The CFPB has unveiled ambitious amendments to the FCRA that would redefine the rules for data brokers, furnishers, and end users.
Central to these changes is the significant tightening of regulations on how companies can leverage consumer data under the FCRA. Some of the most notable suggestions encompass the exclusion of medical debt from credit reports, a prohibition on the sale of data for non-approved uses, and broadening the scope of the FCRA to include data brokers and aggregators.
These groundbreaking plans were developed following a CFPB inquiry in March, which delved into the practices of data brokers and the nature of the information they accumulate and distribute. The foundation for this proposal was laid by the feedback from over 7,000 comments received post-inquiry.
CFPB Director Rohit Chopra, with the support of Vice President Kamala Harris, emphasised the importance of excluding medical data from credit reports. This move is anticipated to rectify inaccuracies, halt aggressive debt collection methods, and enhance the precision of credit scores.
However, financial establishments expressed apprehensions over another segment of the proposal. The suggested alterations imply that entities, previously not covered by the FCRA like data brokers and aggregators, would now come under its jurisdiction. In practical terms, this means that numerous firms not involved in the credit-data business would now be categorised as credit reporting agencies.
CFPB Director Rohit Chopra said, “Removing medical data from credit scores would help clean up inaccurate data, end coercive debt collection tactics and improve credit score predictiveness.”
Currently, the FCRA permits the sale of credit report data exclusively for reasons specified by Congress as permissible. But the new changes, if enacted, would outlaw the sale of such data for non-sanctioned purposes.
The broader implications of this could be seismic for the fields of fraud prevention and customer identification, granting consumers the authority to access and challenge their data. Moreover, it might pave the way for potential class action litigations against data furnishers like banks, as well as brokers and aggregators.
The CFPB has now presented their draft for initial feedback to a group of small enterprises assembled under the SBREFA. The finalised rule, post the comment period, is anticipated to be promulgated no earlier than 2025.
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