UPDATED: Report attempts to document ‘disaster comment codes’ by FIs in offering assistance to customers, members

A report documenting the prevalence of natural disaster comment codes in credit records to shed light on current practices for natural disaster reporting by financial institutions in offering assistance to their customers or members has been published by the federal consumer financial protection agency.

The report from the Bureau of Consumer Financial Protection (formerly known as the CFPB) also documents how the reporting may vary based on account characteristics and consumer credit score.

The report is part of a series of quarterly reports on consumer credit trends produced by the BCFP using, it said, a longitudinal, nationally representative sample of approximately 5 million de-identified credit records from one of the three nationwide credit reporting companies.

“Little is known about the extent to which financial institutions furnish information on natural disaster assistance or how furnishing may vary by industry and consumer type,” the report states. The report, BCFP said, uses the bureau’s consumer credit panel to examine how natural disasters affect consumers’ credit reports and potentially their financial well-being.

The report also provides information on how financial institutions furnish information on natural disaster assistance to credit reporting agencies, BCFP said, noting that “financial institutions are not required to furnish this information. For institutions that do, the Consumer Data Industry Association (CDIA) provides a standardized approach for reporting natural disaster assistance that financial institutions may opt to follow.”

That guidance, the agency said, includes use of a natural disaster special comment code in combination with furnishing information on the current account status that applies or whether the account is deferred.

More specifically, according to a blog post from the agency, the report summarizes trends in natural disaster reporting for consumers in the Greater Houston area affected by 2017’s Hurricane Harvey.

Key findings include:

  • About 8% of tradelines contained a special comment code indicating being affected by a natural disaster in 2017. The natural disaster comment code was on a tradeline for an average of two months.
  •  Nearly 40% of consumers with a credit report in the Greater Houston area received the natural disaster comment code on at least one of their credit tradelines after Hurricane Harvey.
  • Mortgage accounts were the most common type of tradeline to receive the natural disaster comment code.
  • Accounts that received the natural disaster comment code are associated with higher median balances and higher rates of delinquency prior to the hurricane.

BCFP Report on Natural Disasters and Credit Reporting