Preventing Preemption: Finding Space for States to Regulate Consumers’ Credit Reports

Abstract

I. INTRODUCTIONThe recent Great Recession soiled the credit reports of many Americans. Furthermore, advances in database technology have allowed employers and others wider access to comprehensive information about consumers, sometimes significantly narrowing the opportunities those consumers might have for employment, credit, housing, or insurance. These results have inspired some state legislatures to revise their credit reporting statutes to ameliorate the percussive effects of the economic crisis on their citizens' credit records. However, state lawmakers must navigate the thicket of the federal Fair Credit Reporting Act's preemption provisions if they are to create legislation that will be effective rather than impotent. This Article analyzes these provisions alongside recent Supreme Court decisions about preemption. The Article then provides both a theory of the intersection of state and federal credit reporting laws and describes the space remaining for state legislatures to create preemption-proof, or at least preemption-resistant, credit reporting provisions that can fairly balance the concerns of individuals and those who want access to their background information.Part II describes some recent legislative efforts in protecting consumers' financial and criminal record information. Following, Part III sets forth the framework of federal preemption generally and analyzes the Supreme Court's recent preemption decisions that are relevant to information-protection laws. Part IV describes the Fair Credit Reporting Act provisions that may overlap with state legislative activity, along with its specific preemption provisions, and analyzes the vulnerability of various state credit reporting provisions to preemption. The Article then maps out tactics for states to employ to preemption-proof their legislation and maximize the effects of their state information-protection laws.II. STATES' REGULATION OF DISCLOSURE OF CONSUMER FINANCIAL AND CRIMINAL RECORD INFORMATIONNearly every state regulates how consumers' financial and criminal record information may be collected and disclosed; these are, in essence, reputation-protecting provisions. However, given recent developments in the economy and data technology, this may be a suitable time to adjust these laws to better balance the privacy interests of consumers against the information interests of employers, banks, and insurance companies.The Great Recession inflicted tremendous damage to credit records by causing widespread unemployment and depressing housing values, putting great stress on the ability of many to repay debts.1 Those defaults and delays in payment have been duly amassed by the consumer reporting agencies that publish credit reports about consumers and compute their credit scores. Seeing this information about those hurt by economic blows may make employers less likely to hire them, landlords less likely to rent to them, and insurers less likely to insure them (or willing to insure them, but only at elevated premiums).Aside from the economic environment, advances in data technology have increased our ability to view public records across the country, leading many to be marked by visible criminal records incurred even decades ago-records that many might have thought they had surpassed.2 In addition, medical costs continue to accelerate and medical debt not only spoils many otherwise solid credit reports but has also led to a significant number of bankruptcies.3 Finally, the crime of identity theft has increased as data breaches become more common, exposing sensitive financial information to thieves who can then poison their victims' credit reports.4State legislators can ameliorate the effects of some of these historical events on their constituents' opportunities, curbing the impact of old credit, criminal, medical, and identity theft problems. However, for such record-enhancing provisions to have their intended impact, the drafters must carefully navigate the express preemption provisions staked throughout the Fair Credit Reporting Act (FCRA), the federal statute governing the creation and use of credit reports. …