A new law that would effectively force lenders to break federal law in order to comply with state law, is the subject of a lawsuit filed by our colleagues at the American Financial Services Association (AFSA).
On October 1, AFSA and a number of other trade associations sought an injunction in federal district court in Nevada to bar enforcement of a provision of Nevada SB 311/Ch. 280 that would allow an individual with no credit history to apply for credit using their current or former spouse’s credit report without consent. The complaint is available here.
While the original bill laudably expanded the state’s anti-discrimination protections, a last-minute amendment added the problematic credit-history requirements. A number of national and state-based trade groups made every effort to have that language removed, but those efforts have thus far proven unsuccessful. The bill went into into effect the day the suit was filed.
AFSA’s legal challenge is narrow, focused on the spousal credit provision, as federal consumer credit law makes it impossible for creditors to comply with the credit history provisions in Nevada SB 311 / CH 280. For example:
- SB 311 / CH 280 would force creditors to violate the permissible purpose provisions of the Fair Credit Reporting Act (FCRA), passed by Congress in 1970, by requiring them to pull the credit of an applicant’s current or former spouse.
- SB 311 / CH 280 would also violate the Equal Credit Opportunity Act’s proscription on inquiries relating to marital status.
- SB 311 / CH 280 seeks to access historical consumer credit information that does not exist; credit bureaus only maintain current data.
AFSA previously met with the state regulator to raise the preemption concerns and followed up with a letter outlining these concerns. AFSA’s letter to DFI from August is available here.
NILA fully supports AFSA’s action.