CFPB Issues Credit Reporting Guidance Amid Pandemic

By Jon Hill
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Law360 (April 1, 2020, 9:26 PM EDT) -- The Consumer Financial Protection Bureau offered guidance Wednesday about how it plans to handle consumer credit reporting oversight during the coronavirus pandemic, saying it will give companies some flexibility on meeting dispute investigation deadlines and won't go after them for telling credit bureaus about payment help given to borrowers. 

In a statement, the CFPB said it supports efforts to assist struggling borrowers and expects lenders to abide by the restrictions on negative credit reporting enacted last week as part of the Coronavirus Aid, Relief, and Economic Security, or CARES, Act, which requires creditors to keep reporting borrowers' accounts as current when payment deferrals or other accommodations are granted because of financial hardship tied to the pandemic.

But the agency said it is encouraging lenders to otherwise continue their consumer credit reporting during the COVID-19 crisis and won't take action against those that "furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing."

"Furnishers' providing accurate information to consumer reporting agencies produces substantial benefits for consumers, users of consumer reports, and the economy as a whole," the CFPB said.

The CFPB said it will also not hold companies to strict deadlines for investigating disputes that consumers have about information on their credit reports.

Under federal law, creditors and credit bureaus have 30 to 45 days to investigate once a consumer initiates a dispute, but the agency said it knows these timeframes may not be practical right now because of staff shortages and other "significant operational disruptions" caused by the COVID-19 crisis.

As a result, the CFPB said it won't take supervisory or enforcement action against companies that make "good faith efforts to investigate disputes as quickly as possible, even if dispute investigations take longer than the statutory timeframe."

The agency added that it will be similarly sensitive to the bandwidth limitations currently facing firms when it is evaluating the reasonableness of a company's decision to classify a dispute as "frivolous or irrelevant," a determination that can spare the company from having to investigate further.

"During this time of uncertainty, we are providing clarity to ensure the consumer reporting industry can continue to function," CFPB Director Kathleen Kraninger said in a statement.  "An effective consumer reporting system is critical in promoting fair and efficient access to credit in the consumer financial services market."

But consumer advocates such as Chi Chi Wu, staff attorney with the National Consumer Law Center, argued on Wednesday that the CFPB had actually left consumers high and dry with its guidance.

"The CFPB's guidance does not provide one iota of assistance to consumers who are unable to reach their creditors because of long phone hold times, who are too overwhelmed by job losses or dealing with COVID-19 personally or helping afflicted family, or whose creditors are heartless enough to deny them relief," Wu said in a statement. "Instead, the CFPB provides a helping hand to creditors, debt collectors and credit bureaus, even though the latter are the number one source of complaints to the CFPB's own complaint database."

Wu questioned whether the agency can essentially relax the dispute investigation deadlines for companies without a formal rulemaking, and she faulted the guidance for going no further than to remind companies to comply with the CARES Act's negative credit reporting moratorium, which Wu called a "meaningless" protection because it only applies to borrowers who don't fall into delinquency before they're granted payment relief.

"This is shameful beyond belief at a time when so many families and individuals are suffering, and it will make it much more difficult for them to recover financially for many years to come," Wu said of the guidance. 

Aracely Panameño, a director at the Center for Responsible Lending, similarly slammed the document as "outright cruel."

"Giving payday lenders a free pass to do negative reporting on borrowers they've trapped in crippling debt during a time of crisis isn't helpful to consumers," Panameño said in a statement. "It will only drive credit scores lower and make workers financially vulnerable during a time when they need safe and affordable credit. This guidance doesn't provide relief, it doesn't help consumers, and it may have just jeopardized financial security for countless families across the country."

--Editing by Jay Jackson Jr.

For a reprint of this article, please contact reprints@law360.com.

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