Big FCRA Changes Ahead? HEROES Act Would Ban Reporting of Adverse Information During National Emerge

As noted earlier, a 1,815-page House bill has just been introduced that affords $3 trillion in relief to consumers and businesses impacted by COVID 19. The bill (official title: the Health and Economic Recovery Omnibus Emergency Solutions Act, or “HEROES Act”) addresses numerous topics, but I’d like to focus on one: amendments to the Fair Credit Reporting Act (“FCRA”) designed to prevent reporting of adverse information arising out of a national emergency. However well-intentioned these provisions may be, they work an extreme—some might say unworkable and crazy— shift to the credit reporting landscape. If implemented, these changes would have significant negative impact on the financial services industry and consumers’ ability to get credit at rates reflecting their true repayment risk. The House will vote on the bill this Friday but—unsurprisingly given the bill’s drawbacks— the odds of it passing the Senate and being signed by the President in its current form lie somewhere between very unlikely and a snowball’s chance in Hell.

Calling out a handful of the troublesome amendments to the FCRA proposed by the HEROES Act:

  • All Adverse Information Arising from “Major Disaster” Must Be Excluded from Consumer Reports. Under the HEROES Act, consumer reporting agencies (“CRAs”) are prohibited from including “an adverse item of information” (other than a felony conviction) that was the result of “any action or inaction that occurred” during a period declared to be a “major disaster” by the President. There is a similar prohibition on furnishers furnishing such adverse information to CRAs. Think about that. But when is an adverse fact “the result of” an action or inaction that occurred during an emergency? Some cases are easy – I’ve been in the hospital for two months with COVID-19, couldn’t work and so missed payments on my credit cards and mortgage. Fine. But if I’m a CRA and two years from now I want to include a bankruptcy in a consumer report, how could I possibly know if there was some action or inaction that took place during the pandemic such that the bankruptcy could be said to have “resulted” from such action or inaction? It’s an impossible standard.

  • A Catalog of Consumer Woe? HEROES Would Create CFPB Website to Track Consumers’ Economic Hardships. FULL ARTICLE