The case marks a pivotal step for the Consumer Data Industry Association to challenge the law’s constitutionality and its effects on credit reporting agencies and consumers.
08/16/2023 9:10 A.M.
1.5 minute read
The 5th Circuit recently issued a significant decision in the case of Consumer Data Industry Association v. State of Texas, affirming the Consumer Data Industry Association’s (CDIA) standing to challenge Section 20.05(a)(5) of the Texas Business & Commerce Code.
Background
The law, enacted in 2019, prohibits credit reporting agencies (CRAs) from including information about certain medical debt collection accounts in consumer credit reports provided to third parties. CDIA, representing major CRAs like Experian, Equifax and TransUnion, filed a lawsuit against Texas Attorney General Ken Paxton, asserting that the law is preempted by the federal Fair Credit Reporting Act (FCRA) and seeking declaratory and injunctive relief.
CDIA’s challenge centered on several key points. It argued that Section 20.05(a)(5) of the Texas law conflicts with the FCRA, a federal law regulating credit reporting, and that it unfairly limits CRAs’ ability to provide accurate and comprehensive credit information.
Decision
The appellate court affirmed CDIA’s standing to bring the lawsuit. The court held that CDIA’s alleged injury—incurring the cost of operational changes to comply with the law or facing potential state enforcement action—met the criteria of an “injury in fact” required for legal standing.
The court also addressed issues of ripeness and sovereign immunity. It concluded that the case was ripe for adjudication, as it posed a “purely legal question” about the law’s preemption by the FCRA, and that the Ex parte Young exception to sovereign immunity applied in this instance, allowing CDIA to challenge the law’s constitutionality.
ACA’s Take:
This ruling has broader implications for the credit reporting industry and beyond. If CDIA successfully challenges the law, it could set a precedent for how state laws interact with federal regulations in areas like consumer protection and commerce.
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