The U.S. Court of Appeals for the Fourth Circuit recently affirmed a district court's order granting summary judgment in favor of a mortgage servicer on claims of false reporting of credit information and unfair debt collection practices, holding that: (1) the borrower's FCRA claims were barred by the two-year statute of limitations; (2) the borrower's state law claims were preempted by 15 U.S.C. 1681t(b)(1)(F); (3) the borrower failed to present evidence that the servicer acted with the malice or willful intent to injure, as required under 15 U.S.C. 1681h(e); and (4) the borrower's unfair debt collection practices claim failed because she failed to prove proximate causation, an element of her state law claim.
A copy of the opinion is available at: http://pacer.ca4.uscourts.gov/opinion.pdf/081851.P.pdf
A borrower brought claims against Washington Mutual Bank ("WaMu") for false reporting of credit information and unfair debt collection practices. She alleged that, as a result of the allegedly false reporting, she was denied credit on multiple occasions, including a business loan that she claims would have allowed her to start a business that would have made $3,000,000 in annual profits. She also alleged violations of unfair debt collection practices provisions of the North Carolina Unfair and Deceptive Trade Practices Act.
She filed her claims outside of FCRA's two-year statute of limitations, and the Fourth Circuit upheld the lower court's ruling that the borrower's FCRA claims were time-barred.
The Fourth Circuit also upheld the lower court's ruling that several of the borrower's state law claims were preempted by 15 U.S.C. § 1681t(b)(1)(F). Noting that the borrower's state-law allegations concerned WaMu's reporting of allegedly inaccurate credit information to consumer reporting agencies, an area regulated in great detail under §§ 1681s-2(a)-(b), the Court held that the borrower "seeks to use § 75-1.1 as a 'requirement or prohibition' under North Carolina law concerning 'subject matter regulated under section 1681s-2,' it is squarely preempted by the plain language of the FCRA."
Although the borrower argued her state law claims were authorized by 15 U.S.C. § 1681h(e), the Fourth Circuit upheld the lower court ruling that she failed to present evidence that WaMu acted with the "malice or willful intent to injure" necessary to benefit from this section. According to the Fourth Circuit, "[r]uling otherwise would require us to broaden the definition of 'malice' to include mere negligence, and such a holding would vitiate both the FCRA's statute of limitations and its preemption provision."
The Fourth Circuit also upheld the lower court's ruling that the borrower's state-law unfair collection practice claim failed because the borrower failed to prove proximate causation, an element of her state law claim.
Ralph T. Wutscher
Kahrl Wutscher LLP
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