On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. No. 116-136 (H.R. 748)) was signed into law. The CARES Act consists of a $2 trillion economic relief package to aid businesses and workers affected by the 2019 novel coronavirus disease (COVID-19). This Update focuses on the bank regulatory-related provisions of the CARES Act. For a discussion of the bank regulatory-related provisions of the CARES Act, see Legal Update, CARES Act: Bank Regulatory Relief Provisions.

The CARES Act piggybacks on recent directives issued by the US Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) by providing the following mortgage relief for all borrowers with a federally-backed mortgage:

For a more detailed discussion of the CARES Act provisions affecting mortgages, see Legal Update, COVID-19: Federal CARES Act Stimulus Provides Relief for Federally Backed Residential and Multifamily Mortgage Loans.

The CARES Act provides for a temporary amendment to the Fair Credit Reporting Act (FCRA) that requires a creditor to report a credit obligation as current, even in cases where the creditor has granted the consumer forbearance or approved a loan modification due to COVID-19. However, a creditor is not required to report a credit obligation as current in cases where the consumer has not complied with the terms of forbearance or the loan modification, or where the credit account has been charged off. Further, where the consumer’s account was delinquent before the COVID-19 accommodation was requested, then the creditor may continue to report the account as delinquent during the accommodation period, at least until the consumer brings the delinquent account current.

This amendment to the FCRA applies until the later of 120 days from the CARES Act enactment date or the end of the national emergency.

For a discussion of FCRA provisions, see Practice Note, FCRA Litigation: Key Issues and Considerations.

The CARES Act provides relief to borrowers of student loans owned by the federal government. Specifically, a borrower may suspend payments without penalty through September 30, 2020, and apply such suspended payments toward student loan forgiveness. However, this relief does not apply to student loans owned by commercial institutions, educational institutions, and other private entities.

To facilitate this relief, student loan servicers must cancel all auto-debit payments to ensure that borrowers are not charged interest or penalties for the deferred payments. Further, servicers must notify borrowers regarding the expiration of the deferment period and explain how to resume payments.

For a discussion of regulations governing student loans, see Practice Note, Consumer Issues Affecting the Student Loan Industry.