In Carvalho v. Equifax Information Services, LLC, No. 09-15030, 2010 W.L. 3239477 (9th Cir., Aug. 18, 2010), the Ninth Circuit affirmed a lower court’s grant of summary judgment dismissing Plaintiff’s claims under the California Consumer Credit Reporting Agencies Act (“CCRAA”).
The Plaintiff alleged that three credit reporting agencies, Equifax Information Services, LLC (“Equifax”), Experian Information Solutions, Inc. (“Experian”) and Transunion LLC (“Transunion”), erroneously reported a debt on her credit report despite her requests for reinvestigation and correction of outstanding debt information provided to the agencies by Credit Consulting Services (“CCS”), a collection agency. CCS successfully filed a general demurrer alleging that the federal Fair Credit Reporting Act (“FCRA”) preempted the Plaintiff’s claims against it under the CCRAA. Defendant Equifax successfully removed the case to the District Court for the Northern District of California, claiming that the case met the $5 million amount-in-controversy requirement of the Class Action Fairness Act of 2005 (“CAFA”).
In reviewing the state court’s grant of CCS’s general demurrer, the Ninth Circuit followed the precedent set by their decision in Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147 (9th Cir. 2009), in which they found that the FCRA did not preempt private consumer actions against furnishers under California Civil Code §1785.25(a). Despite this finding however, the Plaintiff’s claim failed as she did not defend her claim that CCS had provided inaccurate information in violation of §1785.25(a); choosing only to defend a claim that CCS failed to adequately complete an investigation in response to a reinvestigation inquiry. This latter allegation implicated a violation of California Civil Code §1785.25(f), causing the claim to fail as the Ninth Circuit found that section 1785.25(f) was not saved from preemption by the FRCA. The decision granting the general demurrer was therefore upheld.
Regarding the claims made under the CCRAA, the Ninth Circuit found that while California courts had not yet decided the issue of whether a plaintiff must demonstrate the inaccuracy of a disputed item in order to obtain relief for a violation, decisions interpreting the FCRA, which are deemed persuasive, have found such a requirement. Due to Plaintiff’s concession that all the information on her credit report was correct on its face, she was unable to establish a prima facie reinvestigation claim inaccuracy. In making its decision, the court noted that reinvestigation claims are not the proper vehicle for collaterally attacking the legal validity of consumer debts. A consumer seeking to dispute the legal validity of should seek to resolve the matter directly with the creditor or furnisher.