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Financial Services Law Insights and Observations

California Federal Court Holds FCRA Preempts California State Law Claims

State Issues

On February 2 the U.S. District Court for the Northern District of California held that the Fair Credit Reporting Act (FCRA) preempts certain claims under the California Consumer Credit Reporting Agencies Act (CCRAA) and the California Unfair Competition Law (UCL). Wang v. Asset Acceptance, LLC, No. 09-4794-SC, 2010 WL 409848 (N.D. Cal. Feb. 2, 2010). In Wang, the plaintiff consumer brought a putative class action against defendant debt collection agency, stating that the debt collection agency’s alleged practice of reporting debts to credit reporting agencies (CRA) without reporting that the debts are disputed or that the debts are passed their statute of limitations violates CCRAA § 1785.25(a) and UCL § 17200. The debt collection agency moved to dismiss, arguing that the consumer’s claims were preempted by FCRA. The court granted the motion in part and denied it in part. While recognizing that CCRAA § 1785.25(a) is expressly excluded from FCRA preemption, the court held that the claim was, nonetheless, preempted, because the claim should have been brought under Section 1785.25(c) of the CCRAA – prohibiting the reporting of information that is disputed by the consumer without noting that it is disputed – which does not enjoy such exclusion from FCRA preemption. With respect to the consumer’s claim that the debt collection agency failed to report information related to the debt’s statute of limitations, the court held that Section 1785.25(a) of the CCRAA does not expressly impose such a duty, and that implying such a per se duty would not be appropriate because the statute of limitations is an affirmative defense subject to waiver. However, the court held that, in the instant case, the individual the consumer had stated a claim under CCRAA § 1785.25(a) because there was evidence that the consumer had successfully relied on the statute of limitations defense in the past and that the debt collection agency was not actually pursuing his debt because of that defense. However, the court did not decide whether this claim would be a viable class claim. Finally, the court held that the consumer’s UCL § 17200 claims based on the debt collection agency’s alleged failure to report that a debt was in dispute or that a debt was past its statue of limitations are preempted by FCRA because enforcing such a claim “would impose an independent requirement or prohibition on furnishers of information to CRAs.”

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