Just about every card issuer has a compassionate program to defer credit card payments for those impacted by COVID-19, but there has been a lack of clarity on how credit bureau reporting will be affected. Here is a good read from The National Law Review which opines on the nuances of how credit reporting agencies will handle this critical aspect of consumer life. Improper handling can affect the FICO Score, which drives most of the lending decisions for U.S. Consumers.
My read is that the integrity of credit scoring process is protected.
As part of the federal government’s efforts to provide relief from the economic impact of the COVID-19 pandemic to consumers, Congress took aim at financial services companies that provide consumer account information to credit reporting agencies (CRAs).
The reporting activities of those companies, which are known as “furnishers” and include, among others, creditors, mortgage loan servicers and credit card account servicers, are governed by
the Fair Credit Reporting Act (FCRA). [1]
The Coronavirus Aid, Relief, and Economic Security (CARES) Act
The National Law Review breaks down the difference between current and non-current accounts and how they will be treated. The quick answer is that if the credit cardholder was delinquent before the deferment, and they did not bring their account up to day, they would be reported as delinquent. If the credit card holder was not delinquent, and the deferment was designed to stabilize their status, they would be reported as current.
For accounts provided an accommodation, furnishers must report as follows:
Report as “current,” if the account was current before the accommodation, as long as the consumer makes the required accommodation payments or is not required to make a payment under the accommodation; or
Report as “delinquent,” if the account was delinquent before the accommodation, unless the consumer brings the account current during that period, at which time it should be reported as “current.”
The article comments on a few other important items. First, state laws must yield to federal law, that is the Fair Credit Reporting Act (FCRA), which means that a particular state can not make a contrary ruling. Second, the Consumer Financial Protection Bureau (CFPB) will not take action against creditors who make good faith efforts to investigate related disputes.
Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group.
