Recently, many worried that a government shutdown would significantly impact consumers and employers. While consumers may face financial difficulties, employers may struggle to continue hiring for open positions. These concerns have led many to wonder what problems a government shutdown causes for consumer reporting agencies (CRAs).

Unfortunately, no laws specify how CRAs must respond to problems caused by a government shutdown. Though the government has temporarily avoided a shutdown, the concerns have reached several U.S. Representatives. These Representatives co-sponsored a bill addressing these concerns. 

They would require financial regulatory agencies to release guidance encouraging financial institutions to protect consumers. The bill included the Financial Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) to help reduce the impact of a government shutdown on consumers. 

Bill’s Requirements

The bill would direct the agencies to do the following:

• “Recognize that consumers and businesses affected by a shutdown may lose access to credit and face temporary hardship in paying debts such as mortgages, student loans, car loans, business loans, or credit cards.
• Consider prudent efforts to modify terms on existing loans or extend new credit to help consumers and businesses affected by a shutdown, consistent with safe and sound lending practices.
• Take steps to prevent adverse information from being reported and utilized in any manner that harms consumers affected by a shutdown, including by preventing modified credit arrangements intended to help consumers fulfill their financial obligations from being reported to and coded by consumer reporting agencies on a consumer’s credit report in a manner that hurts the creditworthiness of the consumer.”

The Affected Entities

Although this law primarily affects financial institutions that have provided credit to consumers, it could involve CRAs cooperating with them. In such cases, they would help prevent harmful impacts on consumers’ credit reports due to credit arrangements made during a government shutdown. The law would also require regulators to share the guidance publicly.

This step would inform consumers, businesses, and financial institutions what is coming and what to expect within 24 hours of when a shutdown begins. Once the shutdown ends, they would have 90 days to provide Congress with a report analyzing the guidance’s effectiveness. It must also describe the steps taken to ensure the public and employers felt minimal impact.

This bill is not the first attempt to help those affected by a government shutdown. In 2019, five federal agencies and state regulators encouraged financial institutions to work with consumers affected by the shutdown. These agencies encouraged financial institutions to modify the terms of existing loans or extend credit to homeowners having difficulties.

At the time, the CFPB stated, “Prudent workout arrangements consistent with safe-and-sound lending practices are generally in the long-term best interest of the financial institution, the borrower, and the economy. Such efforts should not be subject to examiner criticism.”

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The U.S. Court of Appeals for the Seventh Circuit recently issued a ruling that affirmed summary judgment. This affirmation affects a defending data furnisher in a lawsuit for allegedly violating the Fair Credit Reporting Act (FCRA). According to the Court, the data furnisher owed no liability due to the consumer reporting agency’s (CRA’s) misinterpretation of the allegedly “misleading data.”

The issues involve a mortgage the plaintiff obtained in 2007. According to the case, the plaintiff failed to make monthly payments starting in 2015. By 2016, her reports showed 90 days delinquent. The plaintiff attempted to resolve the delinquency by negotiating a short sale. This sale closed on January 14, 2016, settling the debt.

In 2019, the plaintiff realized the delinquency still appeared on her credit report and filed a dispute with a CRA. The agency forwarded the claim to the data furnisher via four automated consumer dispute verification (ACDV) forms. The data furnisher returned multiple ACDV responses while amending and verifying several contested points.

However, the CRA interpreted the modified data to mean the plaintiff had missed several mortgage payments. As such, the plaintiff’s subsequent application for a mortgage loan ended in a denial. This rejection resulted in the plaintiff filing separate lawsuits against the data furnisher and CRA.

The plaintiff claimed the data furnisher violated § 1681s-2(b) of the FCRA. Upon notice of a dispute, furnishers must run a reasonable investigation of the disputed data. They must then report the results to the CRA that forwarded the dispute. Should the information prove inaccurate, the furnishers must inform all the CRAs who received the incorrect information.

However, the district court granted summary judgment to the defending data furnisher. The court found that the furnished information did not materially mislead. According to the decision, the plaintiff failed to make a threshold that proved the information inaccurate or misleading. Furthermore, the court argued that the CRA could have interpreted the ACDV-furnished data correctly.

The plaintiff appealed this decision, and now the appeals court has affirmed the ruling for summary judgment. In its decision, the Seventh Circuit has joined multiple other circuits in finding that claims under § 1681s-2(b) require plaintiffs to establish as a threshold element that a furnisher of data provided inaccurate or incomplete information that was materially misleading or incorrect. 

According to the court, the accuracy or completeness of a furnisher’s ACDV response does not consider the accuracy of the CRA’s report. Instead, judgment concerns objective review. As a result, the Seventh Circuit held the district court’s decision as correct, affirming the ruling for summary judgment.

This case acts as a reminder of the importance of maintaining accuracy and providing due diligence. This reminder also applies to the accuracy of consumer reports related to employment. As such, employers should work with a trusted screening provider to ensure they receive accurate and complete information.

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