COVID-19 Credit Reporting: State AGs Might Strictly Enforce FCRA Even Where CFPB Declines

COVID-19 Update

Relaxed Fair Credit Reporting Act (FCRA) credit reporting enforcement during COVID-19? Not so fast, say 23 state attorneys general (AGs).

As we foretold at the time, the Consumer Financial Protection Bureau’s (CFPB or Bureau) recent guidance on COVID-19-related credit reporting must be balanced against the competing perspectives of state regulators and the plaintiffs’ bar. As we noted at the time, “[w]hile the CFPB might not enforce these response times, other state regulators may take a different approach.”

Under the April 1 guidance, the CFPB indicated it would take a relaxed approach to enforcement or supervisory actions against credit reporting agencies (CRA) and furnishers for failing to investigate consumer disputes in a timely fashion. The FCRA generally requires that CRAs and furnishers investigate consumer disputes within 30 days of receipt of the dispute, with extensions to 45 days where the consumer provides additional information within the 30-day period. Recognizing the significant operational disruptions that COVID-19 has imposed on CRAs and furnishers in investigating disputes, the CFPB notes that it will consider a CRA’s or furnisher’s individual circumstances and does not intend to cite in an examination or bring an enforcement action against a CRA or furnisher making good faith efforts to investigate disputes as quickly as possible, even if dispute investigations take longer than the statutory time frame.

In a letter to the CFPB dated April 13 signed by 23 state attorneys general, the AGs demand that the CFPB withdraw its guidance to regulated entities that the Bureau would not enforce certain timing provisions of the FCRA during the COVID-19 pandemic. The letter argues that the CFPB’s guidance could discourage consumers from taking advantage of the forbearances and other accommodations that lenders are offering during a time of economic uncertainty. In a warning to all regulated entities, the AGs then conclude: “Consumers and CRAs should know that even if CFPB refuses to act, our states will continue to defend our consumers and families throughout this crisis. We will not hesitate to enforce the FCRA’s deadlines against companies that fail to comply with the law.”

The letter is signed by the AGs for Pennsylvania (as lead signatory), California, Colorado, Hawaii, Iowa, Illinois, Massachusetts, Maine, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Puerto Rico, Rhode Island, Vermont, Virginia, Washington, Wisconsin and the District of Columbia.

As institutions grapple with what to do next, we likewise remind you of our parting comments from our earlier reporting:

In the understandable rush by Congress to pass the CARES Act, certain nontechnical language was employed that may be inconsistent with Metro-2® format. As furnishers and CRAs already know, Metro-2 is the industry-standard format for reporting consumer payment history, and following its requirements helps to ensure consistency, accuracy and compliance with data reporting practices. Before promulgating new practices, furnishers and CRAs should take care to harmonize these requirements with Metro-2. Back on March 9, the Consumer Data Industry Association (CDIA) issued a useful reminder regarding preexisting guidance on credit reporting during the similar circumstances of a natural disaster.

Readers should likewise be aware that the CFPB policy guidance was not subject to Administrative Procedures Act rulemaking processes and is not legally binding (as the CFPB itself notes). In other words, while the guidance is a critical tool in evaluating best practices, furnishers and CRAs should supplement the guidance with whatever additional best practices they already have in place.

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