By Richard A. Roth
Claims under a New York law that provides private civil remedies for identity theft victims are not necessarily preempted by the Fair Credit Reporting Act, the U.S. Court of Appeals for the Second Circuit has decided. As long as the claims do not concern FCRA-imposed responsibilities of persons who furnish information to consumer reporting agencies, they survive preemption (Galper v. JP Morgan Chase Bank, N.A.).
The consumer complained that Chase employees had opened new accounts in the names of fictitious companies, using her name as signatory, and also had appropriated her dormant checking account in furtherance of a Medicare fraud scheme. The scheme resulted in frequent overdrafts, closed accounts and, much worse, the eventual arrest and prosecution of the consumer for engaging in a money laundering conspiracy.
Once the consumer was acquitted of money laundering, she sued Chase under a New York anti-identity theft law that allows suits by victims if the identity theft resulted in the transmission to a consumer reporting agency of information that otherwise would not have been provided. She claimed that the overdrafts, closed accounts, arrest, and prosecution generated adverse reports to consumer reporting agencies that passed the information along to various banks, and that JP Morgan was responsible for its employees’ actions.
Trial court dismissal. Chase argued that the state law claims were preempted by the FCRA, and the district court judge agreed. While the act generally seeks not to preempt state laws, it does explicitly preempt state laws in specific areas. One exception to the preservation of state laws preempts laws “with respect to any subject matter regulated under . . . Section 1681s-2 of this title, relating to the responsibilities of persons who furnish information to consumer reporting agencies” (15 U.S.C. §1681t(b)).
The district court judge decided that the consumer’s state law claims fell under that description and thus were preempted. However, the appellate court disagreed, determining that the consumer’s claims could be interpreted in a way that rescued them from preemption.
FCRA provisions. FCRA Section 1681s (15 U.S.C. §1681s-2) imposes specific responsibilities on persons who transmit information to consumer reporting agencies, including not furnishing information known to be false and having procedures to respond to identity theft claims. Looking in detail at the preemption language of 15 U.S.C. §1681t(b), the appellate court decided that the act allowed preemption only of state laws that were “with respect to” information furnisher duties imposed by 15 U.S.C. §1681s-2. Further, “with respect to” meant “concerning”—in other words, only state laws that concern information furnisher duties under 15 U.S.C. §1681s-2 are preempted.
Interpretation of consumer’s claims. When the complaint was interpreted in the light most favorable to the consumer, it raised claims that did not concern Chase’s duties as an information furnisher, the court decided. The complaint most reasonably should be construed as alleging that Chase was liable under a theory of respondeat superior for the identity theft perpetrated by its employees. If the employees’ identity theft resulted in the forbidden transmission of information to consumer reporting agencies, Chase then might be liable under the New York law.
Stated more clearly, the consumer’s complaint could be interpreted as claiming that Chase was liable for the employees’ identity theft, not that the bank was liable for reporting adverse information about the consumer. That claim under the state law would not be preempted by the FCRA.
However, if the consumer attempted to argue that Chase was liable for furnishing false information, that claim would be preempted, the court warned.
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