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Maine credit report laws revived by First Circuit

State laws seeking to aid in repairing credit dragged down by medical debt and economic abuse are not preempted by the Fair Credit Reporting Act, according to the Boston appellate court.

BOSTON (CN) — Reversing a lower court ruling, the First U.S. Circuit Court of Appeals held Thursday that two Maine laws that aim to fix credit scores are not preempted by the Fair Credit Reporting Act.

The 2019 laws specifically targeted medical debt and debt stemming from economic abuse. For medical debt, the law limited the ability of credit reporting agencies to penalize medical debt less than 180 days old or that had been paid off in full.

As for economic abuse, the law sought to hinder penalization of credit reporting if an abusive person had access to a spouse or partner’s bank account or made other financial decisions that could affect their credit.

That same year, the Consumer Data Industry Association (CDIA) sued Maine, arguing the laws were preempted under the FCRA. In 2020 a federal judge agreed that the FCRA preempts the Maine laws even though it does not address medical debt or economic abuse directly.

The state took to the Boston-based appeals court last June to defend their laws; Thursday the court sided with them, reversing the lower court’s decision.

U.S. District Judge Pedro Delgado-Hernandez, sitting in from Puerto Rico, picked apart the language of the FCRA, pushing back on CDIA’s argument that Congress intended the act to stop states from regulating credit reporting.

“If as CDIA claims, Congress intended to preempt all state laws relating to information contained in consumer reports, it could have easily so stated,” Delgado-Hernandez wrote in the 30-page opinion. “Congress knows how to preempt states from regulating entire subject areas.”

The FCRA does preempt states from certain regulations, including medical debt as it pertains to veterans, which CDIA argued easily proved that the new laws were no good.

Yet Delgado-Hernandez, an Obama appointee, was not convinced.

“To CDIA’s way of thinking, because regulation of veterans’ medical debt is regulation of medical debt, it is preempted by the FCRA,” wrote Delgado-Hernandez. “But that these sections carry special rules when it comes to veterans’ medical debt as regulated in the statute, does not mean that they more broadly regulate the subject matter of medical debt reporting, given that medical debt afflicting veterans is not the only type of medical debt Congress could have regulated.”

Delgado-Hernandez wrote that Congress could have addressed the debts of police officers, firefighters, healthcare workers and other similar groups if it wanted to.

“If Congress had intended to regulate the reporting of all those instances of medical debt it could simply have said so, without textually limiting the field of regulation to veterans’ medical debt,” wrote Delgado-Hernandez.

Maine and CDIA disagree on whether economic abuse is preempted by the identity theft section of the FCRA; the state argues that they are very different.

The district court did not address the economic abuse issue, leading the appellate court to avoid a decision on it as well, remanding the question back to the lower court.

U.S. Circuit Judge Bruce Selya, a Reagan appointee, and fellow Obama appointee U.S. Circuit Judge David Barron joined Delgado-Hernandez on the decision.

Maine Chief Deputy Attorney General Christopher Taub did not immediately respond to email seeking comment, nor did Hudson Cook attorney Jennifer Sarvadi, who represents CDIA.

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