declared disasters (FAQ 58).” They also warned not to suppress or suspend reporting of portfolios, citing that suppression prevents positive information from appearing on a credit report, among other consequences.