Recently, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board ( FRB) issued a joint advisory on the voluntary loan rehabilitation programs. The FDIC and FRB highlighted the amendment made to section 623 of the Fair Credit Reporting Act (FCRA) by Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) section 602.
They issued this joint advisory to give a precise idea to financial institutions about the amendment to section 623 of FCRA. The Fair Credit Reporting Act is a part of section 602 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was signed into law by the President on May 24, 2018.
Section 602 of EGRRCPA allows a financial institution to eliminate a reported default from the consumer’s credit report if they fulfill the requirements of the financial institution’s Section 602 Program.
The elimination of the reported default is considered valid under the FCRA if the Section 602 Program fulfills the statutory requirements.
According to a report, “The amendment provides a safe harbor from potential claims of inaccurate reporting under the FCRA, provided the financial institutions who choose to offer private education loan rehabilitation programs satisfy section 602’s statutory requirements before removing a reported default from a qualified borrower’s credit report.”
A Brief Description Of Section 602 Requirements:
In order to meet the statutory requirements of section 602, the loan rehabilitation program incorporates a provision that addresses consumers, stating that they must make timely payments in a way that shows they are willing to repay their loans.
Those who meet the section 602 requirements are eligible to obtain benefits under this program. However, under this program, consumers can only get the benefits once per loan.
All FDIC-supervised banks that are willing to establish a Section 602 Program are required to approach their federal banking agency to submit a written request for approval.
If the request addresses the statutory requirements of the program, then the federal banking agency can give feedback to the financial institution within 2-months from the date of receiving the request.
The amendment to section 623 of the FCRA will not only help banks obtain payments on a timely basis but will also help consumers who have reported default on their credit reports.
Today, both granting and receiving an education loan bring different types of challenges. However, having both rules that are effective and regulations for financial institutions and borrowers can fix some problems. The amendment to section 623 of the Fair Credit Reporting Act is one small but important move towards that direction.
The amendment to section 623 will encourage more and more students to take education loans to pursue their education at best-in-class universities. As a result of rising costs of higher education, it’s not possible for every student to obtain a degree from a good college or university. However, the availability of education loans and their easy to follow requirements can make it possible for more people to complete their higher education.