On June 28, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule, encouraging states to enact more laws regulating consumer reporting, arguing that states’ powers are only constrained in limited ways by the Fair Credit Reporting Act (FCRA).
The CFPB believes that states have the ability to enact state-level laws that are stricter than the FCRA, including outright prohibitions on reporting many kinds of truthful information about consumers, with only “limited preemption exceptions.”
The CFPB goes beyond, saying that states have the power to pass these laws, but encourages states to pass laws addressing state-level concerns. For example, the CFPB argues that states may wish to pass laws to prohibit reporting medical debt in a consumer report for a certain period of time after the debt was incurred, articulating its belief that “such a law would generally not be preempted.” Other examples of state laws the CFPB believes would not be preempted include a state law governing when a furnisher may begin reporting a consumer’s account (including medical debt); and a state law prohibiting a consumer reporting agency from including information (or certain types of information) about a consumer’s eviction, rental arrears, or arrests on a consumer report.
The CFPB’s rule argues that state laws that are more protective of consumers than the FCRA are not preempted unless they conflict with specific provisions of the FCRA. The CFPB argues that these conflicts will be on narrow, specific topics, and hence preemption will be narrow. As a result, the scope of permissible state regulation is broad.
The CFPB’s position can be viewed as a follow-up to the CFPB’s recent statements encouraging states to exercise their authority to enforce federal consumer protection laws.
If followed by the states, and by courts hearing preemption challenges to new state laws, the CFPB rule opens the door to more state-by-state regulation of the consumer reporting ecosystem. This regulation could include state laws that restrict the reporting of truthful information, even when permitted by the FCRA and other laws. For example, the CFPB has already questioned the reporting of medical debt, and uses state regulation of medical debt as a main example of permissible state action. It is significant for the CFPB to now also mention eviction records, rental arrears, and arrest records — all data that can be lawfully reported under the FCRA — as topics that the CFPB also believes the states can ban.
It should be noted that the CFPB’s position comes in the context of a long-standing debate in the courts of the scope of FCRA preemption, and the CFPB simply ignores the teachings from the developing case law. For example, multiple courts have broadly questioned the states’ ability to ban reporting of information permitted by the FCRA, while others have roughly aligned themselves with the view of the CFPB that preemption only arises when state law intrudes into consumer reporting questions that have been specifically addressed by the FCRA. In other words, the CFPB has joined the preemption fray, with no certainties in the results other than the promise of a more complex, and litigious, legal environment for consumer reporting, which is already bedeviled by plenty of legal complexity and litigation.