Letters to Regulators: Request that CFPB Prohibit Credit Reporting of Rent Arrears Incurred During COVID-19 Pandemic

May 6, 2021

David Uejio, Acting Director
Consumer Financial Protection Bureau
1700 G Street, N.W.
Washington, DC 20552

Re: Request that CFPB Prohibit Credit Reporting of Rent Arrears Incurred During
COVID-19 Pandemic

Dear Acting Director Uejio:

The undersigned 143 organizations urge you to take aggressive actions to protect the credit
records of renters who have struggled financially due to the COVID-19 pandemic. In particular, we urge you to prohibit debt collectors from reporting rent arrears debt to the nationwide consumer reporting agencies (CRAs), i.e., Equifax, Experian, and TransUnion, if the rent debts accrued during the COVID-19 period. This is another concrete step that the CFPB can take to protect renters that is well within its authority under both the Fair Credit Reporting Act (FCRA) and Section 1031 of the Dodd-Frank Act, 12 U.S.C. § 5531.

We very much appreciate the CFPB’s Interim Final Rule of April 19, 2020 that requires debt
collectors to provide written notice to tenants of their rights under the CDC eviction moratorium and prohibits debt collectors from misrepresenting tenants’ eligibility for protection from eviction under the moratorium. We also appreciate your joint statement with Acting FTC Chairwoman Rebecca Slaughter warning major landlords that evicting or threatening to evict tenants in violation of the CDC, state, or local moratoria, without apprising them of their legal rights under such moratoria, may violate prohibitions against deceptive and unfair practices.

These steps are tremendously helpful and laudable. However, we urge you to go one step further and also protect the credit records of tenants. Just like debt collection, credit reporting rules are well within the heart of the Bureau’s jurisdiction.

As documented by the CFPB’s own report Housing insecurity and the COVID-19 pandemic, 8.8 million American households were behind in rent payments as of December 2020 and the CDC and state moratoria do not absolve renters from making these payments or provide for formal policies allowing renters to defer them. While most landlords do not regularly report rent payments – and thus late payments – on a monthly basis to the nationwide CRAs, the credit report of a renter unable to pay rent may not remain unscathed for long. Landlords frequently refer unpaid rent to collection agencies or collection attorneys, and many debt collectors report debts to the nationwide CRAs. A debt collection item is considered a very negative entry on a credit report that can remain for up to seven years and significantly lower a renter’s credit score.

Because most landlords use tenant screening reports that include credit information, a damaged credit report will seriously hinder a renter’s ability to secure new housing. This could force the renter to turn to landlords who charge above-market rates for low-quality housing or even lead to homelessness. This would likely have a disproportionate impact on Black and Latinx renters, who already had higher eviction rates before COVID-19.

The CFPB should act to prevent these dire consequences. The CFPB could issue guidance that it is an unfair or abusive practice under Section 1031 of the Dodd-Frank Act for a debt collector to report a rent arrears debt to a nationwide CRA if the renter was eligible for the CDC, a state, or a local moratorium, because such reporting would contravene and undermine the effectiveness of these moratoria. Alternatively, the CFPB could issue an Interim Final Rule, using its authority under Section 621(e) of the FCRA, 15 U.S.C. § 1681s(e), to prohibit the furnishing of such information.

As a lesser alternative, the CFPB could require that any rental arrears debt reported on a credit report must also disclose if the debt was a result of economic hardship due to the COVID-19 economic crisis or that the renter is protected from eviction by the CDC, a state, or a local moratorium. Otherwise, such reporting could be considered inaccurate in that it omits a material and important fact, much as the failure to note that a debt has been discharged in bankruptcy and thus is unenforceable is inaccurate under the FCRA.

At the very minimum, the CFPB should declare that it is an unfair practice to report a rent arrears debt if a landlord has received rental assistance funds, either from the American Rescue Plan or state or local programs, or the renter attempted to obtain rental assistance funds and the landlord refused to cooperate. Being an unfair practice, a collector reporting such debts would potentially violate Section 1031 of the Dodd-Frank Act or Sections 1692f and 1692e(8) of the Fair Debt Collection Practices Act.

The end of the COVID-19 pandemic may be in sight due to the vaccines, but the long-term
impact could be with us for years. The economic prospects of consumers on the downward slope of the K-shaped economy could continue along that trajectory even after the pandemic has ended, unless more is done to protect them. The CFPB has the tools to help in one more key respect: it can protect the credit reports of renters saddled with rental debts due to the economic catastrophe of the pandemic.

Thank you for your consideration. If you have any questions, please contact Chi Chi Wu at
cwu@nclc.org or 617-226-0326.

View or download a PDF of the letter here.