Q: Reporting to Credit Reporting Agencies. How should financial institutions report loan payment histories to the credit reporting agencies when the institution and borrower have agreed to a payment accommodation?
A: For institutions that report credit payment histories to a credit reporting agency, Section 4021 of the recently enacted Coronavirus Aid, Relief, and Economic Security Act (CARES Act) amends the Fair Credit Reporting Act to provide relief from negative credit reporting for those who receive payment modifications or forbearances because of the coronavirus pandemic. Under Section 4021, during the period of January 31, 2020 until 120 days after the end of the national coronavirus emergency declaration, if a financial institution makes an accommodation for one or more payments, and the borrower fulfills the terms of the accommodation, the institution should report the account as current. However, if an account was delinquent before the coronavirus pandemic the financial institution can continue to report the account as delinquent unless the account is brought current. Further, Section 4021 does not apply to accounts that have been charged off.
The credit reporting agencies have provided guidance regarding the credit reporting coding options available for furnishers of credit report information during disasters and specifically the COVID-19 emergency. Furnishers are encouraged to review the options available to determine the appropriate coding policy for their borrowers.
The Consumer Financial Protection Bureau (CFPB) released a statement reiterating that financial institutions must follow the provisions of the CARES Act. Refer to the CFPB for more information regarding the FCRA. In addition, the FDIC encourages financial institutions to provide borrowers affected by the COVID-19 outbreak with payment accommodations that facilitate their ability to work through the immediate impact of the virus.
This Q&A was contained in the Frequently Asked Questions for Financial Institutions Affected by the Coronavirus Disease 2019 (Referred to as COVID-19) – As of March 3, 2021 (which may be updated from time to time). This may be found on the FDIC’s website here: https://www.fdic.gov/Coronavirus/faq-fi.pdf.