American Financial Services Association (AFSA) has submitted comments on the Consumer Financial Protection Bureau’s (CFPB) recent action in the Fair Credit Reporting Act (FCRA) space. The letter addresses several proposed changes in the “Small Business Advisory Review Panel for Consumer Reporting Rulemaking Outline of Proposals” (SBREFA). AFSA shares the CFPB’s mission to protect consumers from data misuse, and our comments on the SBREFA outline are intended to ensure that our members can continue to protect consumers from harm.

AFSA’s letter explains how, if adopted, many of the proposals would constitute an expansion of the FCRA beyond the plain language of the law and previous CFPB actions. For example, the SBREFA outline would prohibit medical debt from inclusion in an ability-to-repay analysis. This could result in consumers taking on more valid and legally enforceable debt than the consumer would be able to repay, leading to outcomes that are inconsistent with the CFPB’s rationale in support of its Ability-to-Repay/Qualified Mortgage Rule. Additionally, the CFPB recently filed an enforcement action against an auto lender that accused the lender of not being thorough enough in its analysis. The CFPB deemed the lender abusive for not considering the recurring cost of healthcare, among other debt obligations. Following the SBREFA outline proposal would force financial institutions to engage in that very “abusive” action by ignoring recurring medical debt obligations. This either negates previous CFPB enforcement action or institutes a rule that would allow the CFPB to categorize every lender as “abusive,” putting the rulemaking at risk for being arbitrary and capricious. It is unclear how these competing priorities can be reconciled.

This expansion, amongst others, would introduce more fraud, costs, and consumer harm, not to mention significant legal uncertainty, into the marketplace. The increase in compliance costs, which would have to be passed on to consumers, the delay and disruption in fraud prevention causing consumer harm, the misrepresentation of disputes, and the unintended potential that consumers may borrow beyond their means, will only result in harm to American consumers and small businesses. Additionally, this will likely act as a disincentive for lenders to furnish data, which ultimately could result in furnishers not providing any information to the consumer reporting agencies, which would also harm the consumers.

AFSA encouraged the CFPB to reconsider several of its proposals and offered to meet with the CFPB before the rulemaking process progresses.