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The U.S. Court of Appeals for the 7th Circuit has handed Bank of America a win, taking a broader view of a federal credit reporting law’s pre-emption provisions than a Northern District of Indiana judge. In an Oct. 3 unanimous panel ruling, the 7th Circuit reversed Judge James Moody’s November 2010 judgment, which had dismissed Kristine Purcell’s state common-law claims without prejudice, allowing her to refile in state court. The appeals court found that the claims should have been dismissed with prejudice because they are pre-empted by the Fair Credit Reporting Act. The panel remanded the case with instructions to enter judgment for the bank on Purcell’s state and federal claims. Purcell filed a two-page lawsuit in December 2009, claiming that the bank wrongly accused her of owing money and reported this to credit agencies, but refused to comply with her requests for documentation about the debt. Purcell claimed the bank’s actions amount to criminal mischief. She also claimed that the bank’s actions cost her $20,000, She asked the court to award treble damages, costs and attorney fees. In his November 2010 ruling, Moody dismissed Purcell’s federal claim, finding that § 1681s–2(a) of the Fair Credit Reporting Act does not create a private right of action. Moody then considered the pre-emption provisions under the act and found that the word “laws” in § 1681t(b) is limited to state statutes, leaving claims based on state common law free to proceed. Instead of remanding the case, he dismissed the common law claims without prejudice to refiling in state court. Chief Judge Frank Easterbrook wrote the opinion, joined by judges William Bauer and Diane Sykes. Easterbrook rejected the district court’s interpretation of “laws” as not applying to common law. He noted that neither of two legislative drafting manuals “suggests that ‘law’ be used to designate all sources of law, while ‘laws ‘be used to designate [only] statutes.” “What reason could Congress have had for distinguishing between statutory and common law in such an obscure way?” he asked. “For that matter, what reason would the legislature have had for preempting state statutes regulating information sent to credit bureaus, while not preempting state common law regulating the same subject? The district court did not suggest one.” Easterbrook noted that some district judges have seen an inconsistency between two provisions that each pre-empt some state claims based on reports to credit agencies. Section 1681h(e) of the Fair Credit Reporting Act, enacted in 1970, pre-empts state law negligence claims for providing inaccurate information to credit reporting agencies. Section 1681t(b)(1)(F), enacted in 1996, pre-empts state requirements or prohibitions on entities that give information to consumer reporting agencies, except under certain Massachusetts and California laws. The extra pre-emption was added at the same time as extra federal remedies were added to the law. Easterbrook observed that this latter provision was enacted under a regulatory scheme whereby “reporting to credit agencies would be supervised by state and federal administrative agencies rather than judges.” Easterbrook wrote that “Section 1681h(e) does not create a right to recover for willfully false reports; it just says that a particular paragraph does not pre-empt claims of that stripe.” He stated that reading the earlier statute to defeat the later one “would contradict fundamental norms of statutory interpretation,” concluding that the statutes are compatible. “There is no more conflict between these laws than there would be between a 1970 statute setting a speed limit of 60 for all roads in national parks and a 1996 statute setting a speed limit of 55,” Easterbrook wrote. “It is easy to comply with both: don’t drive more than 55 miles per hour. Just as the later statute lowers the speed limit without repealing the first (which means that, if the second statute should be repealed, the speed limit would rise to 60 rather than vanishing), so § 1681t(b)(1)(F) reduces the scope of state regulation without repealing any other law.” The court remanded the case to the district court with instructions to enter judgment for Bank of America on all of Purcell’s claims. R. John Wray, a Fort Wayne, Ind., lawyer who represented Purcell at the district court, did not respond to requests for comment. Wray was listed as Purcell’s lawyer on the 7th Circuit docket, but he didn’t file a brief or make an appearance. Lawrence Benjamin, a partner at Chicago’s Neal, Gerber & Eisenberg and one of Bank of America’s lawyers on the case, said that the ruling “will put an end to a debate that has vexed the district courts for more than 15 years.” Benjamin said that many of the more than 100 district court decisions about the two provisions have allowed state common law claims to proceed against parties that give credit information to consumer credit reporting agencies “notwithstanding the broad language of the more recent provision.” The 7th Circuit agreed with Bank of America that the statute’s later provision pre-empts such claims, Benjamin said. “The decision in the case is likely to have a material effect on litigation against credit information furnishers not only in the 7th Circuit, but nationwide.” Sheri Qualters can be contacted at [email protected].

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