Summary:
Fritz closed his account with Duke Energy when he moved, but was one week late in paying the final bill, so it was referred to a debt collector. He did pay the balance to Duke Energy, who applied the amount to the balance on his new utility bill. The debt collector was not informed of the payment and two months later, reported Fritz as delinquent to the three major credit bureaus, resulting in a 77 point decline in his credit score. Fritz brought suit against Duke Energy (as well as the debt collector under other bases) under N.C.G.S. § 75-54, alleging that Duke Energy had falsely represented to the debt collector the status of the debt. Duke Energy moved to dismiss asserting both that the Fair Credit Reporting Act preempted N.C.G.S. § 75-54 and that the claim failed under N.C.G.S. § 75-54 itself.
The district court rejected the argument by Duke Energy that FCRA preempts all state law action with regard to credit reporting. § 1681t(b)(1)(F) does preempt causes of action against furnishers of credit information under state laws that both overtly regulate credit reporting and those that indirectly have the effect of regulating credit reporting in certain circumstances. See Ross v. FDIC, 625 F.3d 808, 813 (4th Cir. 2010). Preemption under section 1681 t(b )(1 )(F) is not, however, "a highly[] contagious and fatal disease" such that "a few stray allegations about inaccurate credit reporting ... contaminate[] ... claims." Rex v. Chase Home Fin. LLC, 905 F. Supp. 2d 1111, 1148-1154 (C.D. Cal. 2012).
Fritz' claim nonetheless failed under N.C.G.S. § 75-54, as that "concerns communications between a debt collector and a debtor, not communications between a creditor and a debt collector." Accordingly the communications or miscommunications between Duke Energy and the debt collect did not give rise to a claim for which relief could be granted.
Commentary:
It is also worth noting that this opinion recognizes that pre-emption is an affirmative defense, meaning that cannot be raised not sua sponte by the court, but instead must be asserted by a defendant and, following the reciprocal application pleading requirements of Iqbal/Twombley to affirmative defenses, see Racick v. Dominion Law Assocs., 270 F.R.D. 228 (E.D.N.C. 2010), must be plead with particularity.
For a copy of the opinion, please see:
Fritz v. Duke Energy- FCRA Does Not Preempt State Debt Collection Protections
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