Earlier this month, twenty-one state attorneys general and the AGs for Washington, D.C. and Puerto Rico sent a letter to the Consumer Financial Protection Bureau (CFPB) urging the CFPB to withdraw its non-binding guidance issued on April 1, 2020 with respect to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The signatory AGs include some from the most populous states and some of the states hardest hit by the pandemic, including California, Illinois, Michigan, New Jersey, New York and Washington. Unhappy with the response they received from the CFPB on April 21, 2020, the AGs have now gone directly to the three major credit reporting agencies (CRAs) with a strong message that the AGs “are committed to protecting consumers in our states and will continue to enforce all federal and state requirements during this crisis.” Their message is clear: if you do not comply with the CARES Act, we will act.

CFPB’s April 1, 2020 Guidance

By way of a recap, the CFPB’s non-binding guidance relaxed certain requirements of the Fair Credit Reporting Act (FCRA) during COVID-19. The guidance signaled the CFPB’s intent to provide regulatory relief for businesses by not enforcing the FCRAs statutory investigation timeframe against furnishers or CRAs acting in good faith. The statement emphasized that a CRAs or furnisher’s investigative dispute period would be extended from 30 to 45 days if a consumer provided additional information relevant to an investigation. Additionally, the CFPB encouraged furnishers and CRAs to alleviate operation stress by not investigating “disputes submitted by credit repair organizations and disputes they reasonably determine to be frivolous or irrelevant.”

The guidance was also accompanied by an announcement that the CFPB would not strictly enforce the CARES Act requirements for reporting credit obligations as “current” where accommodations have been made.

State AGs Push Back

In response to the CFPB’s guidance, the state AGs sent a strongly worded letter to the CFPB on April 13, 2020 urging the CFPB to withdraw its guidance and resume vigorous oversight of CRAs and enforcement of the FCRA. In that letter, the AGs opposed the CFPB’s guidance suggesting the CFPB would not (1) enforce the CARES Act’s amendments to the FCRA requiring accounts to be reported as “current” and (2) take enforcement actions against CRAs for failing to investigate consumer disputes in timely manner. The state AGs cited a number of reasons in support of their position, including that the CFPB’s guidance could (1) discourage consumers from taking advantage of forbearance or other accommodations and (2) put consumers at risk for inaccurate reporting if dispute investigations are delayed.

The letter urged the CFPB that “now is not the time to let [CRAs] fall asleep at the switch. They must be vigilant and protect consumers’ credit. Especially during this crisis, we must hold them accountable when they fail to respond to, and correct, errors on consumers’ credit reports.”

CFPB’s April 21, 2020 Response

In a response to the state AG’s April 13, 2020 letter, the CFPB indicated that its guidance “instructed furnishers that in order to comply with the CARES Act amendments to the FCRA, a consumer is current on their loan if they have received any relief as a result of the pandemic.” With respect to CFPB enforcement and supervisory actions, the CFPB stated that “all CRAs remain responsible for conducting reasonable investigations of consumer disputes in a timely fashion.” The CFPB went on to state that its guidance “does not give CRAs an unlimited time beyond the statutory deadline to investigate disputes nor does it say the Bureau will not enforce FCRAs obligations to investigate.”

In short, the CFPB’s response indicated it would take an individualized approach to reviewing the timeliness of a particular CRA’s dispute investigations and would take into account any challenges smaller CRAs may face on the operational side as a result of COVID-19, but it fell short of withdrawing its guidance encouraging CRAs to not investigate “frivolous or irrelevant” disputes and emphasizing scenarios that extend a CRA’s investigation period.

State AGs Letter to the CRAs

In their April 28, 2020 letter, the state AGs warned the CRAs that they expected compliance with the CARES Act and would “actively monitor for and enforce such compliance.” The April 28, 2020 letter focuses on what the state AGs identified as the CFPB’s failure to assure that it will enforce investigation periods related to consumer disputes. Specifically, the AGs indicated they would monitor “furnishers to ensure that they do not improperly report negative credit information” and will monitor the CRAs “to ensure that the CRAs timely and meaningfully investigate disputes arising from improper reporting by furnishers.” Finally, the State AGs informed the CRAs that they expected “the CRAs to comply with all provisions of the FCRA, state law, and the requirements of agreements that the CRAs entered into with [the AG’s] offices, including the CRA’s obligations to conduct meaningful and timely investigations of consumer disputes of credit information.” The state AGs warned they would not hesitate to “hold CRAs accountable if they fail to meet these obligations.”

The state AGs’ message is clear to the CRAs: if the CFPB won’t enforce the FCRA, we will. For regular updates about the latest COVID-19 and CARES Act impacts on the financial services sector, be sure to visit the Pepper Hamilton/Troutman Sanders COVID-19 Resource Center.