Our bank is looking into debt cancellation contracts. I've read the OCC guidance and state guidance but I have a question that has to do with how the loan gets reported to the credit bureau when the payment is past due. If the customer does not make the full payment amount (interest, principal and debt cancellation premium), can we consider them in default without violating the FCRA? I had been told something to the effect that if the contract was between the insurance company and the borrower, it could not be reported but since it will now be between the bank and the borrower, it can be reported. Does that make sense? Appreciate any thoughts...

Since DC must be voluntary, and is cancellable (is that a word?) by the customer at any time, we did not feel that we could consider this a default under the terms of the loan, and consequently, is not reportable to the CRA.

So if your customer was past due on their loan, you would just report the interest/principal and exclude the DCC premium?