In case you missed it, in a June 28, 2022, press release, the Consumer Financial Protection Bureau (CFPB) announced it issued an interpretive rule (Rule) clarifying that states can police credit reporting markets. Within the Rule, the CFPB specifically encouraged states to target medical debt and tenant screenings.
In the CFPB's view, the Fair Credit Reporting Act (FCRA) only preempts narrow categories of state law and does not preempt state laws that forbid certain information or other content from appearing in credit reports. The Rule included the following non-exhaustive list as examples of restrictions states may impose without conflicting with the FCRA:
- Forbidding consumer reporting agencies or furnishes from including medical debt in a consumer report for a certain period after the debt was incurred.
- Prohibiting consumer reporting agencies from including information about a consumer's eviction, retail arrears, or arrests on a consumer report.
The CFPB noted that it clarified this topic in response to recent legal challenges claiming the FCRA preempts state consumer protection laws. Since the CFPB published this clarification as an interpretative rule, it was not required to provide a notice-and-comment period for interested parties to provide feedback.
The Rule can be found in its entirety here.
It is clear that the CFPB does not think the FCRA sufficiently protects consumers. However, rather than using any of its own authority to protect consumers, the CFPB has simply advised states that it won't get in the way of state legislation. This stance is likely to result in a patchwork of various state laws which will be difficult if not impossible to meet simultaneously. Ultimately, giving states the green light to enact 50 different versions of credit reporting laws is going to create confusion and harm consumers.
There are three takeaways that stick out after reading this Rule:
- ARM entities that report medical debt to the credit bureaus may want to re-evaluate that strategy. The CFPB isn't mincing its words: it does not think medical debt belongs on credit reports.
- Compliance departments should be fully staffed. Complying with state and federal laws simultaneously is getting more, not less, complex. Those that are understaffed will pay a price down the line.
- Keep an eye on your state legislatures. If you see something brewing that the industry would want to know about, send it around (including to us at firstname.lastname@example.org!).