In response to the COVID-19 pandemic, many lenders are being flexible when it comes to consumers’ making payments. The Consumer Financial Protection Bureau (“CFPB”) added some structure to those efforts by releasing a policy statement that outlines the responsibility of credit-reporting companies and furnishers during the COVID-19 pandemic.
The CFPB seeks to encourage lenders to continue to work with consumers affected by COVID-19 with various forms of payment flexibility, including allowing consumers to defer or skip payments, whether as required by the CARES Act or voluntarily. And the CFPB’s statement recognizes that many furnishers and credit reporting agencies are also experiencing hardships due to the pandemic, including staffing and resource constraints.
Accordingly, the CFPB’s statement provides flexibility for lenders and credit bureaus in the time they take to investigate disputes. The Fair Credit Reporting Act (“FCRA”) generally requires that consumer reporting agencies and furnishers investigate disputes within 30 days of receipt of the consumer’s dispute. The 30-day period may be extended to 45 days if the consumer provides additional information that is relevant to the investigation during the 30-day period.
But the CFPB has stated that it does not intend to cite in an examination or bring an enforcement action against firms who exceed the deadlines to investigate such disputes, as long as those firms make good-faith efforts during the pandemic to investigate as quickly as possible. Each case will be analyzed individually to determine whether such good-faith efforts were made considering all the circumstances. The CFPB also reminded furnishers and credit reporting agencies that certain statutory provisions allow them to circumvent any obligation to investigate disputes deemed frivolous or irrelevant.
The CARES Act, recently passed by Congress, requires lenders to report to credit bureaus that consumers are current on their loans if consumers have sought relief from their lenders due to the pandemic. Such payment accommodations will avoid the reporting of delinquencies resulting from the effects of COVID-19. The CFPB also stated it does not intend to take enforcement action against furnishers whose reported information accurately reflects their COVID-19 financial relief measures.
Nonetheless, the CFPB did note that the “Policy Statement is a non-binding general statement of policy articulating considerations relevant to the Bureau’s exercise of its supervisory and enforcement authorities.” Thus, the statement does not provide flexibility with respect to claims filed against furnishers and credit reporting agencies by allegedly aggrieved consumers, so credit reporters and furnishers of information should not relax their efforts.
Moreover, on April 13, 2020, twenty-three attorneys general sent a joint letter urging the CFPB to withdraw its recent guidance on Fair Credit Reporting Act (FCRA) requirements during the COVID-19 crisis. The attorneys general urged the CFPB to reverse its decisions to refrain from enforcement, and argued that a failure to enforce the CARES Act’s amendments to the FCRA would deprive consumers of necessary protections that enable them to weather economic turbulence without incurring lasting harm to their credit scores. The attorneys general argued that enforcement is particularly important because credit reporters and furnishers will likely make credit-reporting mistakes as they adapt to the new reporting requirements.
Regardless of whether this letter will change the CFPB’s position, the attorneys general made it clear that they intend to vigorously enforce FCRA’s deadlines and the CARES Act’s amendment. Accordingly, great care should be taken when reporting, as we expect to see a sharp increase in the number of lawsuits alleging violations of FCRA for inaccurate credit reporting against furnishers and reporting agencies. This is especially true considering that several federal appellate courts employ a low standard to find that a report provided “inaccurate” information, which includes technically accurate information that could be considered misleading.
On April 2, 2020, the United States Court of Appeals for the Sixth Circuit joined this group. Now, to state a claim under FCRA for inaccurate reporting in the Sixth Circuit (which encompasses federal courts in Michigan, Ohio and Kentucky), “a plaintiff may allege that a [credit reporting agency] reported either ‘patently incorrect’ information about them or information that was ‘misleading in such a way and to such an extent that it [could have been] expected to have an adverse effect [on the consumer].’” Twumasi-Ankrah v. Checkr, Inc., No. 19-3771, 2020 U.S. App. LEXIS 10427, at *8 (6th Cir. Apr. 2, 2020).
In Twumasi, the plaintiff was a former Uber driver who was fired from Uber after Uber requested a background check from the defendant, Chekr Inc. (“Chekr”). As part of its background check, Chekr provided a report from the Ohio Bureau of Motor Vehicles which stated that the plaintiff had been involved in three accidents. The report also contained a section that reported violations separately from accidents. The plaintiff alleged that because the report did not state whether he was at fault for the accidents, it misled Uber into believing he was at fault for all three and that, on that basis, he was fired. Chekr argued there were numerous other reasons for which the plaintiff could have been fired. Nonetheless, the court held the plaintiff stated a claim for a violation of FCRA. Id. at *14. The court reasoned that “taken as true, these allegations plausibly suggest that Checkr reported ‘misleading’ information about [the plaintiff] that could have been ‘expected to have an adverse effect’ on him.” Id.
Put simply, it is more important now than ever to ensure accurate reporting of information. While the CFPB has backed away from some enforcement, at least twenty-three state attorneys general have announced they will engage in vigorous enforcement. And the enforcement agencies’ decisions have no effect on claims filed by individuals or asserted in putative class actions against furnishers and reporters, alleging FCRA violations.
To sign up for e-mail updates from the NextGen Financial Services Report, Click Here.
Stay ahead of emerging issues with Dykema’s COVID-19 Legal Resource Center and subscribe to all relevant publications so you can easily leverage information, stay up to date on evolving developments, and better position yourself for success.