CFPB Issues Rule Outlining How States Can Enact Credit Reporting Laws

Just because grandma allows your kids to run in her house does not mean that you have to let them run in yours, the Consumer Financial Protection Bureau announced to states yesterday, issuing an interpretive rule reminding them that the Fair Credit Reporting Act does not preempt states from enacting their own credit reporting laws, even going as far as to point out some of the ways that credit reporting could be regulated at the state level.

In enacting the FCRA, Congress “made clear” that the statute preempts “only narrow categories” of state laws, the Bureau said in announcing the rule. States could, if they wanted to, enact laws that prohibit medical debt from being reported on a consumer’s credit report for a period of time after the debt was incurred, the CFPB noted. Nor does the FCRA preempt state laws from governing whether eviction or rental arrears are required to appear on credit reports.

“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, in a statement. “The legal interpretation issued today makes clear that federal law does not automatically hit delete on state data protections.”

The interpretive rule breaks down the language of the FCRA to make the case under which circumstances Congress intended to preempt states from enacting laws governing credit reporting.

Consumer advocates used the CFPB’s announcement as a call to action for state legislatures “to step in and step up” to address “the void left by a divided Congress.”

“This interpretive rule will allow states to better protect their consumers, workers, and tenants from the abuses and flaws of companies that traffic in and profit from our data,” said Chi Chi Wu, National Consumer Law Center staff attorney, in a statement. “As the laboratories of democracy, states are often faster and better positioned to safeguard their residents against emerging problems than the federal government.  Enabling states to step in and step up is necessary when problems start locally or are unaddressed by the void left by a divided Congress.”

It should be noted that the NCLC has been working with state legislatures for a period of time now seeking to enact laws governing how medical debts are collected. It is easy to make the assumption that the NCLC could also lobby state legislatures to now enact laws governing credit reporting as well.

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