InfoBytes Blog

Pennsylvania Federal Court Holds FCRA Does Not Preempt State Law Defamation Claim

On February 12, the U.S. District Court for the Western District of Pennsylvania held that a company’s failure to conduct a reasonable investigation after receiving notification of possible inaccurate credit reporting could constitute malice under state law, which would not be preempted by the Fair Credit Reporting Act (FCRA). Gagliardi v. Experian Information Solutions, Inc., No. 8-892, 2009 WL 365647 (W.D. Pa. Feb. 12, 2009). In Gagliardi, the plaintiff disputed the defendants’ reporting of certain information on his credit report. The plaintiff subsequently filed suit, alleging various federal and state law claims, including defamation, in connection with the defendants’ alleged failure to conduct a reasonable investigation of the dispute. The court reasoned that Section 1681 of FCRA preempts state defamation claims against a furnisher of information to a credit reporting agency, unless the information provided by the company is false and furnished with malice or a willful intent to injure a consumer. In this case, the court found that the defendants’ failure to conduct a reasonable investigation would constitute “malice” or “willful intent” under FCRA, and that, consequently, the plaintiff’s claims are not preempted by FCRA. The court, however, proceeded to dismiss the claim because the plaintiff failed to identify the claim sufficiently to provide the defendants with fair notice of the ground of the defamation claim. The court dismissed most of the plaintiff’s claims with leave to replead them within 14 days. 

State Issues

Colorado Division of Real Estate Adopts New Rules Regarding Mortgage Brokers

The Colorado Division of Real Estate recently adopted two new rules for mortgage brokers regarding (i) mortgage broker licensing education requirements (Rule 1-4-1), and (ii) dual status disclosure requirements (Rule 7-1-1). Rule 1-4-1 clarifies the education requirements for individual mortgage broker applicants and licensees. Rule 7-1-1 finds that an individual’s dual status (i.e., acting as a mortgage broker and real estate broker in a single transaction) is a material fact that must be disclosed to the borrower. A dual status mortgage broker must complete and submit a disclosure form to the borrower within three business days after receipt of a loan application or any moneys from a borrower. The final text of Rules 1-4-1 and 7-1-1 was published in the February 10, 2009 Colorado Register and both rules became effective March 2, 2009. 

Florida Attorney General Settles Suit Against Mortgage Foreclosure Rescue Services Company

On February 9, Florida Attorney General Bill McCollum reached a settlement with a Florida mortgage foreclosure rescue services company that allegedly collected advance fees for its services, in violation of Florida law. Among other things, the settlement (i) orders the payment of $10,000 to the Attorney General’s “Seniors vs. Crime” program, and (ii) requires the company to refund certain consumers.