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CFPB investigates employer-driven debt and the sale of workers’ personal data
On March 9, the CFPB published findings from a recent roundtable event where worker organizations and labor unions shared their members’ financial hardships and challenges. According to the Bureau’s blog post, more workers are reporting that they are responsible for paying for employer-mandated training and equipment, causing workers to owe significant debt to their employers or third-party debt collectors and making it difficult for them to change jobs. The Bureau stated it will continue to analyze information about employer-driven debt and employer/third-party collection efforts to best determine how to address consumer harm and any potential violations of federal consumer financial law, and will participate in the Truck Leasing Task Force with the Departments of Transportation and Labor to investigate predatory financial arrangements.
Organizations also reported concerns related to surveillance technology and the sale of personal data, including how information is being “compiled and used for decision-making that may impact workers’ financial well-being far beyond their current employers.” One participant explained that workers may not be aware that tools designed to track hours worked across different platforms also have the capability to track them outside of working hours and are selling access to their data to financial institutions, insurers, and other employers. The Bureau also heard from participants about data firms that are collecting and selling workers’ data that “may not be following the appropriate protocols for privacy and transparency.” The Bureau emphasized that it will “closely monitor and better understand this emerging market along with our federal partners and assess where provisions of the Fair Credit Reporting Act and other consumer protection laws may protect workers.”
District Court partially grants defendant’s motion in FCRA case
On February 25, the U.S. District Court for the Eastern District of Pennsylvania denied in part and granted in part a defendant’s motion for summary judgment in an FCRA case. According to the opinion, the plaintiffs applied for a loan at a bank to refinance their home mortgage and the bank then engaged a service agency (defendant) to conduct a public records search and provide a report on the plaintiffs. To prepare the report, the defendant allegedly engaged an independent contractor to conduct a physical search of both the open judgment directory and the municipal lien directory. The plaintiffs claimed that the defendant’s report “erroneously” listed outstanding civil judgments against them and that defendant refused to investigate the alleged inaccuracies. The plaintiffs filed suit, alleging that the defendant violated the FCRA by failing to follow reasonable procedures to assure maximum possible accuracy when preparing a consumer report and by failing to conduct a reasonable reinvestigation of the plaintiffs’ dispute.
The defendant moved for summary judgment, asserting that it was not subject to the FCRA as a matter of law since it was not a consumer reporting agency and that it did not supply “consumer reports” within the meaning of the FCRA. Additionally, the defendant claimed that even if it was subject to the FCRA, no reasonable juror could find that it violated either of those FCRA provisions. The district court found that the defendant is a “consumer reporting agency” under FCRA because its operations met the statutory definition. The court partially granted the defendant’s summary judgment on the plaintiffs’ claims that it willfully violated the FCRA by failing to conduct a reasonable reinvestigation of the plaintiffs’ dispute.
9th Circuit affirms judgment for defendant in FCRA suit
On March 1, the U.S. Court of Appeals for the Ninth Circuit affirmed dismissal in favor of a consumer reporting agency (defendant). The suit accused the defendant of violating the FCRA by failing to disclose certain information about a consumer. The plaintiffs were originally part of a class action alleging FCRA disclosure violations against the defendant, but that case was dismissed. Instead of appealing the suit, three plaintiffs brought a separate proposed class action. The defendant removed the case to federal court and filed a motion to dismiss based on a failure to state a claim. Though the case was again dismissed, the plaintiffs were granted leave to amend their complaint. In their First Amended Complaint, the plaintiffs argued that under the FCRA, the disclosures they received from the defendant did not include, among other things: (i) behavioral data; (ii) “soft inquiries” not initiated by the consumer; (iii) the identity of parties procuring consumer reports; and (iv) the date on which employment data was reported. The district court found that the defendant was not obligated to include the behavioral data in its disclosure since the information alleged to have not been disclosed was not part of the consumer’s “file” under the FCRA and was not information that was or might be furnished in a consumer report.
On appeal, the 9th Circuit noted that “none of the information [the plaintiffs] contend [the defendant] failed to disclose is of the type that has been included in a consumer report in the past or is planned to be included in such a report in the future.” The appellate court also noted that “the date employment dates were reported can have no ‘bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal, characteristics, or mode of living.’” Since the district court found that the data that the consumers alleged the defendants failed to include in its disclosures is actually not subject to disclosure under the FCRA, the appellate court affirmed the district court’s dismissal.
CFPB looks at removing medical debt from credit reports
On March 1, the CFPB announced plans to review whether data on unpaid medical bills should be included in consumer credit reports. The Bureau stated in its report, Medical Debt Burden in the United States, that research found $88 billion in medical debt on consumer credit reports, accounting for 58 percent of all uncollected debt tradelines reported to credit reporting agencies (CRAs). “Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe,” CFPB Director Rohit Chopra said in a statement.
The Bureau noted that medical debt is often less transparent than other types of debt, due to opaque pricing, complicated insurance, charity care coverage, and pricing rules, reporting that in many instances, consumers may not even sign a billing agreement until after receiving treatment. Medical debts often end up in collections, the Bureau added, which can cause far-ranging repercussions even if the bill itself is inaccurate or erroneous. The report noted additional challenges for uninsured consumers, as well as for Black and Latino families, consumers with low incomes, veterans, older adults, and young adults of all races and ethnicities. The report further stated that the Covid-19 pandemic has exacerbated the situation, with costs and medical debt expected to increase post-pandemic, and found that medical debt weakens underwriting accuracy, as it is less predictive of future repayment than reporting on traditional credit obligations. The Bureau pointed out that it has seen dramatic effects when newer credit scoring models weigh medical collections tradelines less heavily, but noted that there has been very little adoption of this approach so far.
The Bureau stated it intends to examine CRAs to ensure they are collecting accurate information from medical debt collectors and expects CRAs to take action against furnishers who routinely report inaccurate information, including cutting off their access to the system. The Bureau also plans to work with the Department of Health and Human Services to make sure consumers are not forced to pay more than the amount due for medical debt. A January compliance bulletin reminded debt collectors and CRAs of their legal obligations under the FDCPA and the FCRA when collecting, furnishing information about, and reporting medical debts covered by the No Surprises Act. The Bureau also recently supported changes by the Department of Veterans Affairs to amend its regulations related to the conditions by which VA benefit debts or medical debts are reported to CRAs. (Covered by InfoBytes here and here.)
CFPB releases comment letter on FTC enforcement action
On February 18, the CFPB released a comment letter in response to the FTC’s request for comments on its proposed order with a business credit reporting agency alleging that the respondent engaged in deceptive and unfair practices. (Covered by InfoBytes here). In commending the FTC, the CFPB noted that “there are troubling conflicts of interest when the purveyor of credit reports also sells ancillary services.” The CFPB also discussed that the FCRA “may not have contemplated the serious challenges that small businesses face with respect to business credit reports and associated services such as the provision of credit scores,” and that small business “may not benefit” from the FCRA. The Bureau noted that “[b]usiness credit reporting companies should not be able to unfairly harm a small business’s and their owner’s or operator’s financing opportunities.” In supporting “greater remedial authorities for the FTC to be more in line with other civil law enforcement agencies,” the comment letter argued that “[s]tronger authorities for the FTC may help to remediate this full range of harms,” and that the Bureau “stands ready to work with the FTC and other federal and state law enforcement partners to examine whether there are other unlawful practices related to small business credit reporting by other providers.” According to the CFPB, the Bureau will be working with the FTC “to ensure that small businesses are treated fairly when it comes to accessing loans.” The CFPB also noted that it is “working on a rule to shine more light on small business lending, by gathering more data about whether and how small businesses are able to access credit,” and will provide regulators the opportunity “to understand the landscape of credit availability to small businesses that for too long have had to rely on opaque business credit reporting agencies as gatekeepers of financing,” according to the comment letter.
1st Circuit vacates ruling in Maine FCRA case
On February 10, the U.S. Court of Appeals for the First Circuit vacated a district court’s ruling that the FCRA preempts amendments to the Maine Fair Credit Reporting Act that govern how certain debts are reported to credit reporting agencies. As previously covered by InfoBytes, a trade association—whose members include the three nationwide consumer credit reporting agencies (CRAs)—sued the Maine attorney general and the superintendent of Maine’s Bureau of Consumer Credit Protection (collectively, “defendants”) for enacting the 2019 amendments, which, among other things, place restrictions on how medical debts can be reported by the CRAs and govern how CRAs must investigate debt that is allegedly a “product of ‘economic abuse.’” The trade association argued that the amendments, which attempt to regulate the contents of an individual’s consumer report, are preempted by the FCRA, and contended that language under FCRA Section 1681t(b)(1)(E) should be read to encompass all claims relating to information contained in consumer reports. The district court agreed, ruling that, as a matter of law, the amendments are preempted by § 1681t(b)(1)(E). According to the court, Congress’ language and amendments to the FCRA’s structure “reflect an affirmative choice by Congress to set ‘uniform federal standards’ regarding the information contained in consumer credit reports,” and that “[b]y seeking to exclude additional types of information” from consumer reports, the amendments “intrude upon a subject matter that Congress has recently sought to expressly preempt from state regulation.” The defendants appealed.
On appeal, the plaintiff argued that the phrase “relating to information contained in consumer reports” broadly preempts all state laws, but the appellate court was not persuaded and concluded that the broad interpretation “is not the most natural reading of the statute’s syntax and structure.” The 1st Circuit found “no reason to presume that Congress intended, in providing some federal protections to consumers regarding the information contained in credit reports, to oust all opportunity for states to provide more protections, even if those protections would not otherwise be preempted as ‘inconsistent’ with the FCRA under 15 U.S.C. § 1681t(a).” In addition, the court reminded the plaintiff that “even where Congress has chosen to preempt state law, it is not ousting states of regulatory authority; state regulators have concurrent enforcement authority under the FCRA, subject to some oversight by federal regulators.” As such, the appellate court held that the FCRA did not broadly preempt the entirety of Maine’s amendments, and remanded the case back to the district court to determine the scope under which the amendments may be preempted by the FCRA.
9th Circuit affirms judgment for defendant in FCRA suit
On February 8, the U.S. Court of Appeals for the Ninth Circuit affirmed summary judgment in favor of a consumer reporting agency (defendant). The suit accused the defendant of violating the FCRA by willfully and negligently disclosing a 10-year-old criminal charge that had been dismissed six years prior to an inquiry made on the plaintiff’s credit report. The plaintiff allegedly submitted an application for housing in 2010, which was denied. In 2010, the defendant provided a tenant screening report, which included details of a criminal charge from 2000, which was outside the seven-year window of the FCRA. However, the plaintiff’s criminal charge was dismissed in 2004, which was within the seven-year reporting window. The plaintiff sued under the FCRA, alleging that the defendant reported criminal information older than seven years, failed to maintain procedures designed to avoid violating the FCRA and ensure the maximum possible accuracy of the information in the report, and failed to conduct a reasonable reinvestigation after receiving a consumer dispute.
In ruling for the defendant, the 9th Circuit stated that “to prove a negligent violation [of the FCRA], a plaintiff must show that the defendant acted pursuant to an objectively unreasonable interpretation of the statute.” The 9th Circuit held that Section 1681c(a)(5) of the FCRA “does not specifically state the date that triggers the reporting window.” Further, the appellate court looked to guidance from the FTC and the CFPB, which “appeared to permit reporting the charge” at the time.
As the appellate court explained, whether the consumer reporting agency correctly interpreted § 1681c(a)(5) to permit the reporting of a criminal charge that was filed outside of, but dismissed within, the statute’s seven-year window, arose as a matter of first impression. However, the consumer reporting agency introduced evidence that its interpretation was consistent with industry norms and standards. Likewise, FTC guidance on the question, at the time, appeared to permit reporting the charge. The appellate court noted, therefore, that it “cannot say, nor could any other reasonable fact finder, that on this record defendant’s violation of [the FCRA] was negligent, much less willful.” As a result, the 9th Circuit affirmed summary judgment in favor of the defendant.
District Court grants MSJ to creditor in FCRA case
On February 4, the U.S. District Court for the Middle District of Florida granted a defendant creditor’s motion for judgment on the pleadings in a case alleging FCRA violations. The plaintiff alleged that the payment status for a tradeline appearing on her credit report incorrectly showed it as “90 days past due” despite the account being paid and closed. She filed suit against the defendant and two consumer reporting agencies (CRAs) claiming the information furnished by the defendant to the CRAs was inaccurate and that the CRAs prepared and issued credit reports containing “inaccurate and misleading information.” Under the FCRA, entities that furnish information to CRAs are required to ensure the accuracy of the information. If an entity receives a notice of dispute from a consumer it is required to conduct an investigation and report the results to the CRAs—actions, the plaintiff claimed, the defendant failed to do. She further contended that the “pay status” field—which she claimed “is ‘specifically designed to be understood as the current status of the account’”—was causing her credit score to be lower than if it was marked as closed. However, upon review, the court determined that when objectively viewing the plaintiff’s credit reports in their entirety, it is apparent that the account is accurate and not misleading. According to the court, “the only reasonable reading of the [disputed] account is that the account was past due in September 2020, at which time the account was updated one last time and closed—zeroing out the balance. It does not indicate, as [the plaintiff] argues, that she is currently 60 days (or 90 days) past due.” Moreover, no reasonable creditor would look at the report and be misled into believing that the plaintiff had a present pending amount due, the court added.
CFPB issues guidance on medical debt covered by the NSA
On January 13, the CFPB released a new Bulletin to remind debt collectors and credit reporting agencies (CRAs) of their legal obligations under the FDCPA and the FCRA when collecting, furnishing information about, and reporting medical debts covered by the No Surprises Act (NSA). Effective for plan years beginning on or after January 1, 2022, the NSA establishes new federal protections against surprise medical bills arising out of certain out-of-network emergency care. The CFPB notes that medical debt often poses special risks to consumers as consumers are “rarely informed of the costs of medical treatment in advance” and are “generally ill suited to the task of identifying [medical] billing errors.” Specifically, the Bulletin reminds debt collectors of the FDCPA prohibition against “false representation of the ‘character, amount, or legal status of any debt’” and the use of any “unfair or unconscionable means to collect or attempt to collect any debt.” According to the Bulletin, these would include “misrepresenting that a consumer must pay a debt stemming from a charge that exceeds the amount permitted by the [NSA].” The Bulletin also reminded debt collectors, as furnishers of information to CRAs, and the CRAs themselves of their obligations under the FCRA to assure the accuracy of information furnished or included in a consumer report, as well as to “conduct reasonable and timely investigations of consumer disputes to verify the accuracy of furnished information.” The Bulletin clarified that the accuracy and dispute obligations imposed by the FCRA “apply with respect to debts stemming from charges that exceed the amount permitted” by the NSA. The Bulletin further offered several examples of acts or practices that may be violative of the FDCPA and/or the FCRA in connection with medical debt covered by the NSA. According to the Bulletin, the CFPB “will hold debt collectors accountable for failing to comply with the FDCPA and Regulation F, and it will hold CRAs and furnishers accountable for failing to comply with the FCRA and Regulation V.” The Bureau also noted that it “will continue to work with the U.S. Department of Health and Human Services and other partners to address medical debt abuses.”
CFPB reports on NCRA’s complaint responsiveness
On January 5, the CFPB released a report, pursuant to Section 611(e)(5) of the FCRA, on information gathered by the Bureau on certain consumer complaints transmitted by the Bureau to the three largest nationwide consumer reporting agencies (NCRAs). According to the report, the CFPB received over 800,000 credit or consumer reporting complaints between January 2020 to September 2021, and of the complaints, over 700,000 were submitted about the same three NCRAs discussed in the report. According to the Bureau, complaints submitted about the NCRAs accounted for over 50 percent of all complaints received by the Bureau in 2020 and over 60 percent in 2021. The Bureau’s analysis revealed that consumers submitted more complaints in each complaint session and are increasingly returning to the Bureau’s complaint process, with a significant amount of complaints regarding inaccurate information on their credit and consumer reports. The CFPB found that the NCRAs reported relief in less than 2 percent of complaints, which is down from approximately 25 percent of complaints in 2019. Additionally, consumers most frequently complained that the inaccurate information belongs to other individuals, and consumers often described being victims of identity theft. The Bureau, in addition to pointing out how the NCRAs are “fail[ing] to meet [their] statutory obligations” under the FCRA, also noted that medical debts are an “unnavigable quagmire” and needs to be addressed. It reported that the NCRAs “do not take available steps to distinguish between complaints authorized by the consumer and those not authorized by the consumer.” The Bureau also mentioned issues that consumers face when attempting to dispute information on their credit reports, such as, among other things: (i) unsuccessfully disputing information in a timely manner; (ii) frequently expending resources to correct inaccuracies; and (iii) and finding themselves caught between furnishers and NCRAs when attempting to resolve disputes. Other highlights of the report include noting that the NCRA rely “heavily” on utilizing template responses to complaints, despite having 60 days to respond, and that two of the NCRAs mentioned in the report do not give “substantive responses to consumers’ complaints if they suspected that a third-party was involved in submitting a complaint.”