Ellis Law Group


The Current Status Of Furnisher Obligations
And Liability Under The FCRA (And CCRAA)


Three new decisions – Gorman v. Wolpolf & Abramson, LLP (9th Cir. 2009) ___ F.3d ___, 2009 WL 3365928; Sanai v. Saltz (2009) 170 Cal.App.4th 746; and Liceaga v. Debt Recovery Systems, Inc. (2008) 169 Cal.App.4th 901 (ordered depublished April 29, 2009) –  have changed, clarified, or muddied (depending on your point of view) the legal landscape in California as to the legal obligations of so-called “furnishers” who furnish credit-related information concerning consumers to credit reporting agencies.  These cases address the obligations of furnishers under federal and state law to supply accurate information, as well as a furnisher’s obligation to “reinvestigate” a consumer’s dispute.  These cases also indicate that, for the time being at least, a heretofore unrecognized private right of action exists under Civil Code § 1785.25(g) and § 1785.31 for failure to accurately report credit information in violation of § 1785.25(a).  An understanding of the relevant history is important before one can properly evaluate the current state of the law and the Gorman and Sanai decisions.

The Original FCRA Legislation Applies To
Credit Reporting Agencies Only

The Fair Credit Reporting Act (FCRA), found at 15 U.S.C. § 1681, et seq., was originally enacted in 1970.  The express purpose of the FCRA was to require that consumer reporting agencies adopt and implement “reasonable procedures” for ensuring that credit information about a consumer was collected, maintained, and dispensed “in a manner which is fair and equitable to the consumer with regard to the confidentiality, accuracy, relevancy and proper utilization of such information …”  FCRA, 15 U.S.C. §1681(b); Safeco Ins. Co. of Am. v. Burr (2007) 551 U.S. 47, 127 S.Ct. 2201, 2205.  The Congressional findings noted that “[t]here is a need to insure that consumer reporting agencies exercise their grave responsibilities with of fairness, impartiality, and respect for the consumer’s right to privacy.”  FCRA, 15 U.S.C. §1681(a)(4).

For its first 26 years, the FCRA’s prohibitions and restrictions were aimed solely at consumer reporting agencies, such as Experian, Equifax or TRW.  Collection agencies -- though routinely furnishing, utilizing or disseminating credit information in close connection with credit reporting agencies (CRA) -- were not directly, or even indirectly, regulated by the original version of the FCRA.  See, e.g., Rush v. Macy’s New York, Inc. (11th Cir. 1985) 775 F.2d 1554, 1557.  Entities which merely furnished the credit information to a CRA were not deemed to be covered by the FCRA.  Pulver v. Avco Financial Services (1986) 182 Cal.App.3d 622, 633.  Consequently, collection agencies (often the primary suppliers of credit information to CRA’s) were wholly unregulated under the FCRA.  Pulver, supra, 182 Cal.3d at 633.

Legal Malpractice AttorneyAuthor Mark E. Ellis is the managing partner of Ellis Law Group, LLP. Mr. Ellis is recognized nationally as one of the leading trial attorneys defending creditors and their representatives in federal and state litigation arising from collection practices. See Mark Ellis Profile for his detailed curriculum vitae.

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The original FCRA legislation addressed three primary concerns: (1) inaccurate or misleading credit information being held or supplied about a consumer; (2) irrelevant but confidential information about a consumer being disseminated; and (3) the maintenance of confidentiality, and the prevention of third-party misuse of information.  See 115 Congressional Record, at p. 2410 (January 31, 1969).  Consequently, when the FCRA went into effect in 1970, it was intended to comprehensively and uniformly regulate credit reporting agencies, and it was designed to provide private remedies to consumers for violations of its provisions by CRA’s.  For example, the FCRA gave consumers the right to bring private actions for damages in either the state or federal courts.  15 U.S.C. §1681p.  A private right to sue was made available to consumers to bring lawsuits against credit reporting agencies, depending on whether the violations were willful (15 U.S.C. 1681n) or negligent (15 U.S.C. §1681o).

The 1996 Amendments To The FCRA Impose Duties On Furnishers
And Give Consumers A Limited Right To Sue

In the Fall of 1996, Congress passed the Consumer Credit Reporting Reform Act of 1996.  Public Law No. 104-208, 110 Stat. 3009 (September 30, 1996).  For the first time, legal duties were directly imposed on entities that furnished information, or were otherwise acting as the sources of information to CRA’s.  This, of course, included collection agencies. 

Two categories of obligations were imposed upon those who furnish information to consumer reporting agencies, and these obligations were placed in two separate sections of the FCRA at 15 U.S.C. § 1681s-2(a) and § 1681s-2(b).  

The 15 U.S.C. § 1681s-2(a) Obligations
To Report Accurately And To Flag Disputes

First, the FCRA at subsection 1681s-2(a) prohibits furnishers from reporting “inaccurate” information about consumers. As such, it placed an affirmative duty on furnishers to correct and update information which they know, or reasonably should know, is inaccurate.  The subsection requires furnishers to flag or otherwise provide notice to credit reporting agencies of any “dispute” by a consumer related to his or her credit information or history.  FCRA, 15 U.S.C. §§ 1681s-2(a)(1)-(3); see also Gorman, supra, ___ F.3d ___, 2009 WL 3365928 at *3-*4 (amended 10/21/09 opinion).

Significantly, no private right of action or enforcement was included within the FCRA for any violation of the subsection 1691s-2(a) obligations.  Gorman, supra, 2009 WL 3365928 at *4 and fn. 9; Nelson v. Chase Manhattan Mortgage Corp. (9th Cir. 2002) 282 F.3d 1057, 1060.  The Ninth Circuit explained:  “Congress did not want furnishers of credit exposed to suit by any and every consumer dissatisfied with the credit information furnished.”  Consequently, the duties imposed under section 1681s-2(a) of the FCRA are enforceable only by federal or state government agencies.  15 U.S.C. § 1691s-2(d); Gorman, supra, 2009 WL 3335928 at *4; Nelson, supra, 282 F.3d at 1059-1060.  As we shall see, this refusal to impose a remedy for violation of a § 1681s-2(a) obligation is relevant to any interpretation of the analogous duties found in California’s own version of the FCRA at Civil Code § 1785.25(a).

The 15 U.S.C. 1681s-2(b) Obligations To Investigate

Subsection 1681s-2(b) specifies a second set of obligations on a furnisher.  These obligations are triggered once a credit reporting agency (CRA) notifies the furnisher that it has received a “notice of dispute” from the consumer pursuant to 15 U.S.C. § 1681s-2(a)(2); Gorman, supra, 2009 W.L. 3365928 at *4.  After the disputes are received by a CRA from a consumer, it, in turn, is required under § 1681i  of the FCRA to forward a consumer dispute verification (CDV) form to the furnisher, requiring it to verify the credit information and investigate its accuracy.  After receiving notice of such a dispute from a CRA, a furnisher has 5 mandatory duties it must perform within 30 days: 

(1) to conduct “an investigation” with respect to the disputed information;

(2) to “review all relevant information” provided by the credit reporting agency;

(3) to “report the results of its investigation” back to the credit reporting agency;

(4) if the investigation finds the existing information is incomplete or inaccurate, to report back those results to each of the consumer reporting agencies to whom the furnisher originally communicated information about the consumer; and

(5) to “modify, . . .delete. . .or. . .permanently block” the reporting of any item of information found to be inaccurate, incomplete, or which cannot be verified as accurate after a reinvestigation. 15 U.S.C. § 1681s-2(b)(1); Gorman, supra, 2009 WL 3365928 at *4.

The § 1681s-2(b) duties arise only after a furnisher receives notice of dispute from a CRA.  Notice of a dispute to a furnisher by a consumer directly does not trigger a furnisher’s duty to reinvestigate under § 1681s-2(b). See, e.g., Nelson, supra, 282 F.3d at 1059-60.  The consumer must dispute to a CRA, which, in turn, forwards the dispute to the furnisher.  This indirect “filtering” mechanism must be followed by a consumer to give rise to a duty of investigation under the FCRA to the furnisher.  Nelson, supra.  A furnisher need not honor a dispute received directly from the consumer, whether oral or written, under the FCRA.  Such a dispute, it should be noted, likely does create a legal obligation under § 1692g of the FDCPA however.

What Is A Reasonable Obligation?

Although § 1681s-2(b)(1)(A) seemingly only requires a mere “investigation,” virtually every court that has construed this language has interpreted it to require a “reasonable” investigation.  See, e.g., Gorman, supra, at *5; Johnson v. MBNA (4th Cir. 2004) 357 F.3d 426, 429-31.  What constitutes a “reasonable” reinvestigation by a furnisher is dependent on the nature of the reinvestigation request forwarded by the CRA – which, in turn, is generated by the consumer’s investigation request or dispute. 

The Gorman court recently observed:  “the pertinent question is thus whether the furnisher’s procedures were reasonable in light of what it learned about the nature of the dispute from the CRA’s notice of dispute.”  Id. at *7; accordWestra v. Credit Control of Pinellas (7th Cir. 2005) 409 F.3d 825, 827 (reasonableness of reinvestigation is dependent on the nature of consumer’s dispute to CRA).  In other words, in conducting the investigation, the furnisher need only respond to the specific dispute as described or outlined by the CRA on a consumer dispute verification (CDV) form.  See, e.g., Westra, supra; Malm v. Household Bank (SB), N.A. (D.Minn. 2004) 2004 WL 1559370 at *6; Schmit v. Trans Union, LLC (N.D. Ill. 2004) 2004 LEXIS 6130 #10-11; Mann v. Experian Information Solutions (N.D. Ill. 2004) 2004 LEXIS 2377 *14. 

Obviously, the scope of the dispute outlined on a CDV form received by the furnisher is critical.  The description of the dispute, and the information provided by the CRA, will define the scope of the investigation required; a furnisher is only required to respond to the issues raised on the face of a CDV.  Mann, supra, 2004 LEXIS at *14-15. 

What does this investigation obligation entail?  A furnisher is not necessarily required to conduct an investigation outside of its own files if the query or dispute can be reasonably answered by the knowledge derived from an internal review.  Id.

In Mann, supra, the federal district court granted summary judgment in favor of the furnisher who conducted a limited investigation in response to the narrow dispute outlined on a CDV form.  The court confirmed that given the limited nature of the dispute, the furnisher was not compelled to conduct a more extensive investigation beyond reviewing the information contained in its own internal file.  Mann, supra, 2004 LEXIS 12981 at *14-15. 

In Schmit, supra, 2004 LEXIS 6130 AT *10-11, the consumer more broadly claimed that not only was she not responsible for the debt, she also gave a reason, explaining a specific third party was instead responsible.  Id.  Although the debtor provided evidence of the alleged agreement signed by the third party to the CRA, the agency did not, in turn, pass this information to the furnisher with the CDV.  The District Court held that, under the circumstances, the furnisher’s investigation required nothing “further than an internal review” of its file. 

In Westra, supra, the 7th Circuit held that a furnisher/collection agency’s investigation complied with the FCRA as a matter of law, where the agency concluded its investigation limited to the disputes presented on the face of the CDV form it received.

In short, the investigation of a consumer dispute is normally limited to the concerns outlined on the face of a “CDV” form sent to the furnisher by the CRA.  As such, the investigation may be as simple as confirming the consumer’s demographic information and confirming the credit information reported actually relates to this particular person.  See, e.g., Wade v. Equifax (N.D. Ill. 2003) 2003 U.S. Dist. LEXIS 15686, *9-10 (furnisher’s prompt review of debtor demographic information to determine whether it matched consumer, and  reporting matching results to the CRA, was all that was required under the FCRA).  Even when contacting a third party (such as the creditor) for purposes of the investigation, the furnisher’s investigation may require little more than required for validation of a debt pursuant to 15 U.S.C. § 1692g(a)(4) and § 1692g(b) of the FDCPA.  Clark v. Capital Credit & Collection Service (9th Cir. 2006) 460 F.3d 1162, 1173-1174 (“Verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the credit is claiming is owed.”). 

But, on the other hand, the investigation may need to be more extensive in order to be deemed reasonable.  The earliest known case that adopted a reasonableness standard -- Bruce v. First U.S. Bank (E.D. Mo. 2000) 103 F.Supp.2d 1135 – illustrates this point.  In Bruce, the consumer claimed that credit cards had been fraudulently opened in his nameUpon receiving a CDV from a CRA, the furnisher (a bank) conducted an investigation and concluded that no fraud had been committed, and that the consumer remained responsible for the charges.  The consumer claimed that the furnisher violated the FCRA by failing to conduct a “reasonable” investigation of disputed credit information.

In determining whether the investigation was reasonable, the court looked to the factors used to determine whether a credit reporting agency has conducted a reasonable investigation under 15 U.S.C. § 1681i(a).  These factors included that: (1) the consumer had alerted the furnisher that the initial source of the information to the furnishers was potentially unreliable (or the furnisher knew or should have known that the source was unreliable), and (2) the costs of verifying the accuracy of the information was small compared with the possible harm of reporting inaccurate information. 

Applying the aforementioned factors, the Bruce court determined that a genuine issue of material fact existed there as to the reasonableness of the bank’s investigation based upon the following facts.  First, the court noted two different credit reporting agencies had notified the furnisher of the consumer’s disputes.  Second, the consumer had repeatedly and consistently insisted, in both telephone conversations and written correspondence, that the information reported was erroneous.  Third, the furnisher’s investigation consisted solely of reviewing its internal notes and records.  Fourth, the furnisher’s records facially indicated that the signatures on the credit application were not the consumer’s.  Fifth, the consumer specifically named the person responsible (his wife) and claimed that his wife had fraudulently opened the account.  Sixth, the furnisher’s own records confirmed that the wife was indeed the only one who had ever communicated about the accounts held with the furnisher.  Finally, during its investigation, the furnisher never attempted to speak directly with the consumer, or the consumer’s wife, regarding the dispute.

Mann, supra, U.S. Dist. LEXIS 2377 is illustrative of a reasonable investigation.  There, the consumer disputed various tax liens that had been recorded on her credit profile. Upon receiving notice that she disputed the liens were properly listed against her, the furnisher reviewed the information in its file.  Although the furnisher verified the lien had been released, it did not delete evidence that the liens had once properly existed against the consumer.  The furnisher moved to dismiss the action, asserting that its investigation was reasonable.  The consumer objected, claiming the investigation was only internal, it was conducted within four days, and that the furnisher never directly contacted her.

The court dismissed, finding that the investigation legally complied with § 1681s-2(b)(1) as a matter of law for the following reasons:  The court found that the claim that the furnisher was required to contact her directly was meritless.  The court rejected the consumer’s assertion that the investigation was inadequate simply because the furnisher was given thirty days in which to complete an investigation, but instead completed it in four days.  The court found the consumer offered no proof that the liens were originally reported in error.  Under the circumstances, the court found the furnisher was not required to research outside of its own internal file because there was no evidence that the initial source of the lien information was unreliable.  Mann, supra, fn. 10, at *15.  The court noted the mere fact that a consumer disputes a furnisher’s information is not sufficient by itself to make the furnisher “aware” of the fact that the original source of the information is unreliable.  Id.

Unlike § 1681s-2(a), the “FCRA expressly creates a private right of action for willful or negligent non-compliance.”  Gorman, supra, 2009 WL 3365928 at *4 (citing 15 U.S.C. §§ 1681n and o); accord Nelson, supra, 282 F.3d at 1059.  Consequently, a consumer possesses a private right of action against a furnisher of information for damages for  violation of its §  1681s-2(b) reinvestigation duties.

California's Consumer Credit Reporting Agencies Act (CCRAA)

Originally enacted in 1975, the CCRAA, the California version of the FCRA, was initially aimed solely at regulating the consumer credit reporting industry. See, e.g., CCRAA, Civil Code § 1785.1.  In language virtually identical to that found in the original FCRA legislation, the California Legislature stated the CCRAA’s purpose was “to require that consumer credit reporting agencies adopt reasonable procedures” for handling credit information so as to ensure it was handled in a manner which was “fair and equitable to the consumer with regard to confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this title.” Civil Code § 1785.1(d).  

Court interpretations of the original scheme provided that violation of the provisions of the CCRAA gave “the consumer an action for damages against a credit reporting agency,” but did “not extend liability to one who furnishes information to a CRA.”  Pulver, supra, 182 Cal.App.3d at 633. 

The Duty Of Furnishers To Accurately Report Are Added To The CCRAA

The 1993 Amendments to the CCRAA imposed for the first time duties upon furnishers to accurately report credit information, to flag disputes, and to investigate.  Effective in 1993, the California Legislature amended the CCRAA and added Civil Code § 1785.25 to the CCRAA.  That section imposes similar duties on furnishers similar to those now found in § 1681s-2(a) of the FCRA.  

For example, Civil Code § 1785.25(a) provides that the furnisher “shall not” furnish credit information to “any credit reporting agency if the person [furnisher] knows or should know the information is incomplete or inaccurate.”  Civil Code § 1785.25(a).  Likewise, if a furnisher determines any previously reported information is incomplete or inaccurate, it must update and correct that information so that it is “complete and accurate.”  Civil Code § 1785.25(b).  So long as a consumer continues to dispute the credit history or information (such as whether they owe a debt), the furnisher must note or flag the existence of this dispute anytime it furnishes credit information about that consumer.  Civil Code § 1785.25(c).  Clearly, these duties on furnishers are obviously similar to those found in § 1681s-2(a).

A Duty Is Imposed Upon Furnishers To Reinvestigate

Additionally, analogous to the § 1681s-2(b) requirements under the FCRA, the CCRAA was amended to require that if a furnisher of information receives a notice of dispute made pursuant to Civil Code § 1785.16(a), it then owes a duty to (1) “review relevant information” submitted to it; (2) “complete an investigation with respect to the disputed information” it provided; and (3) to “report to the consumer credit reporting agency the results of that investigation” within 30–business days.  Civil Code § 1785.25(f).

FCRA Preemption (Of The CCRAA) – Current Status

As noted above, in 1993, the California Legislature, and Congress in 1997, amended the statutory schemes under the CCRAA and FCRA, respectively, to impose analogous duties and obligations upon furnishers of information.  As shown above, the obligations on furnishers found in Civil Code §§ 1785.25(a), (b) and (c) are analogous to the obligations found under 15 U.S.C. § 1681s-2(a).  Likewise, the reinvestigation obligations placed on furnishers in Civil Code § 1785.25(f) are found by analogy at 15 U.S.C. § 1681s-2(b).

Until recently, the near unanimous view of the courts was that the FCRA preempted most, if not all, state law claims (arising by statute or common law) that possibly regulated, directly or indirectly, the liability of furnishers.  Under this view, no private cause of action existed at all under the CCRAA for violation of the (1) accurate reporting duties, or (2) the investigation responsibilities.  In other words, the majority view was that the FCRA completely preempted any remedies otherwise ostensibly available to consumers under § 1785.25(g) and § 1785.31 of California’s CCRAA for any furnisher’s alleged violation of its duties.  The following cases, among others, supported this view:  See, e.g., Roybal v. Equifax (E.D. Cal. 2005) 405 F.Supp.2d 1177; Lin v. Universal Card Services Corp. (N.D. Cal. 2002) 238 F.Supp.2d 1147; Quigly v. Pennsylvania Higher Educ. Assistance Agency (N.D. Cal. 2000) 2000 WL 1721069.

The basis for this view that state law claims under the CCRAA were not actionable was based upon the “preemption” provision of the FCRA, which provides:

Relation to State Laws
No requirement or prohibition may be imposed under the laws of any State - -
(1) with respect to any subject matter regulated under . . .
(F) section 1681s-2 of this title, relating to the responsibilities of persons who furnish information to consumer reporting agencies
. . .  (Emphasis added.)

However, § 1681t(b)(1)(F) itself created an express exception to preemption for one section of the CCRAA, specifically, Civil Code § 1785.25(a).  Although it seemed curious that Congress would save from preemption this state law duty under § 1785.25(a) to accurately report, this was thought to be consistent with how Congress had treated the virtually identical right (to accurate reporting) under § 1681s-2(a) where there was likewise no private remedy for violation of that duty. See Nelson, supra, 282 F.3d at 1059-1060.

In other words, in construing the FCRA and CCRAA as creating consistent obligations on furnishers to accurately report, no private remedy was available under either scheme.  This appeared to many courts, who considered the issue, to be perfectly consistent with Congress’ express goal, or promoting uniformity in the law across the country.  See, e.g., Islam v. Option One Mtg. (D. Mass. 2006) 432 F.Supp.2d 181, 188; Roybal, supra, 405 F.Supp.2d at 1181. 

Indeed, the decision in Lin v. Universal Card Servs. Corp. (N.D.Cal. 2002) 238 F. Supp.2d 1147, addressed the precise issue of the application of FCRA preemption to the CCRAA.  The court there held that the FCRA expressly preempted any private cause of action under the CCRAA. The Lin court provided an in-depth analysis of the preemption issue, addressing the scope of the FCRA preemption issue in conjunction with its purpose and legislative history:

While at first blush it may appear unclear as to why Congress excepted CCRAA § 1785.25(a) from preemption but did not except the additional provisions which provide consumers with a private right of action, the history and chronology of both Acts resolves any confusion.

The state of California was first to impose duties and obligations on a person who furnishes consumer credit information. California enacted CCRAA §§ 1785.25(a)-(g) on August 2, 1993. See Stats. 1992, c. 1194 (A.B.1629), § 11, operative July 1, 1993; amended by Stats. 1993, c. 285 (A.B.1340), § 8, effective August 2, 1993. Three years later, in 1996, Congress enacted a similar provision in FCRA § 1681s-2(a). In enacting the provision regarding furnishers of consumer credit information, Congress found that the specific language contained in CCRAA § 1785.25(a) is not inconsistent with its FCRA counterpart, § 1681s-2(a), and thus did not preempt the California provision. See 15 U.S.C. § 1681t(b)(1)(F)(ii).

Provisions contained in the CCRAA that stand in conflict with the FCRA were, however, preempted. Lin is correct that CCRAA §§ 1785.25(g) and 1785.31 provide consumers with a private right of action under California law. These provisions were not excepted from preemption, however, because they are inconsistent with the enforcement scheme of Congress under FCRA § 1681s-2(d), in matters relating to furnishers of consumer credit information. Congress intended to have exclusive authority to enforce such claims through “the Federal agencies and officials and the State officials identified in that section.” Therefore, although CCRAA § 1785.25(a) is excepted from preemption, CCRAA §§ 1785.25(g) and 1785.31, which provide Lin with a private right of action to sue furnishers of consumer credit information, are not excepted from preemption. Lin, supra, 238 F. Supp.2d at 1152-1153 (emphasis added).

Congress was undoubtedly aware of the Lin decision and its interpretation of the FCRA’s preemption provisions at the time it again amended the FCRA in 2003. It appears plain Congress would have certainly clarified a different intent through the amendments if the Lin court got it wrong. But it did not. Instead, Congress enacted even further preemption provisions into the so-called FACTA amendments to the FCRA. Pub. L. No. 108-159.

In short, the similar obligations of furnishers recognized under the FCRA and the CCRAA, as well as the limited rights of enforcement, appeared the deliberate result of the political compromise inherent in the legislative process.  One District Court observed as follows:

To be sure, this result is not what was desired by those who sought broad credit reporting legislation. But courts must respect the fact that the enactment of legislation often is the product of untidy compromises between competing views and not, under the guise of interpretation, reach results that neither side could win in the halls of Congress. White v. First American Registry, Inc. (S.D.N.Y. 2005) 378 F.Supp.2d 419, 424 (emphasis added).

The Ninth Circuit likewise noted:

That purpose, to provide some private remedy to injured consumers, coheres with what we see as a primary purpose for the FCRA, to protect consumers against inaccurate and incomplete credit reporting. The statute [FCRA] has been drawn with extreme care, reflecting the tug of the competing interests of consumers, CRAs, furnishers of credit information, and users of credit information. It is not for a court to remake the balance struck by Congress, or to introduce limitations on an express right of action where no limitation has been written by the legislature
, supra, 282 F.3d at 1060 (emphasis added).)

The Liceaga, Gorman and Sanai Decisions

The new Gorman and Sanai decisions, however, rejected the Lin court’s reasoning and decided the issue the other way.  But, Gorman (and the subsequent Sanai decision) failed to take into consideration Congressional intent – (1)  the intent to establish nationwide uniformity; (2) its intent to insulate furnishers from being subjected to private state actions for inaccurate reporting under either federal or state law; (3) the intent that rights be recognized without corresponding private remedies; and (4) that the right to enforce the duty to accurately report would be an obligation enforced solely by public agencies.

On this last point, it has been argued the FCRA’s preemption provisions for California Civil Code §1785.25(a) would be rendered meaningless if any private right of action is preempted.  Both Gorman and Sanai have so held.  But this is clearly not true.

In Liceaga, supra, 169 Cal.App.4th 901, California’s First District Court of Appeal held that the CCRAA afforded no private right of action because the FCRA preempts it.  As we have seen, this view was supported by other courts as well.  The First Court of Appeal explained that the CCRAA’s creation of a duty to report accurately, which was expressly exempted from preemption, no a private right of action existed to enforce the provisions of the Civil Code § 1785.25(a) duties.  It found the CCRAA’s private enforcement mechanism, preempted by the FCRA, analogous to the fact that no private right of action existed under the similar § 1691s-2(a) duties.  However, this decision was ordered depublished by the California Supreme Court, and is no longer good law and may not be cited as precedent. 

In Gorman, supra, the Ninth Circuit held that the FCRA does not preempt Civil Code § 1785.25(a) of the CCRAA, nor its private enforcement provisions under § 17856.25(g) and § 1785.31, finding “the likely purpose of the express exclusion was precisely to permit private enforcement of these provisions.”  Following the original Gorman decision, California’s Second District Court of Appeal in Sanai v. Saltz also rejected Liceaga and followed Gorman.

Although the recent Gorman and Sanai decisions reached a contrary result to Lin, for the reasons set forth above, this author believes Gorman and Sanai erred by both failing to take into consideration the legislative history and purpose behind Congress’ intent in enacting the FCRA preemption provisions, and failing to account for the fact that Congress was aware of the Lin decision and satisfied with its interpretation at the time it added the FACTA amendments to the FCRA in 2003.  Gorman, however, is the law in the Ninth Circuit, and it has overruled Lin.


The legislative history to the FCRA demonstrates that Congressional intent was to avoid hodge-podge liability.  But, if the Gorman and Sanai decisions stand, a private right of action will exist under federal law for violation of the investigation obligations owed by furnishers, but not under state law.  On the other hand, a private right of action will exist under state law for violations of the duty to accurately report, but no similar right will exist under federal law.  Can this hodge-podge scheme conceivably be what Congress contemplated?  This author thinks not.  But, for the time being, the federal courts in the Ninth Circuit, and one California Appellate Court will enforce liability under the CCRAA against collectors/furnishers in this way for failure to accurately report.

The above article and all articles in this website are not intended to be legal advice. Readers should consult an attorney to determine how the law applies to their particular circumstances. Also, please understand that the law constantly evolves and changes. Certain of the decisions and legal propositions quoted in the above article may be out of date or superseded. Questions or comments about the above article can be directed to its author, Mark E. Ellis.

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