
On December 9, the Consumer Financial Protection Bureau (CFPB) took an important step by issuing an advance notice of proposed rulemaking.
This announcement is geared towards gathering data that will inform a new rule aimed at tackling issues related to information submitted to credit reporting agencies (CRAs).
Specifically, the focus is on coerced debt and misinformation in credit reporting that negatively affects survivors of domestic violence, elder abuse, and other financial exploitation scenarios.
CFPB’s Notice and Goals
The CFPB’s notice encourages public input regarding potential updates to the definitions of “identity theft” and “identity theft report” under Regulation V, which is linked to the Fair Credit Reporting Act (FCRA).
Furthermore, the notice opens up discussions for additional changes to Regulation V that could address transactions conducted without the informed consent of consumers.
In their announcement, the CFPB emphasized that abusers often manipulate victims through coerced debt, forcing them into financial obligations via threats, coercion, or outright violence.
This may manifest in ways such as opening accounts in a victim’s name without their knowledge, pressuring them to sign documents, or racking up debt on shared accounts.
Of particular concern is the disproportionate impact of financial abuse on marginalized communities; for instance, women of color often find themselves facing nearly double the average debt levels.
The CFPB believes that by eliminating coerced debts from credit reports, many survivors could see significant improvements in their financial situations—data suggests that about one-third could experience credit score increases of 20 points or more, which would in turn open up better loan opportunities.
Gathering Public Feedback
To gather comprehensive feedback, the notice invites contributions from consumer advocates, credit reporting agencies, and the general public on several key areas:
- The prevalence and repercussions of coerced debt and its role within the credit reporting landscape.
- Evidence illustrating the link between coerced debt and increased credit risk for survivors.
- The obstacles faced by survivors of economic abuse in seeking legal protections at the federal or state level.
- The specific challenges wrought by coerced debt for particular groups, such as survivors of intimate partner violence, gender-based violence, the elderly, and children in foster care.
- Potential methods for substantiating that a debt was coerced, possibly through self-attestation or documentation.
Those interested in contributing their insights have until March 7, 2025, to respond to this advance notice.
Future Implications
In essence, this announcement reflects the CFPB’s commitment to expanding the framework of the Fair Credit Reporting Act during a year characterized by significant regulatory activity.
It is crucial to recognize that any proposed rule that emerges from this public input process will be overseen by a CFPB Director appointed by the next administration.
This new leadership may elect to overturn many of the regulatory measures set forth during the Biden administration.
Consequently, it will be vital to monitor how these developments unfold regarding the potential expansion of the FCRA as we transition into a new political landscape.
Source: Natlawreview