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When is a state law inconsistent with the FCRA?

April 1, 2011

The FCRA pre-empts state laws on consumer reports … some of the time.  The main pre-emption provision is at 15 U.S.C. Sec. 1861t(a).  It says that the FCRA does not pre-empt all state laws in the field, unless they are “inconsistent” with the FCRA or are specifically pre-empted.  There’s a list of specific pre-emptions at 15 U.S.C. Sec. 1681t(b).  And don’t forget that some common law claims are sometimes pre-empted under 15 U.S.C. Sec. 1681h(e).

This blog post is about how to tell when a state law is “inconsistent” with the FCRA such that it is pre-empted by the FCRA.  I think there are two ways to look at it, and I’ve seen a hint of case law for one of them.

The first way, supported by case law, suggests that the FCRA is a ceiling but not a floor.  In other words, the FCRA sets minimum standards, but the states can exceed them and impose even stricter standards.  For example, 1681c(a)(3) prohibits paid tax liens from being reported for more than seven years.  Suppose that a state wanted to go even further and prohibit such liens from being reported for more than three years.  Under this first approach, the state could do so, because it is simply providing additional consumer protections over and above what the FCRA – itself a consumer protection statute – provides.  The case (that’s singular; I haven’t found any others) supporting this view is Credit Data of Arizona, Inc. v. State of Arizona, 602 F.2d 195 (9th Cir. 1979).  In it, plaintiff-appellant Credit Data wanted to charge a fee for consumer disclosures as permitted by 1681j, but Arizona law forbade any fee from being charged.  Credit Data thought the Arizona law was “inconsistent” with the FCRA, but the Ninth Circuit applied the “ceiling not a floor” approach and found for Arizona.

Of course, we all know that the Ninth Circuit is always wrong.  The other approach to determining whether something is “inconsistent” is to argue that if federal law and state law provide two different rules on the same topic, the federal law applies and the state law is pre-empted.  Under my analogy above, rather than having states set varying timelines on how long a paid tax lien could be reported – some might say two years, others four, others ten – this second approach would say that there is only one standard – seven years per 1681c(a)(3) – and every other standard is “inconsistent” and so pre-empted.

The second approach doesn’t seem to have been taken up and applied by any court, but I think that’s because decisions in this area are relatively rare.  Most of the time, it appears that states are comfortable letting the FCRA take the lead on consumer reports.  And when the states do get out in front, the FCRA will sometimes adapt and catch up – as it did with identity theft concerns in the FACTA amendments of 2001.

If anybody reading this knows of cases that favored one of the two approaches just discussed, or some crazed third approach that I didn’t consider, please let me know.

Categories: Uncategorized
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