Reed Smith Client Alerts

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) amends the Fair Credit Reporting Act (FCRA) to require that when a furnisher of credit information offers payment relief or other accommodations to a consumer affected by COVID-19, and the consumer satisfies the accommodation, the furnisher must report the consumer account as current. If the account was in a delinquent status prior to the accommodation, the furnisher may continue to report the account as delinquent until the consumer brings the account current, in which case the account must be reported as current.
two gemsbok fighting with horns

In response to these changes, the Consumer Financial Protection Bureau (Bureau) issued a nonbinding policy statement (Statement) regarding furnishers’ obligations under the CARES Act and regarding “the Bureau’s flexible supervisory and enforcement approach during this pandemic regarding compliance with the [FCRA] and Regulation V.” In its Statement, the Bureau encourages furnishers to offer payment relief and other accommodations to consumers. It also states that it does not intend to cite in an examination or bring an enforcement action against furnishers that exceed the deadlines to investigate consumer disputes so long as they make good faith efforts during the pandemic to do so as quickly as possible.

The Bureau’s Statement acknowledges that furnishers are currently constrained in their ability to quickly investigate consumer disputes, which is positive news for furnishers. It is an acknowledgement that such facilities, some of which are overseas and some located in the United States, are closed or operating under substantial restrictions to accommodate social distancing requirements. However, there is much uncertainty in how the requirements of the CARES Act could play out in consumer litigation. Specifically, the text of the FCRA still requires that furnishers respond to disputes received from credit reporting agencies within 30 days in most circumstances. So, while the Bureau may decide not to bring an enforcement action against a furnisher for responding to disputes outside the statutory time frame, a consumer likely would still have a private right of action under the FCRA against a furnisher that did not complete its investigation in the statutorily required time frame. Additionally, because consumers are more likely to request payment accommodations from furnishers during this period, there could be an increase in disputes from consumers who claim that their accounts should be reporting as current under the CARES Act. Perhaps anticipating the increased number of consumer disputes, the Bureau “reminds” furnishers that they may take advantage of statutory provisions that eliminate the obligation of a furnisher to respond to disputes that it reasonably determines to be frivolous or irrelevant. While this is a helpful reminder, particularly as it relates to disputes received through Credit Repair Organizations, a furnisher may be more concerned about labeling disputes as frivolous given the amendments to the FCRA. The increase in disputes, even potentially frivolous disputes, is likely to lead to increased litigation.