Interpretive rule aims to underscore states may preempt FCRA with stricter requirements

States can protect residents through their own fair credit reporting laws by enacting laws that are stricter than the Fair Credit Reporting Act (FCRA), the federal consumer financial protection agency said Tuesday in issuing an interpretive rule.

According to the Consumer Financial Protection Bureau (CFPB), its interpretive rule makes clear that states retain broad authority to protect people from harm due to credit reporting issues and that 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 interpretive action was issued, the agency said, after the New Jersey Attorney General notified the bureau of pending litigation that included an allegation the FCRA preempted a New Jersey consumer protection statute.

“Congress made clear that the Fair Credit Reporting Act preempts only narrow categories of state laws,” the CFPB said. “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.

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

The bureau noted that, as an example of how states may protect residents from harm due credit reporting issues, 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.

More directly regarding preemption, the bureau asserted that preemption under FCRA is narrow and targeted. “Nothing in the statute generally preempts state laws relating to the content or information contained in credit,” the agency stated. “It does not preempt, for instance, state laws governing whether eviction information or rental arrears appears in the content of credit reports.”

CFPB Affirms Ability for States to Police Credit Reporting Markets