CFPB Clarifies FCRA Preemption, Rescinds Nonbank Registry Rule

CFPB Reaffirms Broad FCRA Preemption Over State Laws

The Consumer Financial Protection Bureau (CFPB) issued a new interpretive rule on October 28, 2025, clarifying that the Fair Credit Reporting Act (FCRA) generally preempts state laws related to consumer reporting. This move reinforces Congress's original intent to establish national standards for the credit reporting system across the United States.

The new rule replaces a 2022 interpretive rule, which the CFPB had withdrawn in May 2025. The previous rule had been criticized for its narrower interpretation of FCRA preemption, which allowed for greater state-level regulation and was seen as potentially creating a 'patchwork' of conflicting state and federal regulations. The CFPB stated that the 2022 rule 'was neither necessary nor did it reduce compliance burdens' and instead 'sowed confusion into the credit reporting system'. This clarification suggests that states may not be able to regulate the inclusion of certain information, such as medical debt or arrest records, on consumer reports.

Nonbank Registry Rule Rescinded Amid Cost and Duplication Concerns

In a separate but related action, the CFPB officially rescinded its Nonbank Registry Rule (NBR Rule) on October 29, 2025. This rule, which was finalized in July 2024 and became effective on September 16, 2024, had required nonbank financial companies subject to certain government or court orders for consumer law violations to report these orders to a CFPB registry. The rescission also included a proposal for a registry of supervised nonbanks that use form contracts to waive or limit consumer legal protections.

Reasons for Rescission

The CFPB cited several key reasons for rescinding the NBR Rule:

• Unjustified Costs: The Bureau concluded that the costs imposed on regulated entities, which could be passed on to consumers, were not justified by the 'speculative and unquantified benefits' to consumers.
• Bureau Costs: The cost to the CFPB of maintaining the registration system was deemed not to be a 'necessary tool to effectively monitor and reduce potential risks to consumers'.
• Duplication: The rule was found to be duplicative of existing state and federal disclosure systems, such as the Nationwide Multistate Licensing System.
• Regulatory Burden: The rule was criticized for creating a significant regulatory burden, particularly for smaller nonbank entities.
• Public Availability: Much of the information required by the rule was already publicly available through other channels.

Industry groups, including the Mortgage Bankers Association, the American Bankers Association, and the Community Home Lenders of America, had previously opposed the rule, citing regulatory redundancy and increased compliance burdens. The original intent of the NBR Rule was to enhance transparency, streamline supervision, and combat recidivism among nonbank institutions.

Looking Ahead

These actions by the CFPB aim to provide a clearer, more uniform standard for credit reporting nationwide and to alleviate perceived unnecessary regulatory burdens on nonbank financial entities. The changes reflect a shift in regulatory approach, prioritizing a cohesive national framework for consumer financial protection.