In the first half of 2022, the Consumer Financial Protection Bureau (CFPB) has taken considerable action through advisory opinions and guidance, showing that the agency is moving toward an era of aggressive enforcement.
Examples of this enforcement include a particular focus on the Fair Credit Reporting Act (FCRA), which has seen action through advisory opinions, interpretive briefs, and amicus briefs. Through these actions, the CFPB has communicated various new positions, representing a solid increase in compliance requirements for users and providers of consumer reports. These new stances have even conflicted with long-accepted court precedents and should be on employers’ radar.
These are some of the significant actions the CFPB has taken in recent months:
On April 7th, 2022, the CFPB filed an amicus brief with the Eleventh Circuit. The CFPB argues that Section 1681s-2 of the FCRA requires furnishers of credit reports to investigate “legal” and factual inaccuracies in response to consumer disputes. This position contradicts the long-held judicial precedent that furnishers are only responsible for investigations of factual inaccuracies. According to the CFPB’s argument, the prior precedent was incorrect due to a lack of distinction within the FCRA between legal and factual disputes. The CFPB claims it is difficult to distinguish between “legal” and “factual” questions. As such, furnishers are generally in a position where they can assess legal questions. It is currently uncertain if any courts will take up this position.
Under the FCRA’s Section, 1681t federal courts have long held that the law preempts inconsistent state laws, which has prevented states from enforcing laws that more strictly regulate the same subject matter. However, the CFPB has recently issued an interpretive rule indicating the FCRA’s preemption as a narrow and targeted requirement. The CFPB further suggests that states can and should pass their own credit reporting laws that are stricter than the FCRA. This suggestion could, if courts agree, lead to a significant change in the state-level regulation of consumer reporting.
The CFPB has also released an advisory opinion outlining its interpretation of the “permissible purposes” provided in Section 1681b of the FCRA. This Section provided the circumstances required for a consumer reporting agency (CRA) to provide a user with consumer information and those in which a user may request it. Under the CFPB’s interpretation, this Section creates additional conditions for accuracy. Like this, CRAs providing information regarding the wrong consumer due to poor procedures will violate this Section.
The CFPB rejected the “reason to believe” standard that courts apply when judging whether an individual may have a permissible purpose in requesting consumer information. Courts accepting this interpretation would significantly extend FCRA liability for CRAs and users.
The CFPB has reaffirmed its commitment to enforcing the FCRA’s provisions throughout the year and is likely to continue doing so. However, though the CFPB will continue to alter the regulatory environment, it is uncertain if and how the courts will interpret this guidance. Regardless, it is critical for users of consumer reports, including background checks, to work with a CRA to help them remain in compliance with the ever-shifting regulatory environment.
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