The Federal Reserve Board of Governors and the Federal Deposit Insurance Corporation (“FDIC”) issued a joint advisory making financial institutions aware of a recent change to the Fair Credit Reporting Act (“FCRA”) that provides that financial institutions may offer to remove defaults in private education loan borrowers’ consumer reports under an approved rehabilitation program. Qualifying borrowers must show consumer reports containing a default on a private education loan, and the financial institution must submit a written request for approval of the program to their federal regulatory agency. 

The amendment appeared in Section 602 of the Economic, Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA”), enacted on May 24, 2018.  The amendment changed FCRA Section 623 to allow financial institutions to offer the Section 602 Program.  The recent joint advisory addresses requirements of the Section 602 Program. 

The joint advisory explains that if a borrower meets the requirements of a financial institution’s Section 602 Program, the institution can remove a reported default from the borrower’s consumer report.  The advisory further explains that the financial institutions that choose to establish a private education loan rehabilitation Section 602 Program are entitled to a safe harbor from potential claims under the FCRA related to removal of the reported default.