The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes the following provisions of particular interest to members of the consumer financial services industry:
Credit Reporting. Section 4021 (Credit Protection During COVID-2019) amends the Fair Credit Reporting Act to impose new COVID-19 related reporting requirements on furnishers of information to consumer reporting agencies. Under Section 4021, if a furnisher (for example, a financial institution that lends money to consumers) makes an accommodation with respect to one or more payments on a credit obligation or consumer account, the furnisher should continue to report the account as current if the consumer fulfills the terms of the accommodation. However, for accounts that were already delinquent before the accommodation was made, then the furnisher is permitted to continue reporting the account as delinquent unless the consumer brings the account current. This new reporting requirement does not apply to consumer accounts that have been charged off. These furnisher responsibilities will apply to reporting on accommodations made to consumer accounts between January 31, 2020 until 120 days after the end of the COVID-19 national emergency.
Higher Education and Student Lending. The CARES Act contains several provisions related to higher education, some of which pertain to student loan relief, which are described below:
- Section 3503 (Campus-Based Aid Waivers)
- The bill creates an exemption for institutions of higher education from matching requirements for various campus-based aid programs for academic years 2019-2020 and 2020-2021. Covered programs include Federal Supplemental Educational Opportunity Grants (SEOGs), for students deemed to have significant financial need, and the Federal Work-Study Program. However, private for-profit institutions must still pay their share of work-study wages. Unused work-study funds can be applied to SEOGs (but SEOG funds cannot be applied to work-study programs).
- Section 3504 (Use of Supplemental Educational Opportunity Grants for Emergency Aid)
- Institutions of higher education may use SEOG funds to assist undergraduate or graduate students for unexpected expenses and unmet financial need, and waive the need calculation requirements under the Higher Education Act (HEA), up to the amount of the maximum Federal Pell Grant for the applicable academic year.
- Section 3505 (Federal Work-Study During a Qualifying Emergency)
- Students participating in the Federal Work-Study program can receive work-study wages even if they are unable to work.
- Section 3506 (Adjustment of Subsidized Loan Usage Limits)
- If a study does not complete a semester/term due to a qualifying emergency, loans received for that semester will not count toward the total number of terms a student is eligible to receive a subsidized Stafford loan.
- Section 3507 (Exclusion from Federal Pell Grant Duration Limit)
- If a study does not complete a semester/term due to a qualifying emergency, Pell Grants received for that semester will not count toward the total number of terms a student is eligible to receive such grants.
- Section 3508 (Institutional Refunds and Federal Student Loan Flexibility)
- Requirements applicable to institutions of higher education regarding returning HEA Title IV student aid are waived with respect to students withdrawing as a result of a qualifying emergency. Similarly, students will not be required to return Pell Grants received. Moreover, the bill cancels loans for a given term/semester if a student had to withdraw due to a qualifying emergency.
- Section 3513 (Temporary Relief for Federal Student Loan Borrowers)
- All payments on federally-held student loans (not commercially held FFELP or private student loans) are suspended through September 30, 2020.
- During the suspension period, interest shall not accrue on federally held loans.
- For purposes of federal loan forgiveness and loan rehabilitation programs, payments will be treated as if they were made for each month during the suspension period.
- Suspended payments must be reported to the credit bureaus as if they were made (thus not reported using forbearance codes).
- Involuntary collection of loans is suspended during the suspension period.
- The Secretary of Education is given a timeline to notify borrowers.