Multiple financial services industry trade associations submitted arguments to the U.S. Supreme Court this week supporting the Consumer Data Industry Association’s (“CDIA”) petition for review of whether the Fair Credit Reporting Act (“FCRA”) preempts a Maine statute regulating how medical debt and other types of debt must be reported in consumer reports. Industry groups outlined why allowing states to manipulate consumer credit reports contrary to FCRA’s accuracy and uniformity aims harms consumers and sows inefficiencies in the credit-reporting system.
The question before the court is whether the Fair Credit Reporting Act broadly preempts state laws “relating to” the “subject matters” expressly described in 15 U.S.C. § 1681t(b)(1), or narrowly preempts state laws only to the extent they address the specific issues addressed in the cross-referenced provisions of FCRA.
Background of Case
In September 2019, CDIA filed suit against the State of Maine challenging the validity of two new provisions of state law that (1) change the way medical debt is reported to credit bureaus, including regulations on how and when medical debt must be reported; and (2) limit the reporting of adverse information about a consumer if that consumer was a victim of economic abuse.
On Oct. 8, 2020, the District Court granted CDIA’s motion for judgment and found that the 2019 changes to the state’s FCRA are preempted by FCRA. Then, on Feb. 10, 2022, the First Circuit reversed and remanded the case. After the First Circuit denied CDIA’s petition for rehearing, CDIA, on Nov. 16, 2022, petitioned the U.S. Supreme Court for certiorari.
ACA Brief
This week, ACA International—the largest trade group for the debt-collection industry—submitted a brief authored by Brownstein in support of CDIA’s petition. ACA discussed the history of the consumer credit-reporting system throughout the 20th century and outlined the twin aims of FCRA: ensuring the accuracy and uniformity of credit reports. As the consumer credit-reporting system grew, so did the need for complete and accurate consumer credit report content—both for the benefit of consumers and lenders. Accuracy was therefore the primary impetus for the passage of FCRA in 1970. FCRA was amended in 1996 and 2003 to promote uniformity through incorporation of the current preemption provisions. Indeed, Congress intended to create national, uniform standards for credit reports because uniformity was necessary to meet business and consumer demands and very important to the efficient operation of the U.S. economy. ACA’s brief pointed to the fact that the Consumer Financial Protection Bureau (CFPB) effectively invited states to follow Maine’s lead and pass laws restricting accurate reporting and furnishing of the most common types of debt, following other political activity related to this issue.
ACA also explained the disastrous consequences that would follow from the First Circuit’s decision. If states can pass laws like Maine’s that restrict the reporting of complete and accurate credit information, then the utility of credit reports is undercut and credit reporting agencies will be left with the expensive headache of trying to navigate compliance with inconsistent state laws. Plus, the First Circuit’s reasoning arguably extends to furnishers of credit information, who could face the same issues. Finally, ACA discussed the harm to consumers and lenders in dealing with errors of omission in credit reports. Consumers may not know they have particular debts, credit may become more expensive, and consumers may not be extended credit in accord with what they truly can afford to pay, as creditors will have to resort to more subjective review of consumers’ creditworthiness.
U.S. Chamber of Commerce Brief
Additionally, the Chamber of Commerce of the United States of America, the American Financial Services Association, the American Bankers Association, the National Association of Federally-Insured Credit Unions, and the Bank Policy Institute jointly filed a brief in support of CDIA’s petition. These trade associations explained how the First Circuit’s narrow interpretation of FCRA’s preemption provision conflicted with the deliberately broad language of the provision and its underlying purpose, as well as interpretations of FCRA by other federal circuit courts. The trade associations then joined ACA in explaining how the First Circuit’s opinion destroys the benefits and utility that flow from a national, uniform credit-reporting system.
Other Activity and Outlook
Maine obtained an extension to file its opposition to CDIA’s petition. Any brief in opposition is now due on Jan. 18, 2023.
As interested parties wait to see if the Supreme Court decides to take the case, discussions about changing the scope of the credit reporting process continue in other forums. The White House, the CFPB, Congress and many states have all recently engaged in policymaking or discussions about changing the scope of credit reporting, particularly in relation to medical, rental and student loan debt. As discussed in the briefing in the CDIA v. Frey case, opening the door to making changes to the credit reporting system, outside the scope of making statutory changes in Congress, introduces a host of uncertainty and potential unintended consequences. The industry associations argue that the utility of credit reports is a direct product of the accuracy and completeness of reports. And, that a patchwork of state laws that make changes to the need for accurate and complete reports will change how credit is offered and could introduce subjective decision-making into process. Impacted financial service providers should continue to follow and engage in this type of litigation, as well as parallel policymaking, to determine how to address any new requirements or standards in this area.
