Fair Credit Reporting: 10.4.1.3 Intersection with FCRA Preemption Provision
The provision for qualified immunity is distinct from FCRA provisions added in 1996 and 2003 establishing preemption of certain state statutes.
The provision for qualified immunity is distinct from FCRA provisions added in 1996 and 2003 establishing preemption of certain state statutes.
The limited immunity arises only when the consumer’s claim is “with respect to the reporting of information.”136 Accordingly, when the claim is based on other behavior, the immunity should not arise.137 For example, the immunity does not apply to an invasion of privacy claim premised on accessing a credit report without a permissible purpose.138 The immunity should not be available for claims based on the responsibilities of debt collectors that ar
The qualified immunity provision identifies four types of disclosures that may give rise to qualified immunity for claims based on them.
The qualified immunity applies only to actions and proceedings in the “nature of” defamation, invasion of privacy, and negligence. Few cases discuss whether other torts are also in the “nature of” defamation, invasion of privacy, or negligence.162 However, a claim for slander of credit has been held to fall within the provision.163
The qualified immunity provision expressly applies to “any person who furnishes information to a consumer reporting agency.”179 By these very terms, the immunity does not apply when the person furnishes information to someone other than a CRA.180 For example, the provision does not protect a creditor reporting its own experience with its customer to another creditor.
The FCRA’s qualified immunity raises the consumer’s level of proof to prevail in state defamation, privacy, and negligence actions. The qualified immunity does not preclude these tort claims, but requires that the consumer prove that the defendant acted with malice or willful intent to injure, and that the reported information was false.183 The FCRA imposes higher standards than normally required under most if not all tort claims.
In any case making a claim against a party that is eligible for section 1681h(e)’s qualified immunity, practitioners should plead malice or willful intent to injure. In general, such pleading should allow the claim to survive a motion to dismiss.193 Malice need not be plead with particularity, but can be averred generally.194 Of course, where plaintiffs are able to make specific allegations, they should do so.
A factual record is generally necessary for a court to determine whether qualified immunity should bar a claim.198 Once discovery commences, practitioners should prepare to defend a summary judgment motion with evidence that could meet the stringent New York Times standard.199 For example, evidence that a furnisher verified false information as part of a reinvestigation of a dispute, after receiving strong evidence that the item was false, could suffice to survive a furnisher’s motion f
The FCRA’s qualified immunity provision requires that the tort claims not only establish malice or willful intent to injure, but also that the reported information was false.208 This imposes no new requirement for defamation claims where falsehood is an element of the tort and truth is a complete defense. But this does add a new element to negligence claims and may limit the effect of privacy torts.
Common law tort claims are still widely used to challenge inaccurate reports on commercial businesses (often called “mercantile reports” in the case law). But the FCRA has largely replaced tort claims as a cause of action for consumer reporting issues. One reason for this is that the FCRA, like the tort claims, provides a cause of action for actual and punitive damages. But, unlike tort claims, the FCRA also provides for the consumer’s attorney fees.
The traditional non-statutory remedy for inaccurate consumer reports is libel. Libel is the written form of defamation, as slander is the oral form.
The Fair Credit Reporting Act (FCRA) protects a limited segment of financial privacy, by regulating consumer reporting agencies (CRAs) that collect credit and certain other information about consumers, those who provide information to the CRAs, and those who seek information from CRAs. However, many consumer financial transactions do not fall within the FCRA, and other sources of privacy law must be examined to see if they can protect personal financial data from those who seek to acquire and exploit it.
Invasion of privacy is an umbrella term that generally comprises four torts: appropriation of name or likeness, intrusion upon seclusion, publicity given to private life, and publicity placing one in a false light.238 The last three of these have the most potential to apply to a consumer report situation, and are discussed in more detail in Chapter 18, infra.
The development and application of negligence law to consumer reporting activities was advancing when the FCRA was enacted. A few courts had expressly held CRAs liable for negligence,239 and another implied the possibility of a claim for negligent misstatements injuring a consumer.240 Moreover, the proof required to establish malice to overcome a CRA’s conditional privilege defense was beginning to approach traditional negligence standards.
Most states have laws relating to consumer reporting agencies.242 Often, these laws mirror the federal statute. However, in many instances the state laws will provide important additional protections for consumers, or contain different statutes of limitation, remedies, or scope. Consequently, it is generally best to bring an action under both the federal and state statutes. In fact, where a consumer does not want an action removed to federal court, raising only the state law claim may be preferable to bringing an FCRA action.
Section 1681s-2 places a number of specific duties on furnishers, particularly duties of accuracy and investigation of disputes.362 State laws that do not specifically relate to the duties enumerated in section 1681s-2 should not be preempted, even where they impose duties or restrictions on entities that happen to be furnishers.
The subject matter preemption provision extends to five different user provisions.401 These are the duties of users:
Business entities must provide a thief’s information to an identity theft victim.408 Even though there is no private right of action to enforce this provision,409 the FCRA preempts state laws that have the same subject matter.410 Nonetheless, this provision should not preempt actions alleging that the business entity was negligent at common law in providing an identity thief with the credit, goods, or services in the victim’s name, either because s
A number of courts have concluded that preemption does not apply to breach of contract claims based on the reporting of negative information in violation of the terms of a settlement or other contractual agreement.413 The decisions are based on the argument that contractual obligations are entered into voluntarily by the parties, not “imposed” by state law, and cite Cipollone v.
The leading decision adopting the total preemption approach is Purcell v. Bank of America435 from the Seventh Circuit.
Several courts have misread section 1681h(e) to apply only to claims against users and CRAs. Under this misreading, there is no qualified immunity for furnishers, eliminating the need to reconcile sections 1681h(e) and 1681t(b)(1)(F). These courts then typically conclude that section 1681t(b)(1)(F) preempts all claims against furnishers.
FCRA section 1681t(b) begins: “No requirement or prohibition may be imposed under the laws of any State.” Thus, the preemption provision applies only to the “laws of any State.” That language, when read in conjunction with section 1681h(e) limiting furnishers’ qualified immunity from tort claims, strongly suggests that Congress did not intend to preempt state common law claims, as opposed to state statutory or regulatory claims, brought for behavior that may also violate the FCRA.
Courts following a “before and after” approach in interpreting section 1681t(b)(1) preemption focus on when the conduct that gave rise to the plaintiff’s claim against the furnisher occurred. These courts reason that the subject matter of section 1681s-2 covers furnisher conduct only after one of the following specific events has occurred:
As discussed elsewhere in this chapter, the FCRA’s preemption provisions should be read narrowly.484 Courts engaging in careful analysis examine the elements of the plaintiff’s claims to determine if they really relate to subject matter regulated by one of the enumerated provisions listed in section 1681t(b)(1). This analysis focuses on the “subject matter regulated by” phrase rather than the “requirement or prohibition” phrase.485
Section 1681t(b)(2) preempts state requirements and prohibitions “with respect to the exchange of information among persons affiliated by common ownership or common corporate control.”527 The preempting provision has an exception for a Vermont statute, as it existed in 1996, that requires a consumer’s consent to obtain a consumer report, unless the report is obtained pursuant to a court order.528