CFPB Authority to Coordinate With States Questioned By The Congress

Congressional authorities from the U.S. House Financial Services Committee (HFSC) are questioning whether the agency may be overstepping its legal authority. These questions are in response to the Consumer Financial Protection Bureau’s (CFPB) continued movements to coordinate enforcement actions under the Fair Credit Reporting Act (FCRA) and other federal laws with state authorities.

The HFSC has sent the director of the CFPB a letter questioning the source of the agency’s authority to recruit state attorney generals. The HFSC further questions how the agency safeguards against repetitive actions and more critical questions regarding its recent efforts. In recent months, the CFPB has taken several significant steps. Such steps include a wave of interpretive rules concerning the FCRA and enforcement actions with state attorney generals.

One of the most significant steps the CFPB has taken is releasing an interpretive rule, urging the state to introduce new laws with stricter data protection regulations than the FCRA. According to the CFPB, this legal interpretation makes it clear that federal law does not inherently prevent the state from instituting stronger protections. Instead, it only preempts a narrow band of state laws.

However, the CFPB’s interpretation is not binding and contradicts significant prior court rulings. Under the FCRA, several provisions provide for express preemption of conflicting state law. Courts have regularly dismissed claims under state credit reporting laws due to finding that the FCRA preempts the law itself. States that choose to pass more robust laws under the CFPB’s interpretation that they may enact stricter requirements may face challenges in court, should they be enforced.

In another interpretive rule issued in May, the CFPB further detailed how state authorities can pursue actions in response to consumer financial protection law violations. For example, the rule states that a CFPB enforcement action should not necessarily halt separate state enforcement actions, which may consist of a broader range of entities over which the CFPB can exercise authority.

It is uncertain how Congressional authorities may respond to the CFPB’s new actions. However, the aggressive increase in enforcement by the CFPB and states presents significant risks for users and furnishers of consumer reports, such as background checks. This enforcement makes it increasingly crucial for employers to ensure they work with trustworthy background check providers. In addition, it is necessary to work with providers who remain up-to-date with the ever-shifting consumer reporting regulations, ensuring the company remains compliant with federal and state requirements.

Stay updated on all the new rules of compliance with Pre-employ’s free news resources on FCRA, EEOC, and more. Contact a Sales Rep today for more information.

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