CFPB Adopts “Flexible Approach” to FCRA Enforcement in COVID Era — Will Courts Do the Same?

April 3, 2020

The Consumer Financial Protection Bureau announced on April 1, 2020, that it will take a “flexible approach” to supervision and enforcement practices under the Fair Credit Reporting Act and Regulation V because of the CARES Act and the ongoing COVID-19 pandemic.

While the CFPB’s announcement reassures furnishers that engaging in good faith efforts to comply with the FCRA may insulate them from regulatory or enforcement action, it does not protect furnishers or consumer reporting agencies from private lawsuits to enforce the FCRA. Given the daunting challenges furnishers will face in trying to meet statutory deadlines for completing investigations during this pandemic, private FCRA litigation is expected to spike, even as government agencies relax regulatory and enforcement standards.

What’s in the CFPB Policy Statement?

The CFPB’s policy statement provides several examples of the flexibility it intends to provide in credit reporting supervision and enforcement. Among its many provisions, the CARES Act amends the FCRA to require furnishers who make payment accommodations to their customers to “report the credit obligation as current” or maintain a delinquent report, if the account was already delinquent when the accommodation was given. See CARES Act, Pub. L. No. 116-136, § 4201 (2020). Acknowledging that many furnishers will be giving such accommodations in the coming months due to the economic impact of COVID-19, the CFPB announced its support for such measures, including that it will not take enforcement actions against those who furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing.

The CFPB also acknowledged that furnishers are likely to face “significant operational disruptions that pose challenges for them in investigating consumer disputes,” such as reductions in staff, difficulty in-taking disputes, or lack of access to necessary information, rendering them unable to investigate consumer reporting disputes within the timeframes the FCRA requires. The CFPB advised that it will consider a furnisher’s individual circumstances in evaluating compliance with the FCRA as a result of the pandemic, and that it does not intend to bring enforcement actions against furnishers “making good faith efforts to investigate disputes as quickly as possible.”

Finally, the CFPB hinted that it will apply lesser scrutiny to furnisher determinations that investigations are unnecessary for certain disputes. The CFPB “reminded” furnishers that they have no obligation under the FCRA to investigate disputes submitted by credit repair organizations and disputes they reasonably determine to be frivolous or irrelevant, and reassured furnishers that it will consider the “significant current constraints on furnishers and consumer reporting agency time, information and other resources” in evaluating whether such determinations were reasonable.

What’s Not in the CFPB Policy Statement?

The CFPB’s announcement provides welcome reassurance to furnishers and consumer reporting agencies that they are unlikely to face regulatory action during this difficult time, as long as they are making good faith attempts to comply with the FCRA. That said, the CFPB’s policy determinations do not impact the statutory standards that apply in private litigation under the FCRA. For one, furnishers and consumer reporting agencies have independent duties to reasonably investigate credit disputes received from consumers and face monetary exposure if they fail to do so. The CFPB’s announcement, therefore, does not insulate furnishers or consumer reporting agencies from this potential exposure.

Like the last recession, as more accounts enter delinquency due to job losses, furloughs and generally lower income, expect to see a dramatic increase in credit disputes. This time around, however, furnishers and consumer reporting agencies will be especially taxed due to the stresses they are facing on their own resources. Given these factors, furnishers and credit reporting agencies should expect a spike in FCRA litigation in the near term.

McGuireWoods has published additional thought leadership related to how companies across various industries can address crucial COVID-19-related business and legal issues.