On Friday, March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed into law. The newly enacted provisions have the effect of impacting the manner in which financial institutions, including banks, non-bank lenders, and mortgage servicers engage in credit reporting as the country works through the ongoing COVID-19 pandemic.
Section 4021 of the CARES Act serves to amend the Fair Credit Reporting Act (FCRA) (15 U.S.C. 1681). It requires that a furnisher of credit reporting information that makes an accommodation to a consumer for one or more payments report the obligation as current if the consumer makes the payment(s) or is not required to. Alternatively, if the obligation was delinquent at the time of the accommodation, it should be reported delinquent unless brought current, at which time it should be reported as so. The reporting changes are to run from Jan. 31, 2020 to the later of 120 days following enactment of the legislation or 120 days after the end of the current national emergency that was declared on March 13, 2020.
Following the enactment of the CARES Act, the Bureau of Consumer Financial Protection (“the Bureau”) issued a Statement on Supervisory and Enforcement Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES Act (“Statement”). The Statement generally outlines the Bureau’s stance on credit reporting as amended by the CARES Act. The Statement also acknowledges both the importance of credit reporting during these extraordinary times as it relates to consumers, along with anticipated hurdles that furnishers may now face related to volume and staffing issues.
Prior to the recent enacting of the CARES Act, it was commonplace to see consistent litigation based on alleged FCRA violations related to willful or negligent violations of 15 U.S.C. § 1681s-2(b) by failing to perform one or more of the following tasks: (1) conduct an investigation of the inaccurate information that was disputed; (2) to review all relevant information concerning a customers’ account; (3) report the resulting inaccurate information to all credit reporting agencies; and (4) properly participate, investigate, and comply with the reinvestigations that were conducted by any and all credit reporting agencies. Additionally, litigation also involved the alleged furnishing of inaccurate credit, account, and other information concerning the consumer despite knowing said information was inaccurate.
It is anticipated that as a result of the current economic woes caused by COVID-19, there will be a continued influx of demands for accommodations in the form of forbearances made by consumers to financial institutions that serve as credit information furnishers. For the furnishers, however, there must be some wariness and precautions involved in providing mass accommodations in that even though they are encouraged to be flexible during these extraordinary times, there is the potential for improper reporting and associated allegations to rear their head through lawsuits and pre-suit demands from a population already on the outset of economic struggle. With current moratoriums and filing holds in place, the question remains if the courts will be as flexible when judging furnishers and financial intuitions that have purportedly violated FCRA provisions in an effort to combat large scale economic harm from a population already reeling.
Lance Morley serves as a Vice President and Corporate Counsel with Bayview Asset Management, LLC, a mortgage investment firm focusing on investments in mortgage credit, including whole loans, mortgage and asset-backed securities, servicing rights, and mortgage-related equities. Among his duties, Lance is responsible for managing both state and federal litigation associated with the loan servicing arm of Bayview (Bayview Loan Servicing, LLC), which primarily focuses on financial services lawsuits.