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Montana Supreme Court Rules Wrongful Collection Actions Not Preempted by FCRA - Curtis v. Citibank

October 17, 2011

As Rubidoux fair debt collection lawyers, we were interested to read a court opinion rejecting the idea that the Fair Credit Reporting Act preempts state consumer-protection laws. The FCRA regulates how creditors may report debts to the private credit reporting agencies, with penalties for knowingly reporting false debts or failing to correct known mistakes. By contrast, the dispute in Curtis v. Citibank, a decision of the Montana Supreme Court, alleged libel, credit libel and violations of the Montana Consumer Protection Act. Meril Curtis had a credit card stolen by a houseguest who ran up more than $7,000 in debt, and Citibank acknowledged that Curtis was not personally liable for the debt. Nonetheless, Citibank referred the debt to a collection agency for collection against Curtis. Citibank won summary judgment at the trial court with allegations that the state-law claims were preempted, but the state's highest court disagreed, finding that the collection agency was not regulated by the FCRA.

Curtis discovered the July 2008 false charges in a timely manner, and as instructed by Citibank, filed a police report and created an affidavit. Despite the fact that Curtis had followed procedures, Citibank referred the debt to a debt collector called Professional Recovery Services. Eventually, Curtis filed suit against both PRS and Citibank, alleging violations of the Fair Debt Collection Practices Act, the MCPA, libel and credit libel. Curtis settled with PRS, but Citibank moved for judgment on the pleadings (summary judgment) using the FCRA preemption argument. It also argued that it was not a debt collector subject to the FDCPA. This claim was dismissed without further appeal, but the district court also granted summary judgment to Citibank on the FCRA preemption grounds. Curtis appealed.

The Montana Supreme Court reversed the decision, finding that the FCRA does not preempt the state-law claims at issue. The FCRA does expressly preempt state laws that conflict with its requirement that reporting agencies report consumer information in a fair and equitable manner. One of those express provisions is at issue here, prohibiting states from imposing laws "relating to the responsibilities of persons who furnish information to consumer reporting agencies," when those laws conflict with the FCRA's sec. 1681s-2. That section regulates how credit-granting institutions report information to credit reporting agencies. Citibank argued that by referring the debt to PRS, it was simply reporting credit information pursuant to that section. The Montana high court ruled that this was an incomplete look at the issue. PRS is not a credit reporting agency within the meaning of the FCRA, it said; it is a collection agency that does not ultimately furnish credit information to businesses the way credit reporting agencies do. Thus, it is not regulated by the relevant section of the FDRA -- and that means there can be no federal preemption. Nor is there any federal preemption in the applicable statute, the FDCPA. Thus, it reversed the trial court and sent the lawsuit back down.

Our Lake Forest FDCPA attorneys believe the court could have said a great deal more about the cynical use of FCRA preemption in this case. Citibank never argued that Curtis owed the debt or that it did not incorrectly refer the debt; its entire argument hinged on federal preemption. Thus, it was in essence trying to use a technicality to escape responsibility for actions it implicitly acknowledged were illegal. Under the FCRA, creditors like Citibank have a duty to investigate disputed information and correct errors within 30 days of receiving a dispute. They also have a duty to report correct information in the first place. Curtis apparently never made FCRA claims, but Citibank's failure to correct its acknowledged mistake, and its incorrect referral to PRS, surely led to negative credit information for Curtis as well. Thus, it may well have been breaking the law that its was using to escape responsibility for its actions. As Buena Park unfair debt collection lawyers, we appreciate that the Montana high court gave Curtis his day in court.

Howard Law, P.C., represents Californians who are fighting aggressive and unfair debt collection attempts, including those with negative effects on their credit. If you'd like to talk to us about your situation and your legal options, call us today at 1-800-872-5925 or send us an email.

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