Automotive lenders have rallied around consumers during the coronavirus outbreak by halting repossessions, allowing payment deferrals on auto loans and extending leases.
To continue protecting consumers, some industry experts say lenders need to ensure that late, missed or deferred auto-loan payments from customers impacted by COVID-19 won’t be counted against them.
Jenn Reid, vice president of automotive marketing and strategy at credit bureau Equifax, said the Consumer Data Industry Association — which represents consumer reporting agencies that include all three credit bureaus — provides guidance on how best to approach credit reporting during a crisis. The Coronavirus Aid, Relief and Economic Security Act, signed March 27, however, caused some confusion over how lenders should approach different consumer circumstances.
“What this is really set up to do is help get people through this tough period,” Reid told Automotive News.
The $ 2 trillion stimulus bill, referred to as the CARES Act, includes provisions that amend the federal Fair Credit Reporting Act on how data providers such as auto lenders can report changes in customers’ credit activity without harming their scores. The accommodation period covers consumer accounts impacted as early as Jan. 31 and could extend as far as 120 days after emergency orders have ended, Reid said.
Under the act, lender accommodations are defined as “an agreement to defer one or more payments, make partial payments, forbear any delinquent amounts, modify a loan or contract or any other assistance or relief granted to a consumer who is affected by the coronavirus disease 2019 (COVID-19) pandemic.”
One-fifth of Americans will struggle with auto payments in April, Experian said, based on a survey of approximately 3,000 consumers. Nearly half of U.S. consumers have monthly auto payments, the credit bureau added.
Lenders need to thoroughly review the new guidelines, Reid said, and review each customer circumstance individually. If customers affected by the outbreak aren’t properly reported to the bureaus, missed payments could be negatively factored into credit profiles.
Dealerships, too, should ensure customers who qualify for forbearance or payment deferment programs understand how best to approach lenders to make sure their auto loan or lease isn’t harming their score.
“What’s important is making sure [dealership employees] study up and understand that guidance, so if customers call up, they can have that conservation,” Reid said.
TransUnion, Equifax and Experian pledged free weekly credit reports for the duration of the crisis so consumers can monitor whether a lender has made an error in reporting their status.
“What we don’t want at the end of this is a population who can’t have access to credit, or wouldn’t get the terms that they would have pre-COVID,” Reid said.
