Samantha: Hello, this is Samantha Shares.
This episode covers the Fair Credit Reporting Act; Preemption of State Laws.
The following is an audio version of that document.
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And now, the Fair Credit Reporting Act; Preemption of State Laws.
The Consumer Financial Protection Bureau is issuing this interpretive rule to
clarify that the Fair Credit Reporting Act broadly preempts state laws that
attempt to regulate credit reporting.
This action reflects Congressâs original intent to create national standards
for the credit reporting system.
This interpretive rule replaces an earlier Bureau rule from July
twenty twenty-two, which had taken a narrower view of preemption.
That rule was withdrawn in May twenty twenty-five.
The Fair Credit Reporting Act, or F C R A, was enacted in nineteen seventy and
has been amended several times since.
It established a national system for credit reporting and set
rules for consumer reports and the use of consumer information.
From the beginning, the law preempted state laws that were
inconsistent with its provisions.
In nineteen ninety-six, Congress strengthened this preemption by
adding a new clause that barred states from regulating in certain
specifically identified areas.
This was meant to avoid a patchwork of conflicting rules.
Originally, this stronger preemption was set to expire in two thousand
four, but in two thousand three, Congress made it permanent.
The intent was clear: to preserve uniform national standards and support the growth
of the national credit reporting system.
In July twenty twenty-two, the Bureau published an interpretive
rule suggesting that section sixteen eighty-one tee, subsection b,
paragraph one, had only a narrow sweep.
It concluded that many state laws affecting consumer reports could
stand alongside federal law.
For example, it suggested that state laws regulating medical debt,
rental history, or arrest records could coexist with the F C R A.
That interpretation was controversial.
In May twenty twenty-five, the Bureau withdrew that interpretive rule,
stating that it was unnecessary and that agencies lack special authority
to interpret preemption unless Congress specifically delegates it.
The Bureau also found that the twenty twenty-two rule created confusion and
risked imposing higher compliance burdens.
The Bureau now clarifies that the prior interpretation was flawed.
The F C R Aâs preemption clause was written in broad terms
and must be applied broadly.
The text of section sixteen eighty-one tee, subsection b, paragraph one, uses
sweeping language: âNo requirement or prohibition may be imposed under
the laws of any State with respect to any subject matter regulated
underâ certain provisions of the Act.
Congress deliberately used expansive phrases like âno
requirement or prohibition,â âwith respect to,â and ârelating to.â
Read together, these show that Congress meant to occupy the
field of consumer reporting.
The legislative history supports this interpretation.
In the nineteen ninety-six amendments, lawmakers stressed the need for
a uniform national credit system.
In two thousand three, Congress decided to make preemption permanent, concluding
that the national credit reporting system had expanded access to credit,
lowered costs, and accelerated decisions.
Allowing states to impose their own requirements would fracture the system,
increase compliance costs, and undermine the usefulness of credit reports.
Consumers would no longer be able to take their credit history
with them as they moved, and lenders would struggle to compare
creditworthiness across state lines.
The Bureau emphasizes that state laws attempting to regulate core
areas of credit reportingâsuch as prescreening, dispute procedures,
adverse action notices, or the content of consumer reportsâare preempted.
State efforts to ban certain categories of information, such as medical debt
or rental arrears, are also preempted.
The Bureau explains that rules about how long information may remain on a report
and whether it may appear in the first place are points on the same continuum.
Allowing states to prohibit categories outright would
contradict Congressâs intent.
For the financial services industry, the rule restores clarity.
Credit bureaus, lenders, and providers of consumer information can look
to federal law as the governing standard without having to reconcile
fifty different state regimes.
For consumers, the effects are mixed.
A national standard supports broader access to credit and ensures consistency.
But some advocates will argue that state-level protections,
particularly around medical debt, are now off the table.
This interpretive rule is guidance.
It does not have the force of law.
Courts remain the final arbiters of preemption questions.
Still, the Bureauâs position is clear: Congress intended broad federal
preemption under the Fair Credit Reporting Act, and the national
credit reporting system depends on it.
This concludes the Fair Credit Reporting Act; Preemption of State Laws.
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This is Samantha Shares, and we thank you for listening.