New Furnisher Rules Effective July 1
The new rules for furnishers of credit reporting information take effect on July 1, 2010. Subject to several exceptions, the rules implement two significant changes for furnishers.
First, the rules require furnishers to implement reasonable written policies and procedures regarding the accuracy and integrity of consumer information. Second, the rules require furnishers to conduct a reasonable investigation into disputes related to credit reporting submitted to a furnisher directly by a consumer. The Fair Credit Reporting Act rules now in place require such an investigation only after a furnisher receives notice of dispute from a credit reporting agency. Significantly, if a furnisher provides a specific correspondence address for such disputes, the furnisher need only respond to disputes submitted to that address.
New Duties for Furnishers Under Credit Reporting Rules
Pursuant to final agency rules implementing revisions to credit reporting regulations mandated by the Fair and Accurate Credit Transactions Act of 2003 ("FACTA"), significant changes to credit reporting rules will take effect on July 1, 2010.
Subject to several exceptions, the final new credit reporting rules for furnishers require furnishers to conduct a reasonable investigation into disputes related to credit reporting submitted to a furnisher directly by a consumer. The Fair Credit Reporting Act rules now in place require such an investigation only after a furnisher receives notice of dispute from a credit reporting agency. Significantly, if a furnisher provides a specific correspondence address for such disputes, the furnisher need only respond to disputes submitted to that address.
FTC Clarifies FDCPA-FACTA Conflict
In an Advisory Opinion, the Federal Trade Commission has clarified a statutory conflict between the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., and its regulations implementing the Fair and Accurate Credit Transactions Act of 2003 ("FACTA"), which added new sections to the Fair Credit Reporting Act, ("FCRA"), 15 U.S.C. § 1681 et seq.
Specifically, the the FDCPA provides that "if a consumer has notified a debt collector in writing that 'the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate with the consumer with respect to such debt' (with some exceptions not applicable here)." 15 U.S.C. § 1692c(c). Separately, FTC regulation implementing FACTA "requires furnishers of information to CRAs to report the results of a direct dispute to the consumer, 16 CFR § 660.4(e)(3), or notify the consumer if the furnisher determines the dispute is frivolous or irrelevant, 16 CFR § 660.4(f)(2)."
As written, a furnisher of credit information that contacts a debtor regarding a credit dispute investigation, as required by FTC FACTA regulations, could violate the cease-communication rules of the FDCPA. The FTC Opinion eliminates this conflict, providing:
a debt collector does not violate Section 805(c) of the FDCPA if the consumer directly disputes information after sending a written “cease communication” to the collector, and the collector complies with the Rule by means of a communication that has no purpose other than complying with the Rule by stating (1) the results of the investigation or (2) the collector’s belief that the communication is frivolous or irrelevant.
FCRA Preempts California Private Right of Action
In Liceaga v. Debt Recovery Solutions, LLC, the First District California Court of Appeal has held that the federal Fair Credit Reporting Act, 15 U.S.C. §1681 et seq. ("FCRA"), preempts the private right of action provision of California's Credit Reporting Agencies Act, Civ. Code §1785.1 et seq. ("CRAA").
Plaintiff Rebecca Liceaga was the apparent victim of identity theft. Her identity was used to open a Sprint cell phone account without her knowledge. When the account became delinquent, Sprint assigned the debt to defendant Debt Recovery Solutions, LLC, which eventually reported the delinquency to credit reporting agencies, despite plaintiff's protests that the debt was the result of identity theft. Plaintiff sued, alleging a violation of California's CRAA. The trial court granted defendant's motion for judgment on the pleadings on the grounds that FCRA preempts any private right of action under CRAA. Plaintiff appealed.
On appeal, the First District affirmed. Although section 1681t(b) of FCRA preempts any state law "relating to the responsibilities of persons who furnish information to consumer reporting agencies...", plaintiff asserted that California's CRAA was specifically exempted from that preemption provision, along with a similar statute in Massachusetts. The Court disagreed, holding that the California exemption to FCRA preemption applied only to Civil Code section 1785.25(a), not to section 1785.25 generally. The Court also rejected plaintiff's assertion that the language of the FCRA preemption provision should be interpreted broadly to allow a consumer in any state to bring a private state law right of action.
The Court of Appeal held that FCRA preempts the California CRAA private right of action against a "furnisher" of credit information.
