FCRA Limits Consumer Recourse - UHLC

1 FCRA Limits Consumer Recourse Against Furnishers of Information By Jennifer Mitchell In Stafford v. Under section 1681s-2(b), the court concluded that if the Cross Country Bank, Consumer can prove the credit information furnisher violated Kentucky's Western the FCRA negligently or willfully, the Consumer may bring an District Court held the action under state common law for defamation, slander or Fair Credit Reporting invasion of However, this provision is not all- Act ( FCRA ) Limits inclusive. Subsection (b) relates only to the requirements that private causes of a furnisher of information investigate, after receiving notice of action , but does not a dispute pursuant to section 1681i(a)(2), the accuracy of preempt all state law information provided to a Consumer reporting agency.

2 This claims, against limitation means a bank has no responsibility to investigate a furnishers of In Stafford, John and Julie Stafford dispute until the reporting agency, not the Consumer , notifies claimed a third party fraudulently obtained a credit card in it of the John Stafford's name. 2 Subsequently, Stafford filed suit against In sum, in order to bring a successful claim against a Cross Country Stafford alleged the bank violated the furnisher of information, the Consumer must show negligent Fair Debt Collection Practices Act (FDCPA), federal and state or willful violations of the FCRA after notice of a dispute from Consumer protection statutes, and state common law. 4 the Consumer reporting agency. Because Stafford did not allege damage to his credit report, the circumstances of this case are unlike most FCRA FCRA does not preempt all state law claims against furnishers Cross Country Bank moved for summary judgment, contending of information the FCRA provides no private right of action for plaintiffs The court considered three issues in determining against those who furnish information to Consumer reporting whether Stafford's state law claims were permitted under the agencies and preempts the state law causes of action for FCRA.

3 First, the court recognized the preemptory FCRA. defamation, invasion of privacy, slander, and The sections 1681(b)(1)(F) and 1681h(e)overlapped, and district court granted the bank's Motion for Summary possibly contradicted each other. Second, the court Judgment, dismissing Stafford's claims under the FDCPA and explained two different approaches to analyze and apply the his state law claims for defamation and However, two sections. Lastly, the court stated the provisions only the court denied the motion with respect to Stafford's FCRA cover some state law claims made by Stafford, and thus and Kentucky Consumer Protection Act claims, as well as his analyzed each claim state law claims for invasion of privacy and While section 1681h(e) permits state law tort claims, the section requires a higher standard of proof for claims such FCRA provides limited private cause of action against as defamation, slander, or invasion of In its 1996.

4 Furnishers of information Amendments, Congress added section 1681t(b)(1)(F), which The parties agreed Cross Country Bank constituted a sweepingly prohibited all state law claims covered by section furnisher of credit information, and therefore, its FCRA 6181s-2, but made no obligations fell under 15 In its analysis, mention of section the Court divided Section 1681s-2 into two These inherent The first component comprised subsections (a), (c), and (d), contradictions caused which sets out the furnisher's duty to provide Consumer courts to utilize different reporting agencies with accurate information and Limits the approaches to harmonize remedies available for violations of these The the limitations specify the FCRA's broad provision creating civil Using a broad liability for willful and negligent noncompliance are not approach to analyze these applicable to violations of Section 1681s-2, and that only two sections, some courts government officials can enforce the duties imposed by Section have held the new section 1681s-2(a).

5 12 Therefore, Stafford was unable to bring a private completely preempts all cause of action for the Bank's alleged violations of subsection state causes of action , and (a).13 thus also eliminates the Fortunately for Stafford, the second component, possibility of any subsection (b), does not limit the availability of supplemental state claims 106 Journal of Texas Consumer Law against furnishers of information. 21 The rationale behind these further considered under section decisions is Congressional intent. In other words, section 1681h(e).31 Section 1681h(e) of the At this time, 1681t(b)(1)(F)'s preemption of subject matter under covered FCRA provides information furnishers the Fifth in section 1681s-2, illustrates Congress' intent to preempt all qualified immunity from state law Circuit has state law claims connected to furnishers of credit claims of this type by creating a Courts using a more narrow approach hold the state defense the Consumer must overcome declined to law claims are only preempted when they relate to obligations to succeed on a state law claim against hear cases on of information furnishers who know, or should have reason to a party acting in a capacity regulated know, of inaccuracies in the information Therefore, by the Act.

6 32 Under this section's this subject. this analysis interprets section 1681t(b)(1)(F) to preempt only qualified immunity standard, Stafford those claims relating to the actual language of section 1681s- was permitted to pursue claims for defamation and slander only if he could prove malice or willful intent to injure by the In Stafford, the court used the more narrow Unfortunately for Stafford, this higher standard of proof meant The court explained that [s]ection 1681t(b)(1)(F) simply that his claims fell back under section 1681s-2, which regulates states: in full: that no requirement or prohibition may be furnishing of information if done so knowingly. Because the imposed under the laws of any state with respect to any subject claims were regulated by section 1681s-2, they were preempted matter regulated under section 1681s-2 (emphasis by section 1681t(b)(1)(F).)

7 34. added). 26 Because section 1681s-2 simply explains the duties of furnishers of information to provide accurate information, Current Texas Holding on Private and State Law Claims along with the furnishers' obligations after notification of a under FCRA. dispute, not all state law claims necessarily relate to actions or In Carlson v. Trans Union , Texas' Northern duties covered by this Section 1681s-2 merely District Court, Dallas Division, held the FCRA did not preempt regulates conduct involved in reporting credit information, so a state common law claim for In its decision, section 1681t(b)(1)(F) preemption only applies to tort claims the court also stated that sections 1681n and 1681o provide stemming from the Bank's functions as a furnisher of credit for private causes of action under the information.

8 Therefore, Stafford's harassment claim, and The court in Carlson considered the interaction of certain aspects of his invasion of privacy claim, was not the two preemption sections of the FCRA, and made its preempted by the decision differently than the court in Stafford. The Carlson Further, section 1681s-2 only implicates conduct court felt that a simpler approach than the before or after occurring after the Bank knew it possessed inaccurate notice of dispute analysis, used in Stafford, was possible. information, or consciously avoided such knowledge. 29 Looking to the language of the statute, the Carlson court felt Because the Bank furnished inaccurate information to a Congress intended section 1681(e) to apply only to torts, and Consumer reporting agency prior to notification of Stafford section 1681t(b)(1)(F) to apply to state statutory dispute, that conduct was not regulated by section 1681s-2, Currently, only a few courts have decided cases and thus not preempted by section 1681t(b)(1)(F).

9 30 concerning these issues. At this time, the Fifth Circuit has The preemption analysis of Stafford''s claims regarding declined to hear cases on this subject. the Bank's actions prior to notification of the dispute must be (Endnotes). 1 21. Stafford v. Cross Country Bank, 262 776 ( Id. 22. Ky. 2003). Id. 2 23. Id. at 779. Id. 3 24. Id. Id. 4 25. Id. Id. 5 26. Id. Id. at 786. 6 27. Id. at 781. Id. 7 28. 794. 787. 8 29. Id. Id. 9 30. Id. at 782. Id at 788. 10 31. Id. Id. 11 32. Id. Id. See Shaner v. Fleet Bank, 132 F. Supp. 2d 953, 957. 12. Id. ( 2001). 13 33. Id. at 782-783. Id. 14 34. Id. at 783. 788-789. 15 35. Id. Carlson v. Trans Union, , 259 F. Supp. 2d 517 ( 16. 783-784. Tex. 2003). 17 36. Id. at 784. 519. 18 37. 785. 521. 19. Id. 20. Id. Journal of Texas Consumer Law 107.