The COVID-19 pandemic has definitely made credit reporting a lot more complicated for companies that furnish data to credit reporting agencies. Noting whether an account is current or not, if a collection moratorium has been put in place, or using the right condition codes when furnishing information has all become more convoluted. Understanding what is expected and required of furnishers is more important, which is why a number of questions have been submitted to “Ask The Credit Reporting Expert” about how to address different situations. In the latest episode, David Schultz, a partner at the law firm of Hinshaw & Culbertson answers questions from members of the accounts receivable management industry about credit reporting in the pandemic, how to handle audits of credit reporting submissions, and the reliability of credit scores in helping determine a borrower’s propensity to repay a debt.
For individuals who have had accommodations made on their debts, such as forbearance plans or collection moratoriums put in place, those debts need to be reported in a certain manner, Schultz explains. And when that accommodation period is over, furnishers can not simply go back to reporting those debts as unpaid or delinquent without giving the borrower the chance to make payments.
“You got to give them the accommodation period, sort of sanctity, even after the periods expired, now they have time to get back to start making the payments they were supposed to make,” Schultz said. “And now they’re not making a payment after that period. Now, it’s a short payment, they cannot report those because the accommodation period is over.”
With respect to the audits that furnishers should be conducting, Schultz said it is important for companies to look at the data that is going out as well as the data that is coming back from credit reporting agencies on a regular basis.
“One of the most common problems I’ve seen defending furnishers is not having in place a good process to maintain, review, and then handling those [reports] in a timely fashion,” Schultz said.