The FDIC and the Federal Reserve Board of Governors issued a joint advisory to make financial institutions aware of a 2018 amendment to the Fair Credit Reporting Act that provides that a financial institution may, but is not required, to offer a loan rehabilitation program (Section 602 Program) to private education loan borrowers whose credit reports contain a reported default on a private education loan.
The amendment was contained in Section 602 of the Economic, Growth, Regulatory Relief and Consumer Protection Act which was enacted on May 24, 2018. Section 602 amended FCRA Section 623 to allow financial institutions to offer a 602 Program. The advisory addresses the requirements for a Section 602 Program, including the need for a financial institution that intends to offer a Section 602 Program to submit a written request for approval to its appropriate federal banking agency.
The advisory states that if a borrower meets the requirements of a financial institution’s Section 602 Program that satisfies the statutory requirements for such a program, the institution can remove a reported default from the borrower’s credit report and the institution will be shielded (i.e. have a safe harbor) from potential FCRA claims related to the removal.