CFPB’s Proposed FCRA Changes and Industry Implications

CFPB’s Proposed FCRA Changes and Industry Implications

According to an article by Ballard Spahr, the Consumer Financial Protection Bureau (CFPB) has proposed sweeping changes to the Fair Credit Reporting Act (FCRA) aimed at broadening its application to sensitive consumer information, including data handled by brokers. However, the proposed FCRA changes extend beyond data brokers, with significant implications for the definitions of “consumer report” and “consumer reporting agency,” as well as permissible purposes for using consumer data. Comments on the proposal are due by March 3, 2025.

Key Proposed FCRA Changes and Implications:

• Consumer Report Definition:
  • The CFPB seeks to clarify the terms “is used” and “is expected to be used,” potentially expanding what qualifies as a consumer report.
  • Personal identifiers (e.g., names, addresses, Social Security numbers) could be considered consumer reports if linked to preparing a consumer report, even without additional information.
  • De-identified information could still be considered a consumer report under certain conditions, such as if it remains linked or linkable to an individual.
• Consumer Reporting Agency:
  • The proposal redefines “assembling or evaluating” consumer data, broadening activities that qualify entities as consumer reporting agencies.
  • Examples include categorizing bank transactions, altering data formatting, or verifying information. These expansions may encompass entities beyond traditional credit bureaus.
• Permissible Purposes for Data Use:
  • Significant conditions would be added to the “written authorization” purpose, including strict consent, disclosure, and revocation requirements.
  • The “legitimate business need” purpose would exclude data used for marketing or solicitation without consumer initiation.
• Operational Impact:
  • The broadened definitions could make it challenging to determine what data falls outside the FCRA’s scope.
  • Basic activities like verifying identities for fraud prevention could become subject to FCRA compliance.
  • Industry critics argue these changes may require Congressional approval rather than regulatory action.

Given the rule’s scope, stakeholders should consider submitting comments to address concerns about overreach and operational feasibility.