Wednesday, January 18, 2012

FYI: 2nd Cir Holds State-Law Inaccurate Furnishing Claim Preempted by FCRA

The U.S. Court of Appeals for the Second Circuit recently held that a borrower's state law claims that a bank knowingly furnished false information to a consumer credit reporting agency were preempted by the federal Fair Credit Reporting Act.  A copy of the opinion is attached. 
A borrower sued his lender (the "bank"), alleging various state common law tort claims in connection with his contention that the bank provided false information to a credit reporting agency. 
The bank removed the suit to federal court, and then moved for dismissal on the grounds that the borrower's claims were preempted by the federal Fair Credit Reporting Act ("FCRA").  The lower court agreed, and granted the bank's motion.  The borrower appealed. 
As you may recall, the FCRA provides, among other things, that states may not impose any prohibition or requirement with respect to any subject matter regulated under Section 1681s-2 of the FCRA.  See 15 U.S.C. 1681t(b)(1)(F). 
The borrower did not dispute that his allegations fell under Section 1681s-2; however, he argued that Section 1681h(e) of the FCRA explicitly permitted his suit. 
Section 1681h(e) provides that consumers generally may not bring actions against those who report information to credit reporting agencies, "except as to false information furnished with malice or willful intent to injure such consumer."  15 U.S.C. Sec. 1681h(e). 
Based on the conflict the borrower perceived between the above-referenced FCRA provisions, he argued that the Court should hold that s. 1681t(b)(1)(F) preempts only actions based on state statutes, and not on actions based on state common laws. 
The Second Circuit disagreed, reasoning that the two provisions of the FCRA do not conflict.  In the Court's view, although s. 1681h(e) does not preempt a narrow class of claims relating to reports of information to credit agencies, it also does not prohibit s. 1681t(b)(1)(F) from preempting those claims. 
The Second Circuit also noted that, as s.1681t(b)(1)(F) was enacted after s. 1681h(e), reading an earlier-enacted statute to defeat a later-enacted statute would "contradict fundamental norms of statutory interpretation." 
Accordingly, the Second Circuit held that the borrower's state law claims were preempted by the plain language of s. 1681t(b)(1)(F), and therefore it affirmed the judgment of the lower court. 

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
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Chicago, Illinois 60602
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