Seventeen financial services trade groups are calling on the CFPB to abandon its plan to amend rules under the Fair Credit Reporting Act (FCRA) to vastly expand the scope of the FCRA by redefining what a “consumer report” is and who is a “consumer reporting agency.” As previously reported, while the CFPB touts the proposal as one to cover data brokers, it is much broader than that.
“We believe that the proposal is both substantively and procedurally flawed in several key areas,” the groups, including the Mortgage Bankers Association, the Consumer Bankers Association, the American Fintech Council and the U.S. Chamber of Commerce wrote, in a letter to the CFPB.
The proposed rule would treat data brokers like credit bureaus and background check companies: Companies that sell data about income or financial tier, credit history, credit score, or debt payments would be considered consumer reporting agencies required to comply with the FCRA, regardless of how the information is used.
In their letter, the groups said that the proposed rule’s expansion of the definitions of “consumer report” and “consumer reporting agency” conflict with the statutory language of the FCRA and decades of well-settled case law.
“These proposed new interpretations exceed the statutory framework Congress created and raise significant concerns regarding legality and potential unintended consequences,” they wrote.
If finalized, the proposed rule would undermine financial institutions’ ability to fight identity fraud and comply with regulatory requirements, including those under the Bank Secrecy and Anti-Money Laundering Acts, the groups stated.
“The rule’s lack of a clear exception for such beneficial use cases could create operational challenges for financial services companies and expose consumers and financial institutions to greater risk,” according to the 17 groups.
They added that the CFPB’s cost-benefit analysis lacks supporting data. The trades state that the CFPB asserted impacts and conclusions that are either “unsubstantiated or inaccurate.”
They continued, “The Bureau acknowledges in nearly two dozen instances that it “does not have data” or sufficient information to substantiate its policy conclusions or assess the proposal’s potential impact on consumers and the financial services industry.”
Comments on the proposed rule are due March 3. However, the future of the rule—and all CFPB rulemaking—is unclear since Acting CFPB Director Russell Vought has directed agency officials to stop all work on proposed rules.
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