You may have noticed that discussions on the topic of Fair Credit Reporting have been increasing lately.
The Fair Credit Reporting Act (FCRA) outlines obligations of consumer reporting agencies, as well as consumer report users. As the FCRA has been around since the early 70’s, issuances have been published over the course of time that implement amendments and clarify expectations for compliance.
A variety of new FCRA-related issuances remind us that an effective consumer reporting system is important to consumers establishing and requesting credit and that a breakdown in FCRA obligations can result in consumer harm.
Bureau Rule Related to Human Trafficking
On June 24, 2022, the Consumer Financial Protection Bureau (Bureau) published a final rule amending Regulation V, which implements the FCRA. This rule implements new legislation related to protecting victims of trafficking.
This rule adds a new section, 1022.142, which contains miscellaneous duties of consumer reporting agencies. This new section is entitled “Prohibition on inclusion of adverse information in consumer reporting in cases of human trafficking.” As the name indicates, the rule prohibits a consumer reporting agency from furnishing a consumer report that contains any adverse item about a consumer that resulted from trafficking. The rule also establishes how a trafficked victim can submit information to a consumer reporting agency that identifies adverse information that resulted from the trafficking.
New FCRA Advisory Opinion
On July 12, 2022, the Bureau published an advisory opinion that outlines obligations of the FCRA. While the opinion is not a rule amending regulatory requirements, it is an important issuance that reminds the financial industry of related obligations, especially as they relate to having a permissible purpose for furnishing, using, and obtaining consumer reports.
Section 604 of the FCRA outlines permissible purpose provisions and the Bureau’s issuance reminds the industry that a consumer reporting agency may not provide a consumer report under any circumstance not expressly permitted. As the Bureau clarifies, the permissible purposes most commonly used are those related to credit, employment, insurance, and rental housing. As the FCRA permissible purposes have been around for quite some time, one might wonder why the Bureau is issuing this new opinion. Unfortunately, the opinion highlights various compliance-related violations that have been observed, including:
- A settlement involving a group of companies and individuals that obtained consumer reports without a permissible purpose, related to marketing a debt relief service.
- A settlement involving a mortgage broker that used consumer reports for a purpose that was not permissible, in response to negative reviews on a website, and then publicly posted information about the reviewer from the consumer report.
- A settlement involving reports being provided without a permissible purpose that resulted in at least 800 cases of identity theft.
Institutions should review the new opinion and consider their internal controls surrounding the FCRA and permissible purpose provisions. This might include reviewing existing policies, procedures, and training and making them more robust, as needed to support compliance.
Bureau Interpretive Rule Related to FCRA’s Preemption of State Laws
On July 11, 2022, the Bureau published an interpretive rule that addresses the important role of States in the regulation of consumer reporting. Of note, the interpretive rule’s summary clarifies that:
“State laws that are not “inconsistent” with the Fair Credit Reporting Act (FCRA) are generally not preempted by that statute. The FCRA also expressly preempts certain categories of State laws. This interpretive rule clarifies that FCRA's express preemption provisions have a narrow and targeted scope. States therefore retain substantial flexibility to pass laws involving consumer reporting to reflect emerging problems affecting their local economies and citizens. For example, if a State law were to forbid consumer reporting agencies from including information about medical debt, evictions, arrest records, or rental arrears in a consumer report (or from including such information for a certain period of time), such a law would generally not be preempted. Likewise, if a State law were to prohibit furnishers from furnishing such information to consumer reporting agencies, such a law would also not generally be preempted. Similarly, if a State law required that a consumer reporting agency provide information required by the FCRA at the consumer's requests in languages other than English, such a law would generally not be preempted.”
Bureau Blog Post on Credit Reporting for Buy Now, Pay Later
Lastly, on a related note, a June 2022 Bureau Blog Post highlights a recent “market monitoring inquiry” related to Buy Now, Pay Later (BNPL) services, which refers to short-term, no-interest consumer credit products. This inquiry is aimed at collecting information about data furnished by BNPL firms to consumer reporting companies. The Bureau’s goal is to eventually see the industry adopt standardized consumer reporting BNPL furnishing codes and formats that would support the unique characteristics of such products. The Bureau will revisit this issue again in the coming months.
Want to learn more about this new FCRA information?
Interested persons may find the Bureau’s new rule amending Regulation V here.
Interested persons may find the Bureau’s new FCRA advisory opinion here.
Interested persons may find the Bureau’s new interpretive rule related to State laws here.
Interested persons may find the Bureau’s new BNPL blog post here.
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