CARES ACT Modifies Some FCRA Obligations
Apr 06, 2020
As a nation we are all adjusting to a new normal because of the COVID-19 national emergency. The CARES Act (Coronavirus Aid, Relief, and Economic Security Act) was passed by Congress and signed by the President last week. It was enacted to provide various relief measures to help sustain our economy, as 97% of the nation's population is now under "shelter-in-place" orders, except for businesses providing "essential" services.
One of the benefits of the CARES Act is that it allows consumers to obtain deferment of debt payments, classified as "accommodations" under this Act, from credit card companies, banks, and other loan providers, as long as some conditions are satisfied during this COVID-19 national emergency.
The CARES Act, though, went even further. It modified the Fair Credit Reporting Act (FCRA) – the same law that regulates employee and volunteer screening, tenant and resident screening, franchisee screening, and country club and other membership screening background checks.
However, the FCRA is also the consumer lending protection law. In this regard, the CARES Act specifically prevents furnishers of credit information (i.e., creditors, such as banks, credit card companies, mortgage companies, etc., that report consumer credit information to credit reporting agencies – CRAs) from reporting accommodations of any payment deferrals. (The CARES Act did this by adding a subsection (F) to Section 1681s-2(a)(1) of the FCRA, where previously there were only subsections A-E).
If a consumer takes advantage of a payment accommodation, the creditor/bank cannot report this to a credit reporting agency - CRA. It must be reported as current (unless the consumer was already delinquent at the time of the accommodation). However, if the consumer pays the delinquent amount during the accommodation, and continues to defer future payments, the creditor/bank will need to then report the loan account as current to the CRA.
The CARES Act requires that reporting of loan payment deferral accommodations follow these rules from January 31, 2020 to the "later of" 120 days following the enactment of the Act or 120 days after the COVID-19 national emergency is officially declared to have ceased. Credit card companies, banks and other creditors can therefore expect these new FCRA reporting responsibilities to linger into the third quarter of this year, and possibly beyond.
Posted by: Rudy Troisi, L.P.I., President and CEO, Reliable Background Screening
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