A trade group representing the three major credit bureaus filed a lawsuit last week against the state of Maine challenging a new law that, among other things, prevents furnishers, such as collection agencies, from reporting unpaid medical debts for at least 180 days.
The Consumer Data Industry Association argues that the two new laws violate the Fair Credit Reporting Act and that the FCRA should pre-empt state laws that create “unreasonable burdens” on credit reporting agencies.
The Maine legislature enacted two new bills that went into effect last week. The first law restricts furnishers from reporting a medical debt until it is at least 180 days old and requires furnishers to report payments on medical debts the same as a regular credit-based transaction, as long as the individual is making timely payments. The second law requires furnishers to investigate if a person claims a debt is a result of economic abuse, such as when an individual takes out a credit card in his or her spouse’s name. In such instances, the debt is to be removed from the victim’s credit report.
A copy of the CDIA’s complaint can be accessed by clicking here.
The CDIA argues that the two Maine laws “attempt to regulate the content of consumer reports,” which is “expressly preempted by the FCRA.”
The argument against waiting to report unpaid medical debts and treating payments like a credit transaction “prohibits a CRA from reporting certain accounts unless certain conditions exist, which are known only to the furnisher/account holder and the consumer,” the CDIA argues in its complaint. “Thus, the CRA would be required to review the status of every account, including payment activity, etc. or it may not report the account at all.”
The economic abuse law also puts an undue responsibility on credit reporting agencies, the CDIA argues in its complaint. “While the prevention of economic abuse is a laudable goal, putting the responsibility on CRAs to adjudicate the legal effect of a contract is effectively creating an end-run around the parties’ legal rights and the legal system. CRAs are not in a position to adjudicate such claims, and lack sufficient knowledge and expertise to do so.”
