CFPB Issues Policy Statement on Its Supervisory and Enforcement Practices

The Consumer Financial Protection Bureau (CFPB) on April 1, 2020, issued a Statement on Supervisory and Enforcement Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES Act. The statement comes in response to the coronavirus (COVID-19) pandemic and the recently passed Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and serves two primary purposes. First, the statement outlines the responsibilities, under the CARES Act, of entities that furnish information to consumer reporting agencies. Second, the statement informs consumer reporting agencies and entities that furnish information to consumer reporting agencies of the CFPB's flexible approach to supervision and enforcement of Fair Credit Reporting Act and Regulation V compliance during the COVID-19 pandemic.

Furnishers' Responsibilities Under the CARES Act

In its statement, the CFPB recognizes that many furnishers currently are or soon will be offering COVID-19-affected consumers various forms of payment relief. The CFPB emphasizes that if furnishers make payment accommodations to consumers affected by COVID-19, the CARES Act, which amends the Fair Credit Reporting Act, generally requires furnishers to report those consumers' credit obligations as current. Indeed, in pertinent part, the CARES Act provides that "if a furnisher makes an accommodation with respect to 1 or more payments on a credit obligation or account of a consumer, and the consumer makes the payments or is not required to make 1 or more payments pursuant to the accommodation, the furnisher shall—(I) report the credit obligation or account as current; or (II) if the credit obligation or account was delinquent before the accommodation—(aa) maintain the delinquent status during the period in which the accommodation is in effect; and (bb) if the consumer brings the credit obligation or account current during the period described in item (aa), report the credit obligation or account as current." Pub. L. No. 116-136, § 4201 (2020).

In the CFPB's view, these payment accommodations will have the desirable effect of avoiding the reporting of COVID-19-caused delinquencies. And, in its effort to support furnishers' attempts to provide payment relief to consumers and help avoid the reporting of an immense number of delinquencies caused by this global pandemic, the CFPB notes that it "does not intend to cite in examinations or take enforcement actions against entities that furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing."

CFPB's Flexible Approach to Supervision and Enforcement of FCRA and Regulation V Compliance

Under the Fair Credit Reporting Act (FCRA), consumer reporting agencies and furnishers are required to investigate consumer disputes within 30 days of receipt. In its recent statement, the CFPB acknowledges the significant operational disruptions that consumer reporting agencies and furnishers may face during the COVID-19 pandemic. The CFPB understands that these disruptions, whether they relate to reductions in staff, lack of access to necessary information or otherwise, may prevent consumer reporting agencies and furnishers from investigating consumer disputes within the timeframe required by the FCRA. As such, in evaluating FCRA compliance during the pandemic, the CFPB "does not intend to cite in an examination or bring an enforcement action against a consumer reporting agency or furnisher making good faith efforts to investigate disputes as quickly as possible, even if dispute investigations take longer than the statutory timeframe." The CFPB will, of course, consider a consumer reporting agency's or furnisher's individual circumstances, including the entity's size, sophistication and COVID-19-related challenges, in determining whether the entity exercised good faith efforts to investigate disputes as quickly as possible.

The CFPB was also keen to remind consumer reporting agencies and furnishers of the statutory exception to the duty to investigate for disputes that consumer reporting agencies and furnishers reasonably determine to be frivolous or irrelevant. As consumer reporting agencies and furnishers are well aware, under 15 U.S.C. 1681i(a)(3)(A), "a consumer reporting agency may terminate a reinvestigation of information disputed by a consumer . . . if the agency reasonably determines that the dispute by the consumer is frivolous or irrelevant, including by reason of a failure by a consumer to provide sufficient information to investigate the disputed information." Under the CFPB's new policy, it "will consider the significant current constraints on furnisher and consumer reporting agency time, information, and other resources in assessing if such a determination is reasonable."

Conclusion

The CFPB's April 1, 2020, statement of policy has considerable implications for the credit reporting industry and consumer reporting agencies and furnishers should understand the three primary aspects of the new policy, which are summarized below.

First, although the CARES Act generally requires furnishers who make payment accommodations to consumers affected by COVID-19 to report those consumers' credit obligations as current, the CFPB does not intend to cite in examinations or take enforcement actions against entities that furnish information to consumer reporting agencies that accurately reflects the payment accommodations afforded to consumers.

Second, while the FCRA requires consumer reporting agencies and furnishers to investigate consumer disputes within 30 days, the CFPB does not intend to cite in an examination or bring an enforcement action against a consumer reporting agency or furnisher making good faith efforts to investigate disputes as quickly as possible, even if dispute investigations take longer than the statutory timeframe.

Third, 15 U.S.C. 1681i(a)(3)(A) permits consumer reporting agencies and furnishers to terminate an investigation of a consumer dispute if the consumer reporting agency or furnisher reasonably determines that the dispute is frivolous or irrelevant and, during the pandemic, the CFPB will judge consumer reporting agencies' and furnishers' frivolity and relevance determinations in light of the current constraints on consumer reporting agency and furnisher time, information and other resources.

How Holland & Knight Can Help

If you have questions about the potential implications of the CFPB's statement of policy, Holland & Knight's Consumer Protection Defense and Compliance Team and Financial Services Regulatory Team can provide additional information. The teams are comprised of individuals with extensive experience handling CFPB, Federal Trade Commission (FTC) and state attorneys general investigations, and can provide advice on how to best navigate those investigations in an ever-evolving regulatory environment. Please contact the authors with any questions.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the author of this alert for timely advice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.