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Financial Services Law Insights and Observations


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  • U.S. district court holds state laws partially preempted by FCRA


    On January 9, the U.S. District Court of Maine entered judgment, determining that Maine law is only partially preempted by the federal Fair Credit Reporting Act (FCRA). The plaintiff, a trade association that represents the major credit reporting agencies, filed the suit as a facial challenge to certain provisions of Maine law, naming the Maine Attorney General and the Superintendent of the Maine Bureau of Consumer Credit Protection as defendants.

    According to the complaint, the Maine Medical Debt Reporting Act and the Maine Economic Abuse Debt Reporting Act amended the Maine Fair Credit Reporting Act, adding state-specific restrictions on information inclusion in consumer credit reports. The plaintiff argued that the federal FCRA preempts these provisions and that enforcing these amendments threatens the accuracy, integrity, and reliability of consumer report information.

    The court held that while federal law does not “preempt all state laws relating to information contained in consumer reports,” the federal FCRA did preempt provisions of the Maine Medical Debt Reporting Act related to the timing of reporting on veterans’ medical debts by nationwide consumer reporting agencies.  The court noted, however, that sections §§ 1681c(a)(7) and (a)(8) of the federal FCRA do not preempt the Maine Medical Debt Reporting Act to the extent that they regulate non-veterans’ medical debt.

    Regarding the Maine Economic Abuse Debt Reporting Act, the court held that the provisions related to identity-theft in the federal FCRA preempt state law requirements when identify theft is the only method of economic abuse identified by the consumer.  In such cases, the court held that “the blocking of reporting activity on identity-theft-related grounds must proceed according to federal requirements and state requirements are of no effect.” The court noted that its ruling does not “support preemption of Maine’s Economic Abuse Debt Reporting Act insofar as a consumer’s debt is alleged to be the product of economic abuse carried out by means other than or in addition to identity theft.”

    Courts Maine Credit Reporting Agency Consumer Protection State Attorney General Preemption

  • NY enacts the Fair Medical Debt Reporting Act

    State Issues

    On December 13, the New York governor signed into law S4907A, or the Fair Medical Debt Reporting Act (the “Act”), a medical debt credit reporting bill that will bar credit reporting agencies from directly or indirectly incorporating medical debt into consumer credit reports. The Act specifically prohibits hospitals, health care professionals, and ambulances from reporting medical debt to credit agencies. The Act defines medical debt as any amount owed or claimed by a consumer “related to the receipt of health care services, products, or devices provided to a person” by a hospital, health care professional, or ambulance service. Notably, obligations charged to a credit card are excluded from medical debts unless the card is specifically designated for health care expenses under an open-ended or closed-end plan. 

    State Issues State Legislation New York Medical Debt Credit Reporting Agency Credit Report Consumer Protection Consumer Finance

  • Credit reporting agency, collector granted MTD in FCRA and FDCPA case


    On October 26, the U.S. District Court for the District of New Jersey dismissed without prejudice a FCRA and FDCPA lawsuit filed against a law firm and credit reporting agency. The plaintiff alleged that the defendants published inaccurate and incomplete information regarding a trade line for debt allegedly owed to a healthcare facility. The plaintiff claimed that the credit reporting agency refused to validate the debt. The judge held that the FDCPA did not apply to the credit reporting agency because it was not a debt collector, and that plaintiff did not provide any facts that the tradeline was inaccurate. The judge also found that plaintiff failed to state a claim under the FDCPA against the law firm because “merely furnish[ing] a trade line to a credit reporting agency does not violate any provision of the FDCPA.” The plaintiff is allowed to move for leave to file an amended complaint within thirty (30) days if a stronger factual basis for the claims is provided.

    Courts Consumer Finance Debt Collection New Jersey Credit Reporting Agency

  • Judge grants MSJ in class action over disputed debt investigation


    On July 28, the U.S. District Court for the Southern District of Alabama granted summary judgment in favor of a defendant third-party debt collector in an FCRA and FDCPA putative class action, holding that the defendant carried out a reasonable investigation following plaintiff’s dispute of the debt it had reported to credit reporting agencies (CRAs) and that the plaintiff failed to establish that the defendant knew or should have known that the debt was inaccurate or invalid. Defendant entered into an asset purchase agreement with another third-party debt collector and reported debts to credit reporting agencies under the name of the non-defendant third-party debt collector, including an account erroneously associated with plaintiff. When defendant received notice that plaintiff disputed the erroneous account information, defendant verified the account information in its system and provided by the CRA, asked the creditor to provide account documentation, and then requested that the CRAs delete their reporting of the account once the creditor failed to provide account documentation within the requested thirty-day period.

    In relation to the FCRA claim, the court found that the defendant “did everything required by the FCRA in response to Plaintiff’s dispute” such that the plaintiff “failed to establish how this investigation was not reasonable” or in violation of the FCRA. The court also found that plaintiff “failed to show that any different result would have occurred had [defendant] conducted any part of its investigation differently.” Finally, plaintiff’s claim failed as a matter of law concerning defendant’s initial report of the debt to the CRAs because the defendant was not required under the FCRA to “investigate the validity of a debt before commencing to report on that account to the CRAs.” While the defendant was prohibited from reporting inaccurate consumer information, no private cause of action exists for violations of this initial reporting provision of the FCRA.

    For the FDCPA claim, the court held that the plaintiff failed to establish that the defendant had knowledge that the debt it reported was not accurate or was otherwise disputed or invalid. Because the CFPB passed Regulation F in November 2021, after the events at question in this litigation, furnishing information regarding a debt to a CRA before communication with plaintiff was not unlawful at that time. Finally, the court found that plaintiff failed to timely assert that defendant violated the FDCPA provision prohibiting false, deceptive, or misleading representation by using the non-defendant third-party debt collector’s name when reporting the account to the CRAs because this allegation was not present in plaintiff’s complaint.

    Courts Third-Party Debt Collection FCRA FDCPA Alabama Credit Reporting Agency Class Action

  • 7th Circuit affirms dismissal of FCRA claims against subservicer


    On July 5, the U.S. Court of Appeals for the Seventh Circuit affirmed summary judgment in favor of a defendant data furnisher in an FCRA case, holding that the plaintiff failed to establish that the defendant provided “patently incorrect or materially misleading information” to a credit reporting agency (CRA). Defendant was the subservicer for plaintiff’s mortgage and was responsible for accepting and tracking payments and providing payment data to the CRAs. After plaintiff failed to make her monthly payments, she resolved the delinquency through a short sale of her home. Several years later, plaintiff noticed that the closed mortgage account appeared on her credit reports as delinquent. She disputed the information to several CRAs. To confirm the accuracy of its records on plaintiff’s mortgage, one of the CRAs sent the defendant data furnisher four automated consumer dispute verification (ACDV) forms. In the ACDV responses, the defendant amended or verified several contested data points, including the pay rate and account history. The CRA reported this amended data to indicate on plaintiff’s credit report that she was currently delinquent on the mortgage with missed payments in the months following the short sale. After plaintiff applied for and was denied a new mortgage based on the credit report, plaintiff sued the defendant data furnisher for alleged violations of the FCRA, alleging that the defendant failed to conduct a reasonable investigation of the disputed data and provided false and misleading information to CRAs. The district court granted summary judgment in favor of the defendant, finding that plaintiff failed to make a threshold showing that the defendant’s data was incomplete or inaccurate.

    On appeal, the 7th Circuit disagreed with plaintiff that “completeness or accuracy” under the FCRA “must be judged based, not on the ACDV response the data furnisher provided, but on the credit report generated from it.” The court reasoned that the text of the statute “says nothing about a credit report, let alone a duty of a data furnisher with respect to credit reports produced using its amended data. To the contrary, the statute sets out the data furnisher’s duties to investigate disputes, correct incomplete or inaccurate information, and report results from an investigation” to the CRA. Holding that “context can play a large role in determining completeness or accuracy” in this situation, the appellate court agreed with the district court that the data provided by the defendant to the CRA was “not materially misleading” and that “no reasonable jury could find” that the data meant that plaintiff was currently delinquent on her debt, particularly because of strong “contextual evidence”—specifically, that the disputed data appeared directly beside a status code showing that the account was closed. The appeals court affirmed summary judgment for the data furnisher.

    Courts Appellate Seventh Circuit FCRA Consumer Finance Credit Furnishing Mortgages Credit Reporting Agency Credit Report

  • Split 9th Circuit: Nevada’s medical debt collection law is not preempted


    The U.S. Court of Appeals for the Ninth Circuit recently issued a split decision upholding a Nevada medical debt collection law after concluding the statute was neither preempted by the FDCPA or the FCRA, nor a violation of the First Amendment. SB 248 took effect July 1, 2021, in the wake of the Covid-19 pandemic, and requires debt collection agencies to provide written notification to consumers 60 days “before taking any action to collect a medical debt.” Debt collection agencies are also barred from taking any action to collect a medical debt during the 60-day period, including reporting a debt to a consumer reporting agency.

    Plaintiffs, a group of debt collectors, sued the Commissioner of the Financial Institutions Division of Nevada’s Department of Business and Industry after the bill was enacted, seeking a temporary restraining order and a preliminary injunction. In addition to claiming alleged preemption by the FDCPA and the FCRA, plaintiffs maintained that SB 248 is unconstitutionally vague and violates the First Amendment. The district court denied the motion, ruling that none of the arguments were likely to succeed on the merits.

    In agreeing with the district court’s decision, the majority concluded that SB 248 is not unconstitutionally vague with respect to the term “before taking any action to collect a medical debt” and that any questions about what constitute actions to collect a medical debt were addressed by the statute’s implementing regulations. With respect to whether SB 248 violates the First Amendment, the majority held that debt collection communications are commercial speech and thus not subject to strict scrutiny. As to questions of preemption, the majority determined that SB 248 is not preempted by either the FDCPA or the FCRA. The majority explained that furnishers’ reporting obligations under the FCRA do not include a deadline for when furnishers must report a debt to a CRA and that the 60-day notice is not an attempt to collect a debt and therefore does not trigger the “mini-Miranda warning” required in a debt collector’s initial communication stating that “the debt collector is attempting to collect a debt.”

    The third judge disagreed, arguing, among other things, that the majority’s “position requires setting aside common sense” in believing that the FDCPA does not preempt SB 248 because the 60-day notice is not an action in connection with the collection of a debt. “The only reason that a debt collector sends a Section 7 Notice is so that he can later start collecting a debt,” the dissenting judge wrote. “It is impossible to imagine a situation where a debt collector would send such a notice except in pursuit of his goal of ultimately obtaining payment for (i.e., collecting) the debt.” The dissenting judge further argued that by delaying the reporting of unpaid debts, SB 248 conflicts with the FCRA’s intention of ensuring credit information is accurately reported.

    Courts State Issues Appellate Ninth Circuit Debt Collection Medical Debt Nevada FDCPA FCRA Covid-19 Credit Reporting Agency

  • CFPB revises supervision and examination manual

    Agency Rule-Making & Guidance

    On June 5, the CFPB revised its Supervision and Examinations Manual to incorporate minor changes for larger participants under “Module 7 - Consumer Alerts, Identity Theft, and

    Human Trafficking Provisions.” The updates specifically included FCRA and Regulation V requirements that prohibit credit reporting agencies (CRAs) from including information in consumer reporting in cases of human trafficking. Notably, the final rule regarding credit reporting on human trafficking victims was issued in 2022 (previously covered by InfoBytes here). The CFPB also stated that all CRAs must “establish and maintain written policies and procedures reasonably designed to ensure and monitor the compliance of the consumer reporting agency and its employees with the requirements of 12 CFR 1022.142.”

    Agency Rule-Making & Guidance Federal Issues CFPB Consumer Finance Credit Report Credit Reporting Agency FCRA Regulation V

  • District Court denies servicer’s claims that it never received QWR


    The U.S. District Court for the Eastern District of Missouri recently considered whether a mortgage servicer received a borrower’s qualified written request (QWR) relating to a missed mortgage payment. The borrower sent a money order to cover two monthly mortgage payments, but the payments were not properly credited to her account. The borrower made several attempts to contact the mortgage servicer about the improperly credited payment. After receiving a formal notice of default, the borrower sent a “Request for Information and Notice of Error” (NOE) to the servicer explaining the situation and asking that her account be updated to reflect that all payments had been made and requesting the removal of late fees and charges. She also asked that her loan be removed from default status and sent letters to the credit reporting agencies formally disputing the delinquent payment reports. According to the court’s opinion, the borrower claimed that the servicer violated RESPA by failing to respond and violated the FCRA by failing to conduct a reasonable investigation into her credit disputes and verifying inaccurately furnished information.

    In considering both parties’ motions for summary judgment, the court granted the borrower’s motion on liability with respect to her RESPA claim and denied the servicer’s motion for summary judgment on the FCRA claims on the basis that the borrower provided evidence of actual damages resulting from the servicer’s alleged FCRA violation. The court explained that RESPA requires mortgage servicers to respond to a QWR within five days to acknowledge receipt, and again within 30 days by either correcting the account, providing a written explanation as to why it believes the account is correct, or providing the information requested by the borrower or an explanation of why the information requested is unavailable. Failure to do so entitles a borrower to any actual damages suffered as result of the failure. Claiming the NOE was a QWR, the borrower presented evidence, including a certified mail receipt allegedly showing the NOE was signed for by one of the servicer’s representatives. The servicer countered that because it had no record of the correspondence, its RESPA duties were not triggered. The servicer further argued that the NOE did not qualify as a QWR because it failed to provide sufficient information for it to investigate or respond to the request, and that even if it was a QWR, the borrower had failed to show actual damages.

    The court disagreed, determining (i) that the servicer failed to prove it did not receive the NOE, and (ii) that the NOE constituted a QWR. “The information in the letter alone is sufficient to qualify as a QWR,” the court wrote. “The letter quite specifically states the error [the borrower] believed to have occurred…. This is not an ‘overbroad’ and generalized statement of ‘bad servicing.’ It identifies an error specifically contemplated by RESPA’s regulations.” The court further added that “RESPA does not require that a lender’s violations be the sole cause of a borrower’s emotional distress. It merely requires that damages be causally related to a violation of the statute.” However, the court noted that the borrower still needs to prove at trial the extent of damages caused by the servicer's alleged violation.

    Courts RESPA Qualified Written Request Consumer Finance Credit Reporting Agency Mortgages

  • Washington enacts credit repair regulation

    State Issues

    On April 20, the Washington governor signed HB 1311 to enact provisions relating to credit repair services performed by a credit services organization. Among other things, the Act outlines new requirements, including that a credit services organization must provide consumers with a monthly statement that details the services performed, as well as “an accounting of any funds paid by a consumer and held or disbursed on the consumer’s behalf and copies of any letters sent by the credit services organization on the consumer’s behalf,” if applicable. Additionally, a credit services organization is prohibited from sending any communications to a consumer reporting agency, creditor, collection agency, or regulatory entity unless the consumer has provided prior written authorization. Credit services organizations must also comply with specified written communication requirements and provide disclosures addressing consumers’ rights to review their files. Modifications to certain provisions relating to notices of cancellation have also been made. The Act is effective July 23.

    State Issues State Legislation Washington Consumer Finance Credit Repair Credit Report Credit Reporting Agency

  • CFPB says furnishers’ investigative duties include legal disputes


    On April 20, the CFPB filed an amicus brief in a case before the U.S. Court of Appeals for the Eleventh Circuit arguing that the duty to investigate a consumer’s credit dispute applies not only to factual disputes but also to disputes that can be labeled as legal in nature. The plaintiffs entered into a timeshare agreement with the defendant hotel chain and made monthly payments for nearly two years but then stopped. The plaintiffs disputed the validity of, and attempted to rescind, the agreement. The defendant did not agree to the rescission and continued to record the deed under the plaintiffs’ names. The plaintiffs later obtained copies of their credit reports, which showed past-due balances with the defendant, and subsequently submitted letters to a credit reporting agency (CRA) disputing the credit reporting. After the defendant certified the information was accurate, the plaintiffs sued the defendant and the CRA alleging that the defendant violated the FCRA by failing to conduct a proper investigation. The defendant moved for summary judgment, arguing that the issue of whether the debt is owed—the basis of the plaintiffs’ FCRA claim—constitutes a legal dispute and is not a factual inaccuracy. The defendant further maintained that there was no legal error because the plaintiffs owed the money as a matter of law. Last December, the U.S. District Court for the Middle District of Florida granted partial summary judgment in favor the defendant after concluding, among other things, that because the plaintiffs’ dispute centered on the legal validity of their debt, rather than a factual inaccuracy, the investigation requirement was not triggered and the claim was “not actionable under the FCRA.”

    The Bureau argued in favor of the plaintiffs-appellants. According to the Bureau, the district court “unduly narrow[ed] the scope of a furnisher’s obligations by holding that furnishers categorically need not investigate indirect disputes involving ‘legal’ inaccuracies.” This position, the Bureau maintained, contradicts the purpose of the FCRA’s requirement to conduct a reasonable investigation of consumer disputes and “could reduce the incentive of furnishers to resolve ‘legal’ disputes, and, in turn, could increase the volume of consumer complaints about credit reporting issues that the Bureau receives and devotes resources to address.”

    Explaining that the FCRA does not distinguish between legal and factual disputes, the Bureau stated that the district court’s conclusion “is not supported by the statute, risks exposing consumers to more inaccurate credit reporting, conflicts with the decision of another circuit, and undercuts the remedial purpose of the FCRA.” The Bureau presented several arguments to support its position, including that a reasonable investigation is required under the FCRA, and that while the reasonableness of an investigation is case specific, it “can be evaluated by how thoroughly the furnisher investigated the dispute (e.g., how well its conclusion is supported by the information it considered or reasonably could have considered).”

    The Bureau also claimed that the Congress did not intend to exclude disputes that involve legal questions. “[M]any inaccurate representations pertaining to an individual’s debt obligations arguably could be characterized as legal inaccuracies, given that determining the truth or falsity of the representation could require the reading of a contract,” the Bureau wrote. Moreover, an “atextual exception for legal inaccuracies will create a loophole that could swallow the reasonable investigation rule,” the Bureau stressed. The agency urged the court to “reject a formal distinction between factual and legal investigations because it will likely prove unworkable in practice” and said that allowing such a distinction would “curtail the reach of the FCRA’s investigation requirement in a way that runs counter to the purpose of the provision to require meaningful investigation to ensure accuracy on credit reports.”

    As previously covered by InfoBytes, the CFPB and the FTC filed an amicus brief presenting the same arguments last December in a different FCRA case on appeal to the 11th Circuit involving the same defendant.

    Courts Appellate Eleventh Circuit CFPB FCRA Dispute Resolution Consumer Finance Credit Report Credit Reporting Agency


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