On February 4, 2019 the Federal Deposit Insurance Corporation (FDIC) issued a Financial Institution letter (FIL-5-2019) dealing with voluntary private education loon rehabilitation programs. The notice was issued jointly with the Board of Governors of the Federal Reserve System (Fed).
The FIL is designed to make financial institutions aware of an amendment to section 623 of the Fair Credit Reporting Act (FCRA). This amendment is contained in section 602 of the Economic, Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA). It gives consumers the opportunity to rehabilitate a private education loan with a previously reported default under certain conditions. Financial institutions that choose to establish a private education loan rehabilitation program under Section 602 of the EGRRCPA (Section 602 Program) that satisfies the statutory requirements, including written approval of the terms and conditions from their federal regulatory agency, are entitled to a safe harbor from potential claims under the FCRA related to removal of the reported default.
Highlights of the FIL include:
- Consumers may request that a financial institution remove a reported default regarding a private education loan.
- Financial institutions are not required to offer a Section 602 Program.
- As provided by EGRRCPA, a financial institution that chooses to offer a Section 602 Program that satisfies the statutory requirements is entitled to a safe harbor from potential claims under the FCRA of inaccurate reporting for removing a reported default from a consumer’s credit report.
- An existing or a future private education loan rehabilitation program will not be considered a Section 602 Program unless a financial institution designates it as such and it meets the statutory requirements of section 602 of EGRRCPA.
- An FDIC-supervised financial institution that chooses to offer a Section 602 Program should contact its regional office.
- The FDIC will provide feedback within 120 days of receiving a written request.
A few additional details are contained in the following documents: