Proposed Rule: FCRA & Human Trafficking

Because Acts of Congress often contain provisions unrelated to the main theme of the bill, you may have missed that the Fair Credit Reporting Act (FCRA) was amended as part of the National Defense Authorization Act for Fiscal Year 2022.  In response to this change to the FCRA the CFPB published a proposed rule to Amend Regulation V.  Comments are due on or before Monday May 9, 2022.

The FCRA was enacted to regulate consumer reporting, to protect consumers by promoting accuracy and fairness in credit reporting, and to prevent inaccurate information in credit reports.  The proposed rule would implement the recent amendment to the FCRA and would establish a way for human trafficking victims to identify “an adverse item of information” on their credit reports related to human trafficking so that this adverse information can be blocked, and not included on their credit reports.  The proposed rule establishes the procedure for an individual to submit documentation to a consumer reporting agency to accomplish the blocking of human-trafficking-related adverse information.

The proposed rule does not describe what an “adverse item of information” is, as the individual’s circumstances may determine that various items of information are adverse, and indeed it is up to the individual requesting that information be blocked to identify which information is adverse in their opinion.

For instance, “an adverse item of information” could include things such as: creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. In addition, these individuals may want information blocked from their consumer report that are the result trafficking because they do not believe those items accurately reflect them individually. Examples of these adverse items of information include records containing derogatory information reported to a consumer reporting agency on a loan or large purchase, records of coerced debt where a loan is taken out by a trafficking victim under force or threat, records of criminal arrests and convictions, and records of evictions or non-payment of rent.

Although the proposed rule intends to add several definitions to Regulation V, such as “consumer reporting agency,” and “victim of trafficking,” the main discussion in the proposed rule seems to focus on the documentation of adverse information.  The proposed rule indicates that the necessary documentation includes part of an official government record, meaning that either 1) Federal, State, or Tribal governmental entities or a court of law has made the determination that the individual is a victim of trafficking, or 2) documentation has been filed in a court of law indicating that an individual is a victim of trafficking.  Additionally, the documentation filed by the individual with a consumer reporting agency should identify the items of adverse information to be blocked.  Because so much of the information surrounding human trafficking is not documented, the documentation which identifies the adverse items of information may be limited to a statement by the individual, and more tangible evidence is not required.

What the effects will be on banks that are not considered consumer reporting agencies is yet to be seen.  The proposed rule doesn’t indicate that banks will have any specific change to their responsibilities in reporting information to the credit reporting agencies, and all potential blocking activity will be done by the agencies themselves.