CFPB Affirms Ability for States to Police Credit Reporting Markets

Today, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule affirming states’ abilities to protect their residents through their own fair credit reporting laws. With limited preemption exceptions, states have the flexibility to preserve fair and competitive credit reporting markets by enacting state-level laws that are stricter than the federal Fair Credit Reporting Act (FCRA).

“Given the intrusive surveillance that Americans face every day, it is critical that states can protect their citizens from abuse and misuse of data,” said CFPB Director Rohit Chopra. “The legal interpretation issued today makes clear that federal law does not automatically hit delete on state data protections.”

Enacted in 1970, the Fair Credit Reporting Act, among other things, defines the permissible uses of, and establishes guidelines for information included in, credit reports. It also creates a process for people to dispute information in their credit files.

The federal statute leaves states with the flexibility to consider and enact laws that reflect challenges and risks affecting their local economies and residents. For example, tenant screening reports may contain questionable or incorrect information that impedes renters’ access to housing. States are able to enact protections against abuse and misuse of data to mitigate these consequences.

Congress made clear that the Fair Credit Reporting Act preempts only narrow categories of state laws. As federal regulators learned from the 2007-2008 mortgage crisis and ensuing Great Recession, federal preemption of state laws can stop state regulators from identifying dangerous patterns and mitigating market risks. Accordingly, today’s interpretive rule makes clear:

• States retain broad authority to protect people from harm due to credit reporting issues: For example, a state could forbid a credit reporting company from including information about a person’s medical debt for a certain period of time after the debt was incurred.
• State laws are not preempted unless they conflict with the Fair Credit Reporting Act or fall within narrow preemption categories enumerated within the statute: Preemption under the Fair Credit Reporting Act is narrow and targeted. Nothing in the statute generally preempts state laws relating to the content or information contained in credit reports. It does not preempt, for instance, state laws governing whether eviction information or rental arrears appears in the content of credit reports.

Today’s announcement is part of the CFPB’s work to support the role of states to protect consumers and honest businesses. On May 19, the CFPB issued an interpretive rule that describes states’ authorities to pursue lawbreaking companies and individuals under the Consumer Financial Protection Act. The CFPB will continue to consider other steps to promote state enforcement of fair credit reporting along with other parts of federal consumer financial protection law. These steps include consulting with states whenever interpretation of federal consumer financial protection law is relevant to a state regulatory or law enforcement matter, consistent with the State Official Notification Rule .

The issuance of today’s rule arises from the Office of the New Jersey Attorney General notifying the CFPB of pending litigation that included an allegation the FCRA preempted a New Jersey consumer protection statute.

Read today’s interpretive rule, The Fair Credit Reporting Act’s Limited Preemption of State Laws.

Consumers can submit credit reporting complaints, or complaints about other financial products or services, by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit consumerfinance.gov.