A 2019 Texas law that altered how medical debt is reported to the nation’s credit bureaus is preempted by the FCRA. That’s what CDIA argues in CDIA v. Texas, a suit pending in federal court in Texas. This week, CDIA won a key procedural victory when the judge tossed the state’s motion to dismiss.
Texas unsuccessfully argued that the Court lacks subject matter jurisdiction because (1) CDIA lacks standing, (2) CDIA’s claim is not ripe for review, and (3) the State is entitled to Eleventh Amendment immunity from suit. The State further argued that, even if CDIA can show subject matter jurisdiction, its complaint fails to state a claim under federal rules because the FCRA does not expressly preempt the Statute. The Court went through each of the State’s arguments and discounted them all.
On preemption, the Court said that
CDIA thus has sufficiently alleged that the Statute is expressly preempted by Section 1681t(b)(1) because it concerns the same subject matter as Section 1681c of the FCRA: what medical debt information may be included in a consumer report. Other courts have reached the same conclusion concerning FCRA preemption. For example, in a case CDIA brought against Maine officials, the United States District Court for the District of Maine found that § 1681c(a)(8) concerning veterans’ medical debt preempted state provisions on consumer reports of medical debt. Consumer Data Indus. Ass’n v. Frey, 495 F. Supp. 3d 10, 20-21 (D. Me. 2020). The court reasoned: “To be clear, a regulation of veteran’s medical debt is a regulation of medical debt. To hold otherwise, and to say that a regulation within a subject matter is not a regulation of a subject matter, would lead to untenable outcomes when applied to the rest of § 1681c.”
This case is a reminder of three things. First, in the FCRA Congress created a national credit system for an even financial playing field across state lines. Much like the interstate highway and federal rail systems undergird the American transportation economy, the FCRA is the foundation on which the American credit system rests. Second, several courts across at least five circuits have found state laws to be preempted by the FCRA. Third, the nationwide credit bureaus have systems in place such that most medical debt, especially paid medical debt, does not appear on credit reports.
The case, Consumer Data Indus. Assn. v. Texas, is in the U.S. District Court for the Western District of Texas, Austin Div., No. 1:19-cv-00876. CDIA is represented by Hudson Cook and Foley & Lardner
Eric J. Ellman is Senior Vice President for Public Policy and Legal Affairs at the Consumer Data Industry Association (CDIA) in Washington, DC. He also served for eight months as Interim President and CEO of the Association. More