What Creditors Should Know about CARES Act Credit Protections

As the coronavirus continues to wreak havoc on the economy, it’s helpful to know how Section 4021 of the CARES Act amends the Fair Credit Reporting Act (FCRA) to protect consumers from unfair credit reporting practices. This section outlines responsibilities for companies that provide information to consumer reporting agencies or credit bureaus.

When reporting to credit bureaus, lenders must report such accounts as current that have a payment accommodation. Payment accommodations include deferring one or more payments, making partial payments, forbearing any delinquent amounts, modifying a loan or other relief assistance during the COVID-19 pandemic.

For accounts that were delinquent before an accommodation was made, the furnisher (lenders, credit card companies, etc.) should report the account as delinquent, unless the consumer brings the account current. This reporting requirement does not apply to consumer accounts that have been charged off.

Here are key points for creditors to keep in mind:

  • CARES Act protection guidelines are in place for agreements made between January 31, through either July 25, 2020 (120 days after the Act was passed) or 120 days after the end of the COVID-19 national emergency.
  • Lenders should maintain documentation of changes to policies and procedures, including any temporary adjustments to the FCRA. Regulatory updates should be closely monitored so lenders can establish an end date of the temporary period.
  • The Act is silent on whether the agreement must be in verbal or written, but we assume lenders will document any communications and/or agreements.
  • From an operational perspective, system modifications may be required to furnish the required information to credit reporting agencies while complying with the new requirements.

We will continue to share regulatory, operational and tax updates to help you manage and recover from the pandemic. Contact us for more information.

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