Written By Digital Content Editor Thomas Ahearn
On June 28, 2022, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule titled “The Fair Credit Reporting Act’s Limited Preemption of State Laws” that affirmed the abilities of states to protect their residents through their own fair credit reporting laws, according to a news release from the CFPB.
With limited preemption exceptions, the rule from the CFPB – an agency that implements and enforces federal consumer financial law – affirmed that 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,” CFPB Director Rohit Chopra stated in the news release. “The legal interpretation issued today makes clear that federal law does not automatically hit delete on state data protections.”
Enacted by the United States Congress in 1970, the FCRA 15 U.S.C § 1681, among other things, defines the permissible uses of, and establishes guidelines for the information included in, credit reports. The FCRA also creates a process for consumers to dispute information in their credit files. The CFPB rule makes clear:
- States retain broad authority to protect people from harm due to credit reporting issues.
- State laws are not preempted unless they conflict with the Fair Credit Reporting Act or fall within narrow preemption categories enumerated within the statute.
The FCRA leaves states with the flexibility to consider and enact laws that reflect challenges and risks affecting local economies and residents. For example, tenant screening reports may contain incorrect information that impedes access to housing. States may enact protections against misuse of data to mitigate these consequences.
Congress made clear that the FCRA preempts only narrow categories of state laws. As federal regulators learned from the 2007-2008 mortgage crisis and the ensuing Great Recession, federal preemption of state laws can stop state regulators from identifying dangerous patterns and mitigating market risks.
The rule is part of the CFPB’s work to support the role of states to protect consumers and honest businesses. In May 2022, 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 promote state enforcement of fair credit reporting and federal consumer financial protection law and consult with states when the interpretation of federal consumer financial protection law is relevant to a state regulatory or law enforcement matter consistent with the State Official Notification Rule.
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