On March 13, two days after the World Health Organization announced that the coronavirus (“COVID-19”) outbreak could be characterized as a pandemic, the White House declared the outbreak a national emergency.
In response, the Consumer Data Industry Association (“CDIA”) provided guidance for lenders and creditors who report information about consumers whose accounts are impacted by COVID-19. Specifically, the CDIA pointed to two scenarios that have “been available for many years and [are] designed to be flexible to accommodate the many different ways creditors help their customers.” Under the first scenario, outlined in FAQ 45 of the Credit Reporting Resource Guide, the account is placed in forbearance and reported as current, provided that no payments are due during the forbearance period, with a special comment of “CP” to indicate that the account is in forbearance. Under the second scenario, outlined in FAQ 58, the account is reported as current with a special comment “AW” to indicate that the account is affected by a natural or declared disaster.
To supplement the guidance provided in FAQ 45 and FAQ 58, the CDIA issued a fact sheet on March 22 that is more tailored to the current situation, “to provide information on the systems in place to minimize or eliminate the negative credit impact of extreme events like a natural disaster or pandemic.” This fact sheet points to the joint statement of all five federal banking agencies (the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency) and the Conference of State Bank Supervisors to “encourage financial institutions to meet the financial needs of customers and members affected by the coronavirus.”
In this fact sheet, the CDIA explains the first thing that a consumer who is impacted by COVID-19 should do is contact his or her lender or creditor because “lenders and creditors typically offer forbearance or deferred payment programs.” The CDIA explains that “when a consumer is placed into a forbearance plan, a deferred payment plan, or some other special abatement program, credit reporting codes have been created by the credit bureaus to make sure that the consumer’s credit is not treated negatively.” (emphasis added). The CDIA emphasizes that “in many cases, a consumer will be reported as ‘paid as agreed.’”
However, the reporting guidance remains vague, and reporting accounts as affected by natural disasters could introduce a number of operational complexities that have not been addressed, including how to determine whether a consumer’s account is in fact affected by the current pandemic. Unlike natural disasters such as flooding, hurricanes, or earthquakes, there is no approximate geographical boundary that can provide circumstantial data.
Nonetheless, the overarching message from the CDIA is that there are ways to avoid reporting accounts as past due if the accounts are delinquent as a result of the COVID-19 pandemic, but that the consumer remains responsible to first reach out to the lender or creditor. We will continue to monitor for additional reporting guidance during this unprecedented time.