On June 16, 2020, the Consumer Financial Protection Bureau (“CFPB”) issued a seven-page FAQ memorandum addressing some of the most critical questions for compliance with the new consumer reporting requirements of the “CARES Act”. In sum, this Compliance Aid:
- Addresses the specific credit reporting requirements of the CARES Act, including considerations for furnishers when reporting consumers as “current” on open accounts;
- Clarifies that reporting a consumer is affected by a natural or declared disaster is not a substitute for complying with the CARES Act consumer reporting requirements. The CFPB explains that using these codes, without other changes to the reporting, does not constitute compliance with the CARES Act; and
- Addresses the CFPB’s guidance that provides temporary and targeted flexibility in the event consumer reporting agencies (“CRAs”) or the furnisher experience challenges as a result of the pandemic in investigating consumer disputes within the statutory timeframes. The CFPB made clear that it expects CRAs and furnishers to make good faith efforts to investigate disputes as quickly as possible.
On March 27, 2020, President Trump signed the CARES Act, which recognized the extraordinary circumstances caused by the global COVID-19 pandemic and the potential impact on the financial well-being of consumers, as well as the operations of consumer lenders and other supervised entities. The CFPB then issued a policy statement on April 1, 2020 to “highlight furnishers’ responsibilities under the CARES Act and inform consumer reporting agencies and furnishers of the Bureau’s flexible supervisory and enforcement approach during this pandemic regarding compliance with the Fair Credit Reporting Act (“FCRA”) and Regulation V.” While the statement was a “non-binding general statement of policy” and not intended to create new obligations beyond the FCRA and the CARES Act, it emphasized that the CFPB intended to consider the circumstances entities faced as a result of the pandemic when taking regulatory action.
That policy statement provided two examples of the CFPB’s “flexible” approach. First, in regard to payment accommodations provided by furnishers to consumers affected by COVID-19, the CFPB encouraged furnishers to work with borrowers and consumers to provide payment relief, noted the requirement to report consumers who were current before the accommodations and who adhere to those accommodations as current despite those accommodations, and stated that “it does not intend to cite in examinations or take enforcement actions against those who furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing.”
Second, with respect to the 30-day timing of dispute investigations by CRAs and furnishers, the CFPB noted that it will consider the individual circumstances of each CRA or furnisher in determining compliance, particularly for smaller or less sophisticated lenders, thereby insinuating a less-than-strict approach to the 30-day reinvestigation deadline.
The CFPB’s policy statement was met with criticism, including from consumer advocates as well as state attorneys’ general, as we previously discussed here. The CFPB likely issued the FAQs in response to some of these criticisms and, more importantly, to provide clarity on its compliance and enforcement positions moving forward.
Highlights and Takeaways from the FAQs
The FAQs are presented as one of the CFPB’s “Compliance Aids” (the CFPB’s approach on these guidance documents can be found here). Below are the highlights of the FAQs:
- FAQ 1: This summarizes the CFPB’s April 1, 2020 policy statement and makes clear that the CFPB “expects furnishers and consumer reporting agencies to make good faith efforts to investigate disputes as quickly as possible, and that absent impediments due to COVID-19, disputes should be resolved under FCRA requirements.”
- FAQ 2: This deals with the CARES Act requirement that furnishers report as current certain accounts for consumers affected by the COVID-19 pandemic. The CFPB reiterated its individualized approach to enforcement of this requirement, but also made clear it will “not hesitate to take public enforcement action when appropriate against companies or individuals that violate the FCRA or any other law under its jurisdiction.” The agency emphasized in its response that credit reporting accuracy and dispute handling are focuses of the CFPB in its efforts to protect consumers during the COVID-19 pandemic.
- FAQ 3: This concerns the FCRA’s 30-day reinvestigation requirement and the CFPB’s position on supervision/enforcement of that deadline during the pandemic. The CFPB made clear that, even in providing some flexibility, it will not give CRAs and furnishers “unlimited time”; they must act in “good faith” and conduct “reasonable investigations of consumer disputes” despite the pandemic challenges. The CFPB appeared to focus on smaller CRAs and furnishers that may face “unique challenges” during the pandemic as entities most likely to receive less stringent supervision and enforcement.
- FAQ 4: This defines an “accommodation” under the CARES Act, which can include “agreements to defer one or more payments, make a partial payment, forbear any delinquent amounts, or modify a loan or contract.” The answer notes that an accommodation includes assistance that is granted voluntarily as well as an accommodation that is required under statute or regulation.
- FAQ 5: This clarifies the two types of loans that require accommodations under the CARES Act: (1) Federally-backed mortgage loans whose borrower suffers a financial hardship because of the COVID-19 emergency; and (2) Federally-held student loans, which received an automatic suspension of principal and interest payments through September 30, 2020.
- FAQ 6: This details the consumer reporting obligations of furnishers who provide an accommodation to a consumer.
- First, if the credit obligation or account was current before the accommodation, and the consumer makes payments as required under the accommodation (or is not required to make payments under the accommodation) during the time period of the accommodation, the furnisher must continue to report the credit obligation or account as current.
- Second, if the credit obligation or account was delinquent before the accommodation, then during the accommodation the furnisher cannot advance the delinquent status. The CFPB gives the example of an account where the consumer was 30 days past due at the time of the accommodation and notes that the furnisher must not report the account as 60 days past due during the accommodation. Furnishers also must report an account as current if the consumer makes payments to bring it current during the accommodation. For further detail on payment suspensions and furnishing information about Federally held student loans, the CFPB directed readers back to the language in the CARES Act.
- FAQ 7: This reminds furnishers of their obligation to understand and review all data fields (e.g., payment status, scheduled monthly payments, amount past due) and update their credit reporting appropriately if an account is deemed current pursuant to the CARES Act. The CFPB emphasized that this was part of furnishers’ FCRA obligations related to the accuracy and integrity of the information they furnish.
- FAQ 8: This makes clear that a furnisher is not in compliance with the CARES Act if it only uses a special comment code indicating that an account is impacted by a disaster or that the consumer’s account is in forbearance. The CFPB emphasized that the furnisher must also take the steps detailed in the above FAQs to ensure that the account is either being reported as current, if it was current prior to the accommodation, or not to advance the level of delinquency, for accounts that were delinquent before the accommodation.
- FAQ 9: This addresses the reporting of multiple consumer accounts as in forbearance because of a COVID-19 accommodation. The CFPB counsels against placing all accounts for a particular individual in a forbearance status if forbearance has not been requested (or is not relevant to) a specific account.
- FAQ 10: This concerns furnisher reporting after a CARES Act accommodation ends. The CFPB instructs furnishes to essentially disregard the time period during which the accommodation is pending from a delinquency perspective. If the consumer was current before the accommodation, the account must be placed in current status after the accommodation. And furnishers cannot consider the accommodation time period to advance the delinquency of a consumer.
Additional CARES Act and COVID-19 Resources
Troutman Sanders has previously posted updates on CARES Act compliance in the consumer financial services arena, including on its blog. Specific articles can be found here, here, here, and here.
Troutman Sanders and Pepper Hamilton have developed a dedicated COVID-19 Resource Center to guide clients through this unprecedented global health challenge. We regularly update this site with COVID-19 news and developments, recommendations from leading health organizations, and tools that businesses can use free of charge.
The CFPB offers additional resources to help industry comply with credit reporting requirements, as well as provide consumers with up-to-date information and resources to protect and manage their finances during this difficult time. Its COVID-19 resource page can be found here.