FCRA Preemption of Texas Law – TDCA and DTPA Claims

A Court in the Northern District of Texas issued a new opinion on FCRA preemption of TDCA and DTPA claims when the company provided false information to the credit bureaus (like Experian, Equifax, and TransUnion).  In Seelbach v. Ditech Fin. LLC, Civil Action No. 3:17-CV-3386-D, 2018 U.S. Dist. LEXIS 121006 (N.D. Tex. July 19, 2018), the Court stated:

In this action by plaintiff Jeffery Seelbach (“Seelbach”) asserting claims for breach of contract and violations of the Texas Debt Collection Act (“TDCA”), Tex. Fin. Code Ann. § 392.001 et seq. (West 2016), and the Texas Deceptive Trade Practices-Consumer Protection Act (“DTPA”), Tex. Bus. & Com. Code Ann. §§ 17.41-17.63 (West 2018), defendant Ditech Financial LLC (“Ditech”) moves to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim on which relief can be granted. Concluding that Seelbach’s TDCA and DTPA claims are preempted by the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 (“FCRA”), the court grants the motion as to these claims. Concluding that Seelbach has pleaded a plausible breach of contract claim, the court denies the motion as to that claim. The court grants Seelbach leave to file a second amended complaint.

As to FCRA preemption:

The FCRA contains several explicit preemption clauses. Relevant to this case, 15 U.S.C. § 1681t(b)(1)(F) preempts state law claims by providing that “[n]o requirement or prohibition may be imposed under the law 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[.]” Section 1681s-2 prohibits reporting “any information relating to a consumer to any consumer reporting agency if the person knows or has reasonable cause to believe that the information is inaccurate.” Id. § 1681s-2(a)(1)(A). In this way, a state statutory law claim “based on a defendant’s conduct in furnishing inaccurate information to a consumer reporting agency is preempted by the FCRA.” Davis v. Wells Fargo Bank, N.A., 976 F.Supp.2d 870, 883 (S.D. Tex. 2013) (citing Ayers v. Aurora Loan Servs., LLC, 787 F.Supp.2d 451, 457 (E.D. Tex. 2011)), on reconsideration, 2014 WL 585403 (S.D. Tex. Feb. 14, 2014)).^[3]

Applying the text of § 1681t(b)(1)(F), the court holds that Seelbach’s TDCA and DTPA claims are preempted. Seelbach’s TDCA claims appear to be made under Tex. Fin. Code Ann. § 392.304(a)(8) & § 392.301(a)(3).^[4] Section 392.304(a)(8) states that “a debt collector may not use a fraudulent, deceptive, or misleading representation that employs . . . misrepresenting the character, extent, or amount of a consumer debt[.]” Tex. Fin. Code Ann. § 392.304(a). Section 392.301(a)(3) prohibits debt collectors from making representations “to any person other than the consumer that a consumer is willfully refusing to pay a nondisputed consumer debt when the debt is in dispute and the consumer has notified in writing the debt collector of the dispute.” Id. § 392.301(a). Seelbach alleges that Ditech violated both provisions by inaccurately reporting to credit bureaus that a debt that was otherwise settled was an unpaid charge-off. Both of these claims, therefore, would impose liability under a state statute that “relates to the responsibility of persons who furnish information to consumer reporting agencies.” 15 U.S.C. § 1681t(b)(1)(F).

The FCRA preempts Seelbach’s DTPA claim for the same reason…

While the Court found these claims are due to be dismissed, it gave the Plaintiff an opportunity to amend his complaint to bring claims under the correct statutes, which would assumedly be the FCRA.