California Federal Court Holds State Law Claims Preempted by FCRA

On October 30, the U.S. District Court for the Central District of California held that a claim brought under California Bus. & Prof. Code § 17200 was preempted by the Fair Credit Reporting Act (FCRA) because it related to the responsibilities of a furnisher of information to credit reporting agencies (CRAs). Forester v. Pennsylvania Higher Education Assistance Agency, No. SACV 09-0930, 2009 WL 3710517 (C.D. Cal. Oct. 30, 2009). The consumer in Forester sued the servicer of his student loans, alleging that the servicer violated FCRA and Cal. Bus. & Prof. Code § 17200 by failing to investigate the accuracy of their credit reporting after the consumer filed a “Notice of Dispute” and that the servicer violated Cal. Bus. & Prof. Code §§ 17200 and 17500 by falsely promising that the consumer’s credit report would not show any derogatory history if the consumer rehabilitated his student loans. The servicer argued that FCRA preempted the state law claims. Acknowledging that FCRA and § 17200 both “relate to the duties of the furnishers of information to CRAs,” and following the recent trend of courts in the Ninth Circuit that hold that FCRA “totally preempts ‘all state statutory and common law causes of action which fall within the conduct proscribed by [15] § 1681s-2 [Section 623 of FCRA],’” the court found that FCRA clearly preempted the consumer’s claims, which relate to the servicer’s responsibilities as furnishers of information to CRAs, the court dismissed the consumer’s state law claims. The court, however, refused to dismiss the consumer’s FCRA claims, rejecting the servicer’s argument that they were time-barred because the alleged violation was a failure to investigate the item raised in the dispute, which occurred during the limitations period.