FTC Approves 5 FCRA Rule Changes
The Federal Trade Commission (FTC) issued a final rulemaking on Sept. 8, 2021, clarifying that five Fair Credit Reporting Act (FCRA) rules for which it retains rulemaking authority will apply only to motor vehicle dealers.
In 2010, the FTC's rulemaking authority for the FCRA was assigned to the Consumer Financial Protection Bureau (CFPB) by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which substantially changed the legal and supervisory framework for providers of consumer financial services products and services. In 2012, the FTC rescinded some rules it promulgated under the FCRA and those rules were substituted by rules issued by the CFPB. However, pursuant to Section 1029(a) of the Dodd-Frank Act, the FTC retained rulemaking authority with respect to certain motor vehicle dealers. Predominantly, those rules apply to motor vehicle dealers engaged in the sale, servicing and leasing of motor vehicles.
One of the FTC's retained rules now applying only to motor vehicle dealers is the Furnisher Rule (discussed further below), while the CFPB's Furnisher Rule applies to all other entities. Importantly, the Dodd-Frank Act limited only the FTC's rulemaking authority, but it did not affect the FTC's authority to enforce the CFPB's Furnisher Rule. For instance, as recently as 2020, the FTC filed a complaint alleging violations of the CFPB's version of the rule. The FTC agreed with the one comment it received, which stated that the Furnisher Rule assisted millions of consumers to discover inaccuracies in consumer reports and stressed the need for enforcement of the Furnisher Rule.
The FTC's Sept. 8, 2021, rulemaking affects the following FCRA regulations.
- Address Discrepancy Rule: Provides obligations of consumer report users when a notice of an address discrepancy is received from a consumer reporting agency (CRA).
- Affiliate Marketing Rule: Affords consumers the ability to restrict individuals from using information received from an affiliate for the purposes of soliciting the consumer.
- Furnisher Rule: Requires furnishers to establish and enforce reasonable written policies and procedures regarding the accuracy and integrity of consumer information provided to CRAs.
- Pre-Screen Opt-Out Notice Rule: Establishes requirements for users of consumer reports to make unsolicited credit or insurance offers to consumers. The Pre-Screen Opt-Out Rule also includes a web address for which consumers can opt out of credit offers to the model notices used by motor vehicle dealers.
- Risk-Based Pricing Rule: Requires users of consumer reports to provide notice to consumers about the use of such data when offering less favorable terms. The Risk-Based Pricing Rule was revised to add examples detailing its limited scope to motor vehicle dealers.
Conclusion and Considerations
While the substance of the FTC's recent rulemaking is not inherently groundbreaking, it should serve as a reminder to the consumer financial services industry of federal agencies' focus on FCRA compliance and enforcement. The FCRA is perhaps preeminent among all federal consumer financial services laws (with the possible exception of the Equal Credit Opportunity Act) in its role as an filter for access to consumer credit. Because conducting a review of one's consumer report is generally an indispensable step in the creditworthiness evaluation, ensuring that such reports are accurate and not misused is fundamental to ensuring the appropriate allocation of consumer credit. Unrectified errors in a consumer report can deny credit to an eligible applicant.
The FTC's recent rulemaking should serve as a reminder for all providers of consumer financial services and users of consumer reports to review the way that they access consumer reports, handle consumer report information and respond to alleged discrepancies.
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