CFPB Issues Rule Clarifying States’ Rights to Protect Consumers Through Fair Credit Reporting Laws

On June 28, the CFPB issued an interpretive rule affirming states’ abilities to police credit reporting markets through the issuance of their own fair credit report laws. The interpretive rule clarifies that the Fair Credit Reporting Act (FCRA) does not prevent states from enacting their own fair credit reporting laws that are stricter and more protective of consumers. The FCRA defines the permissible use of credit reports, and establishes the guidelines of the information that can and should be included in those reports. However, the FCRA leaves to the states the flexibility to consider local challenges affecting consumers and economies, and enact laws to protect consumers by further regulating credit report guidelines and uses. State fair credit reporting laws are not preempted by the FCRA unless they directly conflict with the FCRA or fall within the narrow preemption categories directly enumerated in the statute, according to the interpretive rule.

The CFPB highlighted that states retain “broad authority” to protect people from harm resulting from credit reporting issues due to the narrow and targeted preemption categories. The interpretive rule focused on medical debt as an example: states could decide to forbid the inclusion of information about medical debt after a certain period of time after the debt was incurred. State laws could also govern, for instance, whether eviction information or rental payment arrears appear on credit reports.

Putting It Into Practice: The June 28 interpretive rule is just the latest example of CFPB efforts to emphasize the importance of the state role in consumer protection. In May, the bureau issued an interpretive rule highlighting the role of states in enforcing the Consumer Financial Protection Act against businesses and individuals who violate the statue and harm consumers in the process. Companies should be mindful that compliance with federal consumer protection laws is the minimum—states sometimes have more stringent regulation, and more states yet may begin imposing stricter consumer protection laws at the urging of federal regulatory agencies.