Forbearance agreements exist across virtually every type of consumer debt. A homeowner calls their mortgage servicer after a job loss. A borrower contacts their auto lender when medical bills pile up. A credit card holder asks the issuer for a reduced payment plan during a difficult stretch. A student loan borrower is placed on an administrative forbearance while their repayment plan is processed. In each case, the lender may (or may not) offer some form of relief, whether it is a temporary pause on payments, a reduced payment amount, or a modification of the loan terms.
That relief is supposed to make the consumer’s situation easier during a difficult time. But when the forbearance is not properly documented and is then misreported to the credit bureaus, the consumer’s situation gets worse, not better. Instead of a lifeline, the forbearance becomes the source of new damage: a delinquency on the credit report that should not be there, triggered by the very arrangement that was supposed to help.
This is not a rare problem. In 2024, the Consumer Financial Protection Bureau received roughly two million complaints about credit reporting, a 182 percent increase over the prior two years. Incorrect information on credit reports was the single most common issue, up 247 percent. Many of those complaints reflect a pattern that consumer protection lawyers have been seeing for decades: a consumer enters an agreement with a lender to pause or reduce payments, holds up their end of the deal, and then discovers that the lender reported them as delinquent anyway.
What Is a Forbearance and How Should It Appear on Your Credit Report?
Forbearance is an agreement between a borrower and a lender to temporarily pause or reduce payments on a loan or credit obligation, usually because the borrower is experiencing financial hardship. Although the term is most commonly associated with mortgages, forbearance arrangements come up across virtually every type of consumer debt: federal and private student loans, auto loans, credit cards, and personal loans.
A related concept, deferment, is more commonly used in situations where interest accrual as well as monthly payment obligations are paused. The two terms are not used uniformly across the industry, but as a general matter, forbearance means that the consumer is allowed to pause or reduce payments while interest continues to accrue on the outstanding balance. Deferment, depending on the loan type, may or may not involve continued interest accrual. The practical significance is worth understanding: even when a forbearance is working exactly as intended, the consumer may owe more at the end of the forbearance period than at the beginning because of the interest that accumulated during the pause.
One critical question for consumers is how the arrangement will be reported to the credit bureaus. The principle is straightforward: if the borrower and lender agree that no payment, or a reduced payment, is due for a period of time, the borrower should not be reported as delinquent during that period. In practice, this breaks down with alarming frequency.
There can be a significant disconnect between what a customer service representative agrees to on the phone and what the lender’s computer system actually reports to the credit bureaus. The bank’s executives may genuinely want to help borrowers (or at least avoid higher default rates on their loan portfolio), but if the reporting system is not updated to reflect the agreement, the result is an inaccurate delinquency on the borrower’s credit report.
This disconnect is not limited to formal forbearance agreements. The same problem arises whenever a consumer enters a verbal agreement with a creditor or debt collector to modify payment terms. A credit card holder going through a difficult period calls the issuer and is told, “No problem, just pay $20 a month until you’re back on your feet.” A consumer negotiates a reduced payment plan with a debt collector over the phone. In both situations, the consumer relies on the verbal agreement, makes the agreed-upon payments, and then discovers that the creditor reported them as delinquent anyway or that the debt collector sued them despite the deal. Without written evidence of what was agreed, the consumer has very little to work with when trying to challenge the inaccuracy.
Auto loan hardship programs present the same risk. These programs are widely available from major lenders, including Ally, Capital One, Toyota Financial Services, and Wells Fargo, among others. Options typically include payment deferrals, due date changes, temporary payment plans, and loan modifications. But these programs are entirely discretionary, vary by lender, and the terms are often communicated verbally over the phone. Even Experian, in its consumer guidance on auto loan hardship programs, advises borrowers to “get the details in writing.” That advice exists for a reason: when the terms live only in a phone conversation, the consumer has no way of proving the content of the agreement reached.
The CARES Act: When Congress Addressed the Problem Directly
The COVID-19 pandemic put this problem under a national spotlight. Millions of Americans entered forbearance agreements simultaneously, across every type of consumer debt, and Congress recognized that the credit reporting system needed a specific mandate to handle it. The CARES Act, signed into law on March 27, 2020, included Section 4021, which added a new subsection (F) to FCRA Section 623(a)(1). The rules were clear: if the borrower’s account was current at the time the accommodation was granted, the furnisher must report the account as current for the duration of the accommodation; if the account was already delinquent, the furnisher must freeze the delinquency at its existing level and not advance it; and if the borrower brought the account current during the accommodation, the furnisher must report it as current. The CARES Act defined accommodation broadly to include any agreement to defer payments, make partial payments, forbear delinquent amounts, modify a loan, or provide any other assistance or relief to a consumer affected by COVID-19. These protections applied to all types of consumer credit, not just mortgages. The CFPB made clear that simply furnishing a special comment code indicating the account was “in forbearance” or affected by a natural disaster did not satisfy the CARES Act’s requirements.
These protections were temporary and COVID-specific. The covered period ran from January 31, 2020 through 120 days after termination of the national emergency. The COVID-19 national emergency ended on May 11, 2023, which means the CARES Act credit reporting protections expired on September 8, 2023.
Even with these explicit statutory requirements in place, major servicers got it wrong. The CFPB brought an enforcement action against Carrington Mortgage Services, which serviced approximately 500,000 federally-backed mortgage loans, resulting in a $5.25 million penalty for misreporting forbearance status and misleading borrowers about their CARES Act rights. More recently, a class action against Wells Fargo alleges the bank reported CARES Act forbearance accounts as “in forbearance” instead of “current,” the exact special comment code problem the CFPB had warned against. That settlement, for $56.85 million, is pending final approval in April 2026. Most mistakes of this type will not result in class action litigation or government investigation. Individual consumers facing this problem need to understand their rights when confronting a forbearance-related credit reporting error.
What Happens Outside the CARES Act
The CARES Act’s credit reporting protections expired on September 8, 2023. And for forbearances that had nothing to do with COVID-19, there was never a comparable statutory mandate for how they must be reported. Outside of the CARES Act context, the rules regarding credit reporting are determined by the FCRA and any applicable state laws regarding credit reporting. A consumer’s protection depends on what the consumer can prove about the terms of their deal. There is no statute that says, for example, that an auto lender who grants a hardship deferral must report the account as current during the deferral period. If the lender agreed to that term as part of the arrangement, and then reported the account as delinquent anyway, the reporting is inaccurate and the consumer may have a claim under the FCRA. But the consumer will need to be able to prove what the agreement actually said. That is where documentation becomes critical.
The landscape varies by loan type:
Mortgages. Post-CARES Act, mortgage forbearance is generally discretionary. The servicer may agree to it and may note the forbearance on the credit report, but there is no federal statutory requirement to report the account as current during the forbearance period. RESPA provides additional protections for mortgage borrowers who submit qualified written requests, including a prohibition on adverse credit reporting for 60 days after the servicer receives the request.
Federal student loans. The federal student loan system involves multiple types of forbearance, including administrative forbearance (such as the forbearance applied to borrowers while the SAVE repayment plan was frozen by litigation), general forbearance for financial hardship, and mandatory forbearance for specific qualifying circumstances. The student loan servicing system has been under enormous stress in recent years, with massive servicer transfers, policy reversals, and system errors generating credit reporting mistakes at an alarming rate. Forbearance handling errors in the student loan context are part of a broader pattern: these are industries where servicers make large volumes of mistakes in their day-to-day operations, and the credit reporting errors are a downstream consequence of that systemic dysfunction. We cover this in depth in our article on student loan credit reporting errors.
Auto loans. Hardship programs are widely available from major lenders but entirely discretionary. There is no federal mandate requiring any particular reporting treatment during a deferral or hardship arrangement. The terms are what the consumer and lender agree to, and proving those terms requires documentation.
Credit cards. Many issuers offer hardship programs that may include reduced interest rates, waived fees, or reduced minimum payments for a period of time. These programs are typically not advertised and are discretionary. As with auto loans, the credit reporting treatment depends on the specific terms of the arrangement.
Personal and private loans. Forbearance or deferment options vary widely by lender and are the least standardized of any loan type. Some lenders offered forbearance during the pandemic but may not have formal hardship programs outside of that context.
When Forbearance Credit Reporting Goes Wrong
Forbearance credit reporting errors follow several common patterns. For example, a servicer may fail to code the forbearance into its system before the next reporting cycle, resulting in a delinquency being reported for a month the consumer was not required to make a payment. In other cases, the servicer’s system shows no record of the agreement at all. Some borrowers discover that the servicer removed them from forbearance without their knowledge or consent. And when a retroactive forbearance is applied, it frequently does not clear the negative reporting that was already furnished for the period before it was granted. Student loan servicer Edfinancial has acknowledged that “forbearances, even if applied retroactively, rarely clear prior negative reporting.”
In each of these scenarios, the consumer did the right thing. They were in a difficult situation, they reached out, they were offered relief, and they relied on it. The forbearance was supposed to make things easier. Instead, the misreporting made things worse.
Perez v. Dovenmuehle Mortgage, Inc., Case No. 3:21-cv-176 (D. Conn.), a case Schlanger Law Group and the Connecticut Fair Housing Center litigated, illustrates how this can play out. Our client had a federally-backed mortgage and requested CARES Act forbearance in March 2020. The servicer, Dovenmuehle Mortgage, granted only 90 days instead of the 180 days required under the CARES Act and demanded excessive documentation beyond what the statute required. When the borrower was told by phone in June 2020 that his forbearance had been extended, the servicer’s system instead incorrectly marked the borrower as having requested cancellation of the forbearance. He never made any such request.
The result: the borrower was reported as 90 days delinquent for April through June 2020, a period during which he should have been protected by his forbearance agreement and by the CARES Act itself. As a direct consequence of the inaccurate delinquency, two credit cards with zero balances and years of good payment history were cancelled. The borrower disputed the error by phone on July 10, 2020 and followed up by email the same day with documentation. The servicer took months to correct the reporting.
The complaint alleged that hundreds of similar complaints appeared on the BBB, the CFPB complaint portal, and consumer review sites, all describing the same problems with this servicer: forbearance status changes without notice, no record of prior communications, and delinquency reporting when borrowers were not delinquent.
Documenting Your Forbearance Agreement to Protect Against Misreporting
When a consumer disputes a forbearance-related credit reporting error, the outcome often comes down to one thing: what can the consumer prove?
Under the FCRA, when a consumer disputes information on their credit report, the credit bureau must conduct a reinvestigation. In practice, the bureau contacts the furnisher (the lender or servicer) and asks whether the reported information is accurate. If the furnisher responds that its records show no forbearance, or that the forbearance was cancelled, or that the terms were different from what the consumer claims, the bureau will typically verify the reported information and deny the dispute.
Without documentation, the consumer is left arguing that a verbal agreement existed, while the furnisher’s records say otherwise. That is an uphill battle. With documentation, the consumer has evidence that the agreement existed, that its terms were specific, and that the reporting contradicts those terms.
As our colleague, consumer protection lawyer Leo Bueno once wrote, “inked paper is heavier than human memory.” Lawyers are significantly more likely to take a credit misreporting case when the consumer has documentation of the agreement, because that documentation turns what would otherwise be a credibility contest into a factual dispute where the furnisher’s own records are provably wrong.
Here is what consumers should do to protect themselves:
Request that the forbearance agreement be set forth in a writing. If the lender will not provide written terms, create your own written record. Save confirmation emails from the lender or servicer acknowledging the forbearance or hardship arrangement. Take screenshots of the online account portal showing the forbearance status, the dates, and the terms. Keep a record of every phone call, including the date, time, the name of the representative, and what was specifically agreed. After any phone conversation in which a forbearance or hardship arrangement is discussed, follow up with a written summary sent to the lender by email or, better yet, by certified mail, stating the terms as you understand them. Save all correspondence, including letters, emails, and any written communications from the lender.
This applies equally whether the agreement is a mortgage forbearance, a credit card hardship plan, an auto loan deferral, a student loan accommodation, or a payment arrangement with a debt collector.
Your Legal Rights When Forbearance Reporting Is Wrong
When a lender or servicer reports a consumer as delinquent during a period covered by a forbearance agreement, several legal frameworks may come into play
The Fair Credit Reporting Act. The FCRA imposes obligations on both furnishers and credit bureaus. Under 15 U.S.C. § 1681i, when a consumer disputes information with a credit bureau, the bureau must conduct a reasonable reinvestigation and, if the information is found to be inaccurate, correct or delete it. Under 15 U.S.C. § 1681s-2(b), when a furnisher receives notice from a credit bureau that a consumer has disputed information, the furnisher must conduct its own investigation, review all relevant information provided by the consumer, and report the results. This provision is the primary vehicle through which consumers bring litigation against furnishers that refuse to correct inaccurate forbearance reporting after receiving notice of a dispute.
For consumers who had COVID-19 accommodations during the covered period (January 31, 2020 through September 8, 2023), the CARES Act amendment at 15 U.S.C. § 1681s-2(a)(1)(F) created a direct statutory obligation for furnishers to report accommodated accounts as current (or to freeze the delinquency status for accounts that were already delinquent). A furnisher that violated this requirement during the covered period may have liability under the FCRA.
RESPA. For mortgage borrowers, the Real Estate Settlement Procedures Act provides additional protections. When a borrower sends a qualified written request to a mortgage servicer regarding an error on their account, the servicer is required to acknowledge the request within five days, investigate and correct any identified error within 30 days, and refrain from furnishing adverse credit information regarding the payment that is the subject of the request for 60 days after receiving it. These RESPA protections apply regardless of whether the CARES Act is involved and can be a powerful tool for mortgage borrowers dealing with forbearance credit reporting errors.
State consumer protection statutes. Many states have unfair and deceptive acts and practices (UDAP) statutes that may provide additional claims when a servicer’s conduct is misleading or harmful to consumers.
What to Do If Your Credit Report Shows a Delinquency During a Forbearance
We cover the credit report dispute process in more depth in our guide to fixing errors on your credit report.
Here is an overview of the key steps:
Pull all three of your credit reports from AnnualCreditReport.com and identify the specific accounts showing a delinquency during a period when you had a forbearance or hardship agreement. Gather all documentation of the agreement: confirmation emails, screenshots, call logs, written correspondence, and any written summaries you sent to the lender.
Dispute the inaccuracy in writing with each credit bureau that is reporting the error. Send the dispute by certified mail, return receipt requested, and include copies (not originals) of your documentation. Separately, send a dispute directly to the furnisher (the lender or servicer) with the same documentation. If you are a mortgage borrower, frame your communication as a qualified written request under RESPA to trigger the additional protections described above.
Request written confirmation of any correction. Monitor your credit reports after the dispute to ensure the error has been corrected and does not reappear. Reinsertion of previously deleted information can, itself, be a violation of the FCRA if the credit bureau does not follow the required procedures.
Contact Schlanger Law Group
Schlanger Law Group has represented consumers since 2007, and credit reporting litigation, including litigation related to improper reporting on forbearances, is one of our core practice areas. We typically represent victims of credit reporting errors on a contingency fee basis and handle cases nationwide. If your credit report shows a delinquency during a period when you had a forbearance or hardship agreement, contact us today to discuss your options.
