Do Banks have the right to not report negative information to a CRA on a borrower if they decided not to?

Based on how the question is worded I will say absolutely not.

You either report all information or none on your borrowers. You cannot pick and choose what information your report or that I'll report on Dan but not on Randy.

The FCRA requires you to report accurate information. Picking and choosing what you report would not meet that requirement.

The Bank is working with a borrower right now, but the borrower cannot continue to make his payments and in order to protect his crdit rating, the borrower is requesting that no negative info is reported to the Credit Bureaus and that he will volunarily surrender his property to the Bank and the Bank obtains a deed-in-leiu. So far, the borrower has not been late on his payments.

So in light of what you are saying, since the Bank has a policy of reporting all negative infomation, the Bank should not grant the borrower's request to not report this information, but to report to the Credit Bureaus that the borrower volunarily surrendered his property, right?

If you do it for one person, you would have to do it for everyone, otherwise you have a fair lending issue. He can't have it both ways - pay the loan as agreed or get reported.

So in light of what you are saying, since the Bank has a policy of reporting all negative infomation, the Bank should not grant the borrower's request to not report this information, but to report to the Credit Bureaus that the borrower volunarily surrendered his property, right?

Right. As Randy indicates you are looking at a Fair Lending issue and as I stated earlier FCRA issues for not reporting accurate information. In addition you most likely will also be violating the contract with your CRA.

Thank You.