CFPB Issues Guidance on FCRA in Light of COVID-19

By Michael Klazema on 4/21/2020

The Consumer Financial Protection Bureau (CFPB) recently issued guidance to help consumer reporting agencies (including background check companies) stay compliant with the Fair Credit Reporting Act (FCRA) in light of COVID-19. Specifically, the CFPB guidance relates to the Coronavirus Aid, Relief, and Economic Security Act or CARES Act.

The CARES Act is intended to provide emergency financial relief to private citizens throughout the United States along with industries impacted by the novel coronavirus. The CFPB published guidance on the CARES Act because the legislation “includes provisions addressing consumer reporting requirements” that could affect reporting agencies, employers, and other entities (such as banks, insurance providers, and credit card companies) that rely on consumer reports to make decisions.

The CFPB guidance document—titled “Statement on Supervisory and Enforcement Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES Act”—will not have direct implications for most employers. If you are an employer that uses background checks to make hiring decisions, the specific obligations of FCRA compliance will not be changing for you. You must still issue all necessary disclosures and follow all guidelines laid forth by the FCRA.

The CFPB’s guidance is intended to ensure the “continued operation of the consumer reporting system.” “Consumer report information is critical to consumers and industry in determining who obtains credit, insurance, and housing, and at what price, and who obtains employment in many cases,” the guidance reads. “Consumer reporting has enormous reach, as evidenced by the over 200 million consumers in the United States who have credit files and trade lines furnished by over 10,000 providers.”

Keeping this system operational, even in light of a significant economic disruption, “will play a critical role in the functioning of the consumer financial services market, promoting fair and efficient access to credit and benefiting consumers and creditors alike,” according to the CFPB.

There are two reasons why the COVID-19 pandemic may affect the consumer reporting system. First, the pandemic has effectively kickstarted a recession that will affect the financial standing and wellbeing of consumers. This fact has raised questions of how consumer reporting agencies will report information such as missed payments—especially if landlords, lenders, or creditors provide consumers with leeway on late payments.

Second, COVID-19 has led to stay-at-home orders and other workplace disruptions on a nationwide scale, which the CFPB acknowledged could create staffing challenges and other hurdles that would “temporarily impede” the ability of consumer reporting agencies “to timely comply with their statutory and regulatory consumer reporting obligations.”

The CFPB guidance both gives data furnishers the right to provide payment relief (and report consumer data that reflects this relief) and gives consumer reporting agencies more flexibility in reporting or reviewing information. For instance, the FCRA typically requires consumer reporting agencies and data furnishers to investigate consumer disputes within 30 days of receiving them. The CFPB will grant leeway to agencies or data furnishers that are currently unable to meet this time-frame due to staffing shortages.

For employers, this guidance underlines the importance of the consumer reporting system and keeping the system stable during the COVID-19 pandemic. Hiring managers do not necessarily have to change any of their practices when filling open positions. However, if employers utilize credit history checks or bankruptcy reports to make hiring decisions, they may wish to follow the CFPB’s lead in acknowledging the financial hardships that COVID-19 and the resulting economic downturn are likely to cause.

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