The CFPB is asking lenders to provide consumers financial accommodation and report this to credit bureaus, but consumer advocates don’t see that as adequate support.
The coronavirus pandemic is taking a toll on employment, impacting peoples’ ability to pay bills and wrecking their credit scores.
For the week ending March 28, the government reported initial unemployment claims of 6.648 million, the highest ever for this statistic.
Although a legislative attempt that sought to prevent reporting of negative credit scores during this crisis has not gained traction, there may be some relief for beleaguered consumers.
The Consumer Financial Protection Bureau, for one, has come out with some guidelines for lenders and credit bureaus on how to deal with credit reporting during this emergency situation.
CFPB asks lenders to report on accommodationsThe coronavirus stimulus legislation, known as the CARES Act, asks lenders to report to credit bureaus that borrowers are current on their loans if they have asked for accommodations as a result of the crisis.
The consumer protection agency is also asking that lenders work with customers to provide relief and report information to credit bureaus on such leniency efforts.
It is good practice for lenders to report information about any flexible arrangements so that consumers’ credit reports are accurate, according to the CFPB.
“During this time of uncertainty, we are providing clarity to ensure the consumer reporting industry can continue to function,” CFPB Director Kathleen Kraninger said in a statement. “Consumers rely on their credit report to purchase a new car, their new home or to finance their college education. An effective consumer reporting system is critical in promoting fair and efficient access to credit in the consumer financial services market.”
And taking into account the strain on resources the emergency has brought about, the CFPB is also giving lenders and credit bureaus a flexible time frame to investigate disputes.
Credit reporting bureaus endorse CARES provision
The major credit reporting bureaus – Equifax, Experian and TransUnion – have endorsed the CARES Act provision to treat consumers who are working on forbearance or a payment plan as current. They believe this will help provide accurate information on consumers so that lenders can make informed decisions.
In a joint statement put out by the Consumer Data Industry Association, a credit reporting industry trade group, the credit bureaus said, “Together, we believe this solution ensures consumers get the help they need while preserving the integrity of the consumer reporting system, which is critical to our economic recovery.”
See related: How credit scores affect interest rates
Consumer advocates say more needs to be done
The National Consumer Law Center, a consumer advocacy group, doesn’t see the CARES legislation attempt to tackle credit reporting as sufficient. According to the group, the provision, which it sees as weaker than the current industry standard for disaster victims, doesn’t do much to protect consumers’ credit records from the coronavirus impact.
“This bill’s credit reporting provision is meaningless,” Chi Chi Wu, an attorney at the NCLC, said in a statement. “Tens of millions of consumers will have their credit reports trashed and their scores nose-dive because of mass unemployment and loss of income, impeding their ability to get affordable credit, jobs, housing and to generally recover when this crisis is over.”
The Consumer Federation of America also noted in a statement that the legislation lacks adequate protection and does not suspend debt collection efforts or negative credit reporting efforts.
See related: How to remove negative items from your credit report
What you can do if you run into difficulties with payments
If you do have difficulties making your credit card payments during this crisis, you could also take some steps. The first course of action would be to contact your card issuer, many of which are offering some form of relief.
And CreditCards.com’s industry analyst Ted Rossman offers the following tips if you’re carrying credit card debt:
- Apply for a 0% balance transfer card, or 0% introductory rate card (though these may be harder to qualify for in the current economy)
- See if you could avail of a personal loan
- Defer your tax filing if you owe money
- See if you can redeem any card rewards you have earned
The CFPB has also set up an online portal providing information on how to manage your credit during this crisis.