The Consumer Financial Protection Bureau (CFPB) has unveiled extensive modifications to the Fair Credit Reporting Act (FCRA), signaling significant implications for data brokers, furnishers, and end users.
On a recent Thursday, the CFPB detailed proposals aimed at imposing substantial constraints on companies' access to consumer data under the FCRA. These proposed alterations encompass the removal of medical debt from credit reports, prohibiting the sale of data for unauthorized purposes, and extending FCRA coverage to encompass data brokers and aggregators.
These initiatives stem from an earlier investigation by the CFPB, conducted in March of this year, which delved into the practices of data brokers and the nature of the data they collect and sell. The CFPB's proposal is grounded in the input received, which exceeded 7,000 comments submitted during the inquiry.
CFPB Director Rohit Chopra, accompanied by Vice President Kamala Harris, underscored the benefits of eliminating medical data from credit scores. They emphasized that this move would rectify inaccuracies in data, eliminate coercive debt collection methods, and enhance the predictive accuracy of credit scores.
However, it's the latter part of the proposal that has raised concerns within the banking and financial sectors. Under the proposed changes, previously exempt entities, such as data brokers and aggregators, would become subject to the FCRA's requirements. In practical terms, this would entail a broad spectrum of companies, not primarily engaged in using data for credit purposes, being classified as credit reporting entities.
Presently, existing regulations strictly limit the sale of credit report data to purposes explicitly authorized by Congress. The proposed adjustments would prohibit the sale of credit report data for non-permissible purposes. If data brokers and aggregators are brought under the FCRA's purview, these entities would be obligated to grant consumers access to and the ability to dispute their data. This shift could potentially disrupt the existing systems for fraud prevention and customer identity verification. Furthermore, it opens the door to class action lawsuits against data furnishers, brokers, and aggregators, including banks.
The CFPB has presented its outline for initial commentary to a panel of small businesses convened under the Small Business Regulatory Enforcement Fairness Act (SBREFA). Following the conclusion of the comment period, a final rule is anticipated, but it is not expected to materialize before 2025.
