In Gorman v. Wolpoff & Abramson, LLP, __ F.3d __ 2009 WL 57091 (9th Cir. 2009) the Court of Appeals for the Ninth Circuit held, among other things, that FCRA does not pre-empt Civil Code 1785.25 of the CCRAA. This holding overrules multiple district court opinions to the contrary, and is opposite to the California Court of Appeal’s decision on December 31, 2008 in Liceaga v. Debt Recovery Solutions, L.L.C. __ Cal.App.4th __ 2008 WL 5392184 (2008). See my earlier post on Liceaga at http://www.calautofinance.com/?p=336 The Court of Appeals for the Ninth Circuit in Gorman explained:
Because the plain language of the preemption provision does not apply to private rights of action, and because the likely purpose of the express exclusion was precisely to permit private enforcement of these provisions, we hold that the private right of action to enforce Cal. Civ. Code section 1785.25(a) is not preempted by the FCRA.
The Court of Appeals for the Ninth Circuit also set and applied the standard a furnisher of credit information must undertake in response to a consumer dispute with a Credit Reporting Agency, adopting a standard of “reasonableness”:
As we have noted, the term “investigation” on its own force implies a fairly searching inquiry. It is thus likely that, if anything, the “reasonable” qualifier with regard to re investigations by CRAs signals a limitation on the CRAs’ duty, not an expansion of it beyond what “investigation” itself would signal. And, indeed, the statute goes on to spell out the CRA’s investigative duty in some detail, requiring, inter alia, that the CRA provide notification of the dispute within five business days of receipt of notice of a dispute. The furnisher’s investigation obligation under § 1681is triggered by receiving the CRA notification, required as a central aspect of the CRA’s own investigation, and includes the obligation to “report the results of [its] investigation to the [CRA].” § 1681s2-(b)(1)(C). In other words, the CRA’s “reasonable reinvestigation” consists largely of triggering the investigation by the furnisher. It would make little sense to deem the CRA’s investigation “reasonable” if it consisted primarily of requesting a superficial, unreasonable investigation by the furnisher of the information.
The Court of Appeals for the Ninth Circuit did impose certain obligations on the consumer, noting:
We agree that “[w]hether a reinvestigation conducted by a furnisher in response to a consumer’s notice of dispute is reasonable … depends in large part on … the allegations provided to the furnisher by the credit reporting agency.” Krajewski v. Am. Honda Fin. Corp. 557 F.Supp.2d 596, 610 (E.D.Pa. 2008). Without any indication in the allegations that the initial investigation lacked reliability or that new information was available to discover, MBNA’s decision not to repeat a previously-conducted investigation cannot have been unreasonable. Congress could not have intended to place a burden on furnishers continually to reinvestigate a particular transaction, without any new information or other reason to doubt the result of the earlier investigation, every time the consumer disputes again the transaction with a CRA because the investigation was not resolved in his favor. Thus, although reliance on a prior investigation can be unreasonable, cf. Bruce v. First U.S.A. Bank, Nat’l Ass’n, 103 F.Supp.3d 1143-44 (E.D.Mo. 2000) (concluding that a furnisher’s investigation was not necessarily reasonable when an initial investigation was deficient for, among other reasons, failing to contact the consumer), that was not the case here.
Finally, the Court of Appeals for the Ninth Circuit found adopted the Court of Appeals for the Fourth Circuit’s standard in Saunders v. Branch Banking and Trust of Virginia, __ F.3d. __ (4th Cir. 2008), where a furnisher fails to report an account as disputed after reinvestigation. See my prior post on Saunders here: http://www.calautofinance.com/?p=22
It is true, as we have said, that a furnisher’s initial failure to comply with this requirement is not privately enforceable. But as the Fourth Circuit noted, this does not excuse the furnisher’s failure to correct the omission after investigating pursuant to § 1681s-2(b). See Saunders, 526 F.3d at 150. The purpose of § 1681s-2(b) is to require furnishers to investigate and verify that they are in fact reporting complete and accurate information to the CRAs after a consumer has objected to the information in his file. See Johnson, 357 F.3d at 431. (“[Congress] create[d] a system intended to give consumers a means to dispute-and, ultimately, correct-inaccurate information on their credit reports.”). A disputed credit file that lacks a notation of dispute may well be “incomplete or inaccurate” within the meaning of the FCRA, and the furnisher has a privately enforceable obligation to correct the information after notice. § 1681s-2(b)(1)(D). We thus conclude that the statute permits Gorman to bring his claim regarding MBNA’s failure to report the charge still disputed.