What Are the Options for Reporting Accounts with Temporarily Postponed Payments?

Temporarily postponed payments, also known as forbearance, deferment, or payment suspension, occur when a lender allows a borrower to delay or reduce payments for a specified period. Properly reporting these accounts is critical for compliance with the Fair Credit Reporting Act (FCRA) and for ensuring that the consumer’s credit report accurately reflects their financial situation.

Understanding Temporarily Postponed Payments

There are several common types of postponed payments:

• Forbearance: The lender temporarily suspends or reduces payments, but interest may continue to accrue.
• Deferment: Payments are delayed without penalty, and depending on the loan type, interest may or may not accrue.
• Payment Assistance Programs: Lenders may offer temporary payment relief due to financial hardship, disasters, or other circumstances.

Steps for Reporting Accounts with Postponed Payments

1. Maintain the Account’s Current Status (If No Delinquency Exists):
   • If the borrower was current on payments before the postponement period, report the account as “Current” to prevent negative credit impact.
   • Use a Special Comment Code indicating “Account in Forbearance” or “Deferred Payment Agreement” to clarify the temporary nature of the payment suspension.
2. Report the Payment History Accurately:
   • Do not report late payments if the borrower is in an approved postponement program and is complying with its terms.
   • If the borrower was delinquent before entering forbearance or deferment, maintain accurate reporting of the pre-existing delinquency.
3. Use Special Comment Codes to Provide Transparency:
   • Apply Special Comment Codes to indicate the type of payment relief:
     • “Forbearance” (for temporary suspension due to financial hardship).
     • “Deferred Payment Agreement” (if payments are officially postponed by the lender).
     • “Affected by Natural or Declared Disaster” (if postponement is due to a disaster-related relief program).
   • These codes help lenders and credit bureaus understand the reason for postponed payments without treating them as delinquencies.
4. Ensure Proper Balance and Interest Reporting:
   • If interest continues to accrue during the postponement period, update the account balance to reflect this.
   • Clearly state in the reporting whether payments are simply delayed or if they will be added to the end of the loan term.
5. Notify Consumer Reporting Agencies (CRAs):
   • Submit updates to all relevant CRAs to ensure consistency in reporting across all major credit bureaus.
   • Failure to report postponed payments correctly could lead to inaccurate credit reporting and consumer disputes.

Compliance with the FCRA

The FCRA requires that credit reporting be:

• Accurate: Ensure that postponed payments are correctly reflected without incorrectly marking accounts as delinquent.
• Complete: Provide the necessary details about the postponement program, including any accrual of interest or changes to the repayment terms.
• Transparent: Use Special Comment Codes to clarify the nature of the postponed payments.

Impact on the Consumer’s Credit Report

1. Credit Score Considerations:
   • If properly reported, temporarily postponed payments should not negatively impact a consumer’s credit score.
   • Incorrectly marking an account as delinquent during a deferment or forbearance period can lower the consumer’s score unnecessarily.
2. Transparency for Lenders:
   • Proper reporting ensures that future lenders see the borrower’s financial history accurately, recognizing that postponed payments were part of a formal relief program.

Conclusion

Accurately reporting accounts with temporarily postponed payments is essential for compliance with the FCRA and for protecting consumers’ credit profiles. By maintaining the correct account status, using Special Comment Codes, and ensuring accurate balance and interest reporting, data furnishers can provide fair and transparent credit reporting. Proper handling of these accounts benefits both consumers and lenders by promoting accuracy and trust in the credit reporting system.