On June 28, 2022, the Consumer Financial Protection Bureau issued an interpretative rule under the Fair Credit Reporting Act (FCRA) clarifying that states have the ability to protect their residents by enacting their own fair credit reporting laws, notwithstanding existing federal law. Specifically, the interpretative rule underscores the bureau’s position that the FCRA prevails over state laws governing the conduct of consumer reporting agencies (CRAs), providers and users of consumer reports only in certain limited circumstances. and listed. The CFPB rule emphasizes that states can strengthen consumer protections by enacting stricter laws governing credit reporting practices where they are not expressly preempted by federal law.
Pre-emption under the FCRA
The interpretative rule states that:
- State fair credit reporting laws that protect consumers more than the FCRA are generally not preempted unless they fall under one of the preemption categories listed in Section 1681t(b) of the FCRA.
- The FCRA’s express preemptive categories are narrow and focused in scope, as they relate only to the specific conduct required or subject matter regulated under each preemptive provision. Thus, if a state law does not “relevant” to the subject matter or conduct regulated by an FCRA preemption category, it is not preempted.
- The FCRA generally only regulates how long certain information (for example, bankruptcies) may continue to appear on a consumer report, but does not prejudge state requirements regarding whether – or when – certain information may initially be included in a consumer report.
The interpretative rule provides examples of state fair credit reporting laws that the bureau says would not be preempted by the FCRA — which, unsurprisingly, focus on many of the same issues the bureau has flagged in recent months. :
- State laws prohibit credit rating agencies from including information about medical debts, eviction information, arrest records, or rent arrears in a consumer report (or from including such information only after a certain period of time).
- State laws prohibiting providers from reporting certain information to CRAs, such as medical debts, or requiring providers to report certain information only after a certain period of time.
- State laws requiring CRAs to provide, upon consumer request, disclosures and information covered by the FCRA in languages other than English.
What to expect?
Most states have already enacted their own fair credit reporting laws, but only a handful, like California, provide additional protections beyond those provided by the FCRA. The interpretive rule paves the way for states to more strictly regulate local credit reporting practices. A state-by-state approach—tailored to the specific agenda and priorities of each state legislature—would require the credit reporting industry to comply with a patchwork of state laws, in addition to the FCRA.
In addition, the interpretative rule affects two recent CFPB initiatives. First, this is another example of the CFPB’s recent efforts to encourage states to become more active in a number of areas of consumer protection, including continued enforcement of consumer financial protection law. and state laws prohibiting unfair or deceptive acts and practices. Second, it reiterates the CFPB’s renewed focus on medical debt reporting, which has been the subject of three separate guidance documents issued by the office since the start of the year. Consistent with Director Rohit Chopra’s position that medical debt should not be included in consumer reporting due to its lower predictive value, CFPB pressure for states to regulate the provision and reporting of medical debt n isn’t a surprise. The interpretative rule takes a similar position with respect to rental history and eviction records, indicating that this information is essential to consumers’ access to housing and credit, but is often marred by errors. Providers of medical debt data or tenancy information should therefore expect more scrutiny from the bureau, as well as stricter regulations at the state level.
Finally, while the interpretive rule gives states the green light to enact tougher fair credit reporting laws, we also expect zealous state attorneys general and regulators to rely on the CFPB’s reasoning for limiting the scope of the FCRA’s preemption under their current credit reporting requirements. .