The outgoing Biden Consumer Financial Protection Bureau (CFPB) is trying to turn up the heat on data brokers with a bold new proposal seeking to modernize regulations under the Fair Credit Reporting Act (FCRA). The proposed rule purports to aim at closing loopholes in how consumer data is collected, sold, and used—particularly by data brokers who profit from sensitive personal information. The message from this current CFPB is:  unchecked data practices pose risks like identity theft, financial scams, and privacy violations, and regulators should intervene.

Key Highlights of the Proposed Rule

The CFPB’s proposal would amend Regulation V, allegedly broadening FCRA’s application to modern data-driven practices. Here’s what businesses need to know:

1. Expanded Definitions Covering Data Brokers

• The proposed rule redefines “consumer reporting agency” and “consumer report” to explicitly include modern data practices.

• Any entity that sells information like credit history, income, or financial standing could fall under FCRA rules—even if the data wasn’t originally intended for FCRA purposes.

• Personal identifiers like names, addresses, and ages could be covered if collected for consumer reporting or if they’re later used for FCRA-permissible purposes.

2. Limits on Permissible Data Uses

• The proposal would allegedly tighten restrictions to ensure that consumer reports are used only for FCRA-authorized purposes like credit eligibility or fraud prevention.

• Marketing and advertising would be broadly defined as not permissible purposes.

3. Enhanced Consumer Consent and Privacy Safeguards

• The proposal would target practices like the re-identification of de-identified data and improper sale of aggregated information without safeguards.

• Consumer consent would be required to be clear, standalone, and explicitly state the purpose of access without hidden terms in fine print.

What This Means for Your Business

If your business interacts with consumer data—whether you buy it, sell it, or use it—you need to pay attention. The proposed changes to Regulation V carry potentially sweeping implications, particularly for companies in the consumer financial services sector and those partnering with data brokers.

Key impacts could include:

1. Expanded Compliance Scope

• Businesses that previously operated outside FCRA’s reach could face strict compliance obligations.

• Companies leveraging data aggregation tools or innovative data models could need to reassess whether they’re inadvertently acting as “consumer reporting agencies.”

2. Policy and Process Overhaul

• Companies would need to review and update policies around data collection, sharing, and permissible uses.

• Vendor contracts and internal controls would require refreshed scrutiny to ensure compliance with the new rules.

3. Vendor Management Risks

• Companies partnering with data brokers would need rigorous due diligence processes to verify compliance. Selling or using consumer data for non-FCRA purposes (e.g., marketing) could expose businesses to regulatory penalties and reputational damage.

4. Operational and Legal Exposure

• Violating the proposed rules could result in enforcement actions, steep financial penalties, and loss of consumer trust.

5. Opportunity to Influence Policy

• The current CFPB indicates that it is accepting comments on the proposed rule until March 3, 2025.  If the incoming Trump Administration does not change the process or proposal, impacted businesses should seize this opportunity to:

• Highlight unintended consequences

• Advocate for practical compliance solutions

• Shape a regulatory framework that balances consumer protection with business feasibility

Read the CFPB’s proposed rule here.

For questions or more information, contact Troy Garris at troy@garrishorn.com.