On March 31, the Consumer Financial Protection Bureau (CFPB or Bureau) announced it is rescinding its April 1, 2020 policy statement regarding the Fair Credit Reporting Act (FCRA) and Regulation V following the enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This recission is effective April 1.
Background
On March 27, 2020, President Trump signed the CARES Act into law. Among other provisions, the CARES Act amended the FCRA to require businesses furnishing consumer credit information to consumer reporting agencies (CRAs) to report as “current” any account for which a consumer is performing pursuant to a COVID-19-related deferral, partial payment, or forbearance agreement — including missing one or more payments as agreed. The special reporting period started January 31, 2020 and will end 120 days from the later of the enactment of the CARES Act or the end of the national state of emergency — meaning at present there is no end date.
Recognizing the logistical difficulties presented by these obligations during the pandemic, the CFPB issued a “non-binding general” policy statement on April 1, 2020, stating it would not enforce the FCRA’s statutory investigation timeframe against furnishers or consumer reporting agencies acting in good faith. The April 1, 2020 policy statement emphasized that a CRA’s or furnisher’s investigative dispute period would be extended from 30 to 45 days if a consumer provided additional information relevant to an investigation. Additionally, the CFPB encouraged furnishers and CRAs to alleviate operation stress by not investigating “disputes submitted by credit repair organizations and disputes they reasonably determine to be frivolous or irrelevant.”
The CFPB maintained its April 1, 2020 guidance despite initial push back from state attorneys general and calls from consumer advocacy groups later in the year.
Recission of April 1, 2020 Guidance
In the press release announcing recission of the April 1, 2020 guidance, CFPB Acting Director Dave Uejio stated, “Providing regulatory flexibility to companies should not come at the expense of consumers. Because many financial institutions have developed more robust remote capabilities and demonstrated improved operations, it is no longer prudent to maintain these flexibilities. The CFPB’s first priority, today and always, is protecting consumers from harm.”
The recission, available here, states the CFPB’s April 2020 guidance “expressed the Bureau’s recognition of the impact of the COVID-19 pandemic on the operations of many consumer reporting agencies and furnishers.” But the Bureau believes recission is now appropriate as “consumer reporting agencies and furnishers have had sufficient time to adapt to the pandemic and should be able to regularly meet their obligations under the FCRA and Regulation V.”
Addressing concerns that one day’s notice was not a significant heads-up to companies regarding the policy shift, the recission states, “because the [April 1, 2020 guidance] did not create binding legal obligations on the Bureau or create or confer any substantive rights on external parties, it did not create any reasonable reliance interests for industry participants.”
Notably, the recission does not apply to the section of the April 2020 guidance titled, “Furnishing Consumer Information Impacted by COVID-19.” That unaffected section encourages furnishers “to continue furnishing information despite the current crisis,” while also supporting “furnishers’ voluntary efforts to provide payment relief.” The section also states the CFPB “does not intend to cite in examinations or take enforcement actions those who furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing.”
Takeaways
Companies providing consumer financial services have been anticipating a more aggressive CFPB under President Biden. On January 18, then President-elect Joe Biden announced he would nominate current Federal Trade Commission (FTC) Commissioner Rohit Chopra as the next director of the CFPB. Last week, the CFPB signaled its enforcement priorities in its Consumer Response 2020 Annual Report to Congress.
Furnishers and CRAs can continue to expect a more robust presence from the CFPB and should immediately re-evaluate their compliance management systems to minimize risk.