Judge Debevoise on the Wackiness of the Fair Credit Reporting Act

by Jeff Sovern

Burrell v. DFS Services, LLC, 753 F.Supp.2d 438 (D.N.J. 2010) is a couple years old now but we haven't blogged about it before and the problem it describes has not been fixed so it still merits atttention.  Burrell was victimized by an identity thief and complained about it to the creditors rather than, at first, the credit bureaus.  Burrell sued the creditors for, among other things, violating the Fair Credit Reporting Act by reporting incorrect information about him to credit bureaus and failing to investigate when Burrell told them about the problem.  The creditors moved to dismiss.  Judge Debevoise wrote:

Though the Court is loath to reward their effort to hide behind the esoteric strictures of the FCRA to defeat claims by a layperson like Mr. Burrell—who could not possibly have been expected to comply with the procedural requirements of that statute and who attempted to address the theft of his identity in a manner that most similarly-situated consumers would consider reasonable—Defendants' arguments relating to Mr. Burrell's FCRA claims are legally, if not morally, correct.

Judge Burrell also opined:

[The FCRA's] stated purpose is to “require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.” 15 U.S.C. § 1681(b). Yet cases like this one lead the Court to wonder how Congress could have possibly believed that the FCRA would carry out those functions. It is of little value to ordinary consumers, in part due to the fact that it is hopelessly complex—the statute is drafted in hyper-technical language and includes a sufficient number of internal cross-references to make even the most dedicated legal practitioner consider a change in career. But the FCRA's substance is even more troubling than its complex form. The statute includes numerous provisions that limit consumers' ability to enforce its mandates either by explicitly barring private actions or by imposing such burdensome procedural requirements that no layperson could possibly be expected to comply.

I'm omitting much of what the judge had to say about the FCRA, but here is another part of his complaint:

[T]he FCRA generally requires creditors to make sure the information they send to credit rating agencies about a consumer's behavior is correct, but allows the creditors to delegate that duty to consumers by posting an address to which they can complain. It then allows the creditors to ignore consumer complaints by prohibiting them from bringing suit. In order to effectively keep a creditor from distributing inaccurate information, consumers must submit disputes not to the credit card companies and other creditors with which they regularly interact, but to credit reporting agencies—obscure third parties with which they are unlikely to be familiar. Those requirements have the practical effect of insulating creditors, such as Defendants, from liability even in cases where they fail to take basic measures to protect their customers. Instead, the FCRA places the burden of ensuring the efficient functioning of the credit reporting system on the consumers themselves—laypeople who are, in most cases, in no position to carry out that task by jumping over the technical hurdles created by the statute. Such a scheme is troubling, to say the least.

The court also determined that Burrell's state law claims were preempted by the FCRA.  In so doing, Judge Debevoise discussed the conflict between two of the FCRA's preemption provisions, in sections 1681h(e) and 1681t.  In my view, those provisions cannot be reconciled. Yet courts faced with figuring out which one governs have to reconcile them anyway.  Courts have created at least four different approaches for doing that, one of which is on view in Burrell.  So that's two big problems with the FCRA (not that there aren't others).  Anyone know why Congress wrote the two preemption provisions the way they did or section 1681s-2 so as to trigger the creditor's obligation to conduct an investigation upon the credit bureau's complaint rather than the consumer's?  Was it simple sloppiness?

(HT: Dee Pridgen)

Comments

[grahamgoch]

I would never want to miss out any opportunity to read out your contents.
http://www.free--credit-score.net

[Robert Sola]

1681h(e) is the older provision and was intended to insulate companies (primarily CRAs) for liability under state common law based on reports they are required to provide under 1681g and h, and to protect creditors in regard to adverse action notices they must provide under 1681m.

Most of 1681t was enacted later and was part of a trade off for enactment of new liability provisions including the liability provision in 1681s-2(b) that applies to furnishers.

My guess is that the exemption from liability for violation of s-2(a), but not s-2(b) (thus requiring consumers to dispute to CRAs to have a cause of action against a furnisher), was also a compromise.

Robert Sola
FCRA Attorney and former Legislative Director for Congressman Bill Richardson