On October 1, three trade groups filed a lawsuit in Nevada federal court challenging an amendment to Nevada law that allows an applicant for credit with no credit history to request that the creditor deem the applicant’s credit history to be identical to that of the applicant’s spouse during the marriage. The amendment is contained in Senate Bill 311 which was signed into law by the Nevada Governor on July 1, 2019 and became effective on October 1.
Like the Federal Equal Credit Opportunity Act, Nevada law prohibits discrimination based on marital status in credit transactions. SB 311 amends Nevada law to allow an applicant for credit who has no credit history, but who is or was married, to request that the creditor deem the applicant’s credit history to be identical to that of the applicant’s spouse during the marriage. The amendment provides that if the creditor requests, and the applicant provides, evidence of the existence of the marriage and the date of the marriage (and, if applicable, the date the marriage ended), “then the creditor must deem the credit history of the applicant to be identical to the credit history of the applicant’s spouse which was established during the [applicant’s marriage].” A creditor’s failure to comply with this requirement is deemed discrimination based on marital status in violation of Nevada law. The requirement applies to anyone defined as a “creditor” under Nevada law, which is an expansive definition that includes virtually every form of lending and lending practice. See NRS 598B.060.
The lawsuit, which was filed by the American Financial Services Association, the Nevada Credit Union League, and the Nevada Bankers Association, names as defendants the Commissioner of the Financial Institutions Division of the Nevada Department of Business and Industry and the Nevada Attorney General. The trade groups allege that the new requirement:
- Is preempted by the Fair Credit Reporting Act “FCRA”and the Equal Credit Opportunity Act. The trade groups claim that (1) because creditors are not permitted to access a credit report where there is no permissible purpose or consent from the non-applicant, the requirement violates the FCRA, and (2) because creditors are not permitted to obtain information about a non-applicant spouse or former spouse based solely on the applicant’s request, it violates the ECOA/Regulation B prohibition on requesting information on an applicant’s spouse or former spouse.
- Violates privacy rights and data security rules by requiring creditors to obtain and disseminate private financial information about an applicant’s spouse or former spouse without that person’s knowledge or consent.
- Is “hopelessly unworkable, and impossible to comply with in practice-especially in the context of ex-spouses” because the information in the former spouse’s credit report would be accurate as to the former spouse as of the date the report is obtained but would not be accurate as to the applicant since the report would reflect account activity that occurred after the termination of the marriage. The trade groups claim that, as a result, creditors are required to make credit decisions based on information they know to be inaccurate with regard to the applicant.
The trade groups seek to block the defendants from enforcing the new requirement. They also seek a declaration that the requirement is preempted by federal law, invalid, and void.
We expect a motion for a temporary restraining order, motion for preliminary injunction and /or a motion for summary judgment to be filed quickly by the trade groups.