The U.S. District Court for the Western District of Texas has granted partial summary judgment to the Consumer Data Industry Association (CDIA) in Consumer Data Industry Association v. State of Texas, finding that the Fair Credit Reporting Act (FCRA) expressly preempts a Texas law restricting the reporting of certain out-of-network emergency medical debts.
The court determined that Section 1681t(b)(1)(E) of the FCRA preempts Texas Business & Commerce Code Section 20.05(a)(5) and permanently enjoined the state of Texas from enforcing the provision.
Background of the Dispute
The dispute stems from Senate Bill 1037, enacted by the Texas Legislature in 2019. The law prohibited consumer reporting agencies from furnishing consumer reports containing certain medical debt collection items when the consumer was covered by a health benefit plan at the time of the medical event.
Specifically, the provision applied to outstanding balances owed to an emergency care provider or facility-based provider when the debt involved an out-of-network claim.
The case was previously stayed while the Consumer Financial Protection Bureau considered a rulemaking process concerning medical debt reporting. After the stay was lifted, CDIA moved for summary judgment, arguing that the Texas provision was expressly preempted by the FCRA.
Court’s Analysis of FCRA Preemption
The court focused its analysis on Section 1681t(b)(1)(E) of the FCRA, which provides that states may not impose requirements or prohibitions concerning any subject matter regulated under Section 1681c of the federal law.
The court determined that the scope of preemption under Section 1681t(b)(1) depends on the specific provisions contained in Section 1681c.
In examining Section 1681c(a)(5), which governs the reporting of “any other adverse item of information” that predates a consumer report by more than seven years, the court also considered the legislative history of the FCRA’s preemption provisions.
Congress added Section 1681t(b) in 1996 as part of an effort to balance states’ rights with the industry’s interest in maintaining nationwide uniformity. The provision initially included a sunset clause. In 2003, however, Congress removed the temporary sunset provision, making the preemption framework permanent.
The court concluded that Congress intended to preempt state laws imposing additional restrictions on the reporting of adverse information covered by the FCRA.
Medical Debt Reporting Restrictions
The court also considered specific exclusions contained within Section 1681c, including Sections 1681c(a)(7) and (a)(8), which address the reporting of certain types of veterans’ medical debt.
The court reasoned that federal regulation of veterans’ medical debt necessarily involves regulation of medical debt reporting more broadly. Based on this interpretation, the court determined that Texas Business & Commerce Code Section 20.05(a)(5) addressed a subject matter already regulated by federal law.
As a result, the court held that the Texas provision was expressly preempted by the FCRA.
Author: Jennifer Evancic
Jennifer.Evancic@ResourceManagement.com
Jennifer Evancic is a third-party auditor valued by creditors and large organizations for her knowledge in call monitoring within the collections industry. With meticulous attention to detail and a firm grasp of regulatory requirements, she ensures compliance with clients’ criteria and state and federal regulations.
Jennifer audits collections calls, ensuring they meet client-specific criteria and comply with regulations, providing valuable insights and maintaining industry standards.
Beyond her auditing responsibilities, Jennifer takes the lead in organizing and facilitating monthly call calibrations. These sessions serve as a collaborative forum where clients and their vendors come together to discuss call monitoring results and address any findings or areas for improvement. Jennifer’s guidance fosters open communication and ensures alignment between clients and vendors, driving continuous improvement in collections practices.
Jennifer stays up-to-date with compliance and industry best practices by participating regularly in peer meetings, regulatory updates and industry webinars. This keeps her informed about emerging issues and ensures she remains a knowledgeable leader in collections compliance.
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