On September 21, 2023, with limited time to digest the comments received by September 11, 2023 from the request for information regarding medical payment products, the Consumer Financial Protection Bureau (CFPB) started the FCRA rulemaking process. The press release describes a “rulemaking process to remove medical bills from Americans’ credit reports.” However, the proposed rulemaking includes changes to critical definitions and processes under the Fair Credit Reporting Act (FCRA), which should not be overlooked. The rulemaking was announced by CFPB Director Rohit Chopra at a press call on medical debt hosted by Vice President Kamala Harris. Vice President Harris’ prepared remarks claimed the rulemaking “will improve the credit scores of millions of Americans so that they will better be able to invest in their future.” Citing concerns about the accuracy of medical debt billing and reporting practices, Director Chopra’s prepared remarks claimed that “research has found medical billing history has limited predictive value in underwriting.” Chopra also cited to the CFPB Bulletin 2022-01: Medical Debt Collection and Consumer Reporting Requirements in Connection with the No Surprises Act and changes made by credit reporting agencies (CRAs) earlier this year to exclude certain medical debt from consumer reports. To conclude his remarks, Director Chopra noted that “the proposals we are outlining today would ensure that credit decisions are based on someone’s ability to repay a debt, not their ability to file disputes and navigate red tape.”

The CFPB’s outline of the FCRA rulemaking includes the following proposals for consideration and comment:

  • Change key defined terms: Consumer Reporting Agency, Consumer Report, Assembling or Evaluating
  • Clarify applicability of FCRA to data brokers and prohibit the sale of covered data for purposes other than those authorized under the FCRA
  • Clarify prohibited marketing and advertising purposes
  • Clarify the interpretation of permissible purposes to furnish a consumer report in response to a consumer request and legitimate business need
  • Clarify that furnishing credit header data is considered a consumer report
  • Address CRA’s obligation to protect consumer reports from unauthorized access
  • Change the processes to dispute the accuracy of a consumer report for (1) those that are classified by a consumer reporting agency or furnisher as involving legal matters and (2) those involving systemic issues at a consumer reporting agency or furnisher
  • With respect to medical debt tradelines, (1) revise Regulation V § 1022.30(d) to prohibit creditors from obtaining or using medical debt collection information to determine a consumers’ credit eligibility and (2) prohibit consumer reporting agencies from including medical debt collection tradelines on consumer reports furnished for such purposes
  • Consider the appropriate implementation period

Notably, the FCRA Rulemaking Outline acknowledges the applicability of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) requiring the CFPB to consider the economic impact that rule will have on small entities, which requirement was largely ignored with the credit card late fee rulemaking earlier this year. The CFPB also created a Discussion Guide: Consumer Reporting Rule SBREFA Outline to aid the CFPB in obtaining feedback from the small entities that will be directly affected by the proposed regulations.

We have previously blogged about the CFPB’s plans to regulate data brokers and credit header information under FCRA and the Second Circuit’s ruling that FCRA does not contemplate a threshold inquiry by the court as to whether an alleged inaccuracy is “legal” for purposes of determining whether the plaintiff has stated a cognizable claim under the FCRA.

We are curious to see the approach the CFPB will take with respect to defined terms for its rulemaking. While the CFPB is authorized to implement FCRA through rulemaking under Regulation V, only Congress may revise defined terms under FCRA. The CFPB was reminded of its function when it unsuccessfully tried to expand the definition of applicant under the Equal Credit Opportunity Act, which was struck down in the Townstone Mortgage case. The CFPB has appealed the adverse decision to the Seventh Circuit.

We will continue to monitor any developments with this FCRA rulemaking, including any comments to the proposal or additional analysis that may be performed as a result of the comments submitted and concerns expressed about the proposal.