Credit Reporting, Forbearance, and Skips
Amid the ongoing national emergency, NAFCU has blogged about skip payments for open-end and closed-end credit and forbearance agreements. If a credit union provides this type of relief to its members, how does that affect how a credit union reports these loans to a credit reporting agency? The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) explains what is required if a credit union provides relief to its members during the national emergency.
Section 4021 of the CARES Act amends section 623(a)(1) of the Fair Credit Reporting Act (FCRA) and prescribes how credit unions furnish information to credit reporting agencies during the COVID-19 national emergency if they make accommodations as defined in the CARES Act. An accommodation under the CARES Act is an agreement to defer payments, accept partial payments, forbear delinquencies, modify loans, or provide any other relief to members affected by the COVID-19 pandemic during the period beginning January 31, 2020 and ending 120 days after the COVID-19 national emergency ends. The FCRA amendment requires credit unions that make one or more accommodations on a credit account to furnish information to the credit reporting agencies in one of two ways. If a member is current before an accommodation is made, the CARES Act requires reporting the credit account as current. If the account was delinquent before the accommodation, then the CARES Act requires continuing with the delinquent reporting while the accommodation is in place unless the member becomes current during the accommodation. If that happens, the CARES Act mandates that the account be reported as current.
With the credit reporting requirements included in the CARES Act, you may wonder whether there are any additional resources that might be helpful in documenting a credit union's reporting obligations when there is a forbearance or a deferral of payments. The Consumer Data Industry Association (CDIA) has provided several useful resources about how to furnish information under these circumstances.
The CDIA is a trade organization representing the consumer reporting industry. The CDIA developed the Metro 2® reporting format - which appears to be the industry standard for reporting information. During the pandemic, the CDIA has reminded furnishers of information that there is already a framework in place to address credit reporting of forbearances that arise out of the COVID-19 national emergency. In particular, the CDIA has identified two frequently asked questions (FAQ) included in its Credit Reporting Resource Guide, FAQs 58 and 45, that deal with accounts affected by a natural disaster and accounts in forbearance, respectively.
Both FAQs explain the nuts and bolts of reporting these two types of accounts and include information about:
- what information should be reported in particular fields (e.g., "D" used for terms frequency to show that payments are deferred),
- what special comment codes should be used depending on whether a credit union is reporting an account under the natural disaster rules (AW) or the rules for accounts in forbearance (CP), and
- things to consider if a member's account was delinquent before the account was affected by the COVID-19 national emergency or went into forbearance.
The CDIA has a relevant webinar from March available on its website. The webinar walks through the application of both FAQs and some of the practical considerations of following the guidance in the FAQs. For example, the webinar noted that credit unions can make a risk-based decision about whether to follow the reporting guidance, and if they choose to do so, which pathway to choose. The webinar also answered several questions that can help credit unions understand how the reporting guidance in FAQs 58 and 45 aligns with their existing credit reporting policies. Like the policy statement issued by the Consumer Financial Protection Bureau, the webinar encourages furnishers to continue reporting information instead of suppressing consumer reporting during this time to avoid gaps that may be harmful to consumers and the economy. In short, the CDIA, through the FAQs and the webinar, has provided information that can help credit unions navigate through this reporting minefield.