FCRA preemption of state law claims against furnishers of credit information is anything but a settled legal issue. For better or worse, guidance may be on the way soon from the Eleventh Circuit. This is a subject that cannot be discussed comprehensively in this forum, but we can take a quick look at where we are and perhaps where we’re going.
The Fair Credit Reporting Act, 15 U.S.C. 1681 et seq. was enacted in 1970 as a comprehensive statutory scheme designed to regulate the consumer reporting industry. The FCRA deals primarily with three types of entities – those who use credit, credit reporting agencies (CRAs), and those who furnish information to CRAs. As originally drafted, the FCRA included a preemption provision, 1681h(e), that narrowed state law claims for defamation, invasion of privacy and negligence unless there was evidence of malice or intent to injure by the furnisher of information. Congress intended this general bar on defamation, invasion of privacy, and negligence actions to be a quid pro quo for providing full disclosure under the FCRA.
In 1996, the FCRA was amended by the Consumer Credit Reporting Reform Act of 1996, which added a second preemption provision, 1681t(b)(1)(F). This section provides even stronger protections to furnishers of information and has been termed “the absolute immunity provision.” Unfortunately, the addition of 1681t(b)(1)(F) has caused dissent among the courts as to the interplay between the two provisions. To simplify, there have been three primary approaches to this puzzle:
- the temporal approach,
- the statutory approach, and
- the total preemption approach.
To be sure, there has been no wholesale adoption of any one approach, and the appellate courts do not seem eager to take up the issue.
In the past few years, however, there has been some indication that the total preemption approach, or some iteration of it, is gaining traction. Since 2010, the Second, Fourth, and Seventh Courts of Appeal have applied the total preemption approach, resulting in the preemption of an array of state law claims by the FCRA with no regard to the reporting entity’s motive in furnishing the information. And although there is no guarantee we will receive further guidance, the Eleventh Circuit now has a pending case that could provide further clarity, or further confuse, the issue.
The case, Daley v. JPMorgan Chase & Co, involves a former Chase employee’s allegations of defamation, invasion of privacy, tortious interference with business relations, conversion, and FCRA violations, all arising out of a post-employment report she believes Chase made to credit-reporting agencies. The District Court for the Northern District of Georgia granted Chase’s motion to dismiss Daley’s claims with prejudice, and Daley has appealed the ruling. Chase argues that it enjoys absolute immunity related to its duties as a furnisher of credit information to the CRA’s, citing the aforementioned decisions by the Second, Fourth, and Seventh Circuits.
It will be interesting to see whether the Eleventh Circuit agrees and adopts what appears to be the prevailing trend, which would further empower financial institutions to furnish information to the CRAs without fear of litigation.