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Seventh Circuit confirms that the FCRA preempts state common law claims

On October 17, 2013 by Schnader in Finance

By Stephen J. Shapiro

The Fair Credit Reporting Act (FCRA) imposes responsibilities on those who “furnish information to consumer reporting agencies.” Where entities that furnish information violate those responsibilities, the FCRA provides consumers with legal remedies, but prohibits them from pursuing state law claims relating to the violations. In a recent opinion, the Seventh Circuit reaffirmed that the FCRA preempts all state law claims, both those arising under state statutes, and those arising under state common law.

In Aleshire v. Harris, N.A., the plaintiff borrowed several million dollars from the defendant bank. When the bank reported those loans to consumer credit reporting agencies, it allegedly reported incorrect loan balances, double-reported some of the loans and incorrectly reported that the borrower had exceeded her credit limit. The borrower sued the bank, pleading claims under the FCRA as well as claims under state common law. Holding that they were barred by the FCRA’s preemption provision, the district court dismissed the borrower’s state law claims.

On appeal, the borrower argued that the FCRA only preempts state law claims arising under state statutes, not claims arising under the common law. In support of her argument, the borrower pointed to a section of the FCRA that prohibits consumers from bringing defamation, invasion of privacy and negligence claims against entities that furnish false information to credit reporting agencies unless those entities do so “with malice or willful intent to injure” the consumer. The borrower reasoned that, reading the FCRA’s preemption provision expansively to bar common law claims rather than narrowly to bar only statutory claims would nullify the section that allows consumers to bring defamation, invasion of privacy and negligence claims under certain conditions.

The Seventh Circuit noted that the borrower’s argument “has garnered some sympathy among district courts” in Pennsylvania, Georgia and Texas.  However, relying on its previous holding in Purcell v. Bank of America, in which the Seventh Circuit concluded that these two provisions of the FCRA are not inconsistent because one provision simply preempts more claims than the other, the Court rejected the borrower’s argument and affirmed the dismissal of her state law claims.

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