In Ross v. Federal Deposit Insurance Corp., No. 08-1851, 2010 WL 4261819 (4th Cir. Oct. 29, 2010), the U.S. Court of Appeals for the Fourth Circuit affirmed the grant of summary judgment in favor of Washington Mutual Bank (“WaMu”) and against Charlotte Ross who alleged common law defamation claims, violations of the Fair Credit Reporting Act (FCRA), and violations of the North Carolina Unfair and Deceptive Trade Practices act (NCUDTPA).

Ross became the sole owner of home in 2001 while her husband retained sole responsibility for the mortgage, held by WaMu. Ross nonetheless requested that WaMu send her the mortgage statements and the IRS 1098 form. In the course of fulfilling Ross’s request, WaMu mistakenly listed Ross’s name on the mortgage. 

In 2001 and again in 2003, the loan went into default. In 2001, even though Ross was not responsible for the loan, WaMu reported negative information about Ross to consumer reporting agencies (“CRAs”). After Ross complained, WaMu conducted an investigation and suspended credit reporting for the loan. In 2003, Ross again complained to WaMu that one of the CRAs was still reporting the loan on her credit report. WaMu investigated and directed the CRA to remove the loan from the credit report. The loan no longer appeared on Ross’s credit reports after December 2003.

Ross filed a complaint against WaMu in August 2006. Her FCRA claims, however, were barred because they were not brought within the two-year statute of limitations. The district court found that her state law claims, while timely, were preempted by the FCRA or otherwise deficient and entered summary judgment on July 2, 2008. Ross appealed the grant of judgment on her NCUDTPA claims.

The Fourth Circuit affirmed. The court held that Ross’s NCUDTPA claim that WaMu reported false information “runs into the teeth” of the FCRA’s broad preemption provision found in 15 U.S.C. § 1681t(b)(1)(F). Ross, however, argued that her claim was expressly authorized by a separate provision of the FCRA, specifically Section 1681h(e) because WaMu acted with “malice of willful intent to injure.”

As a threshold matter, the court questioned whether Ross’s claim fell within the scope of Section 1681h(e) but, assuming it did, the court found that “[v]iewing the summary judgment record in the light most favorable to Ross, WaMu did not act with the ‘malice or willful intent to injure’ necessary for Ross to qualify for the § 1681h(e) exception.” The court acknowledged a split in authority as to whether state or federal law governs the meaning of “malice” in 1681h(e), but that both definitions would require that WaMu reported information that it knew was false.

The court found that, rather than establishing that WaMu reported information it knew was false, the evidence established that “WaMu made a regrettable but honest mistake and took action to remedy this error once Ross brought it to WaMu’s attention.” The court found that the fact that one CRA continued reporting incorrect loan information does not lead to the inference that WaMu itself continued to report incorrect loan information. But, even if such inference could be drawn, it would not give rise to malice as needing “a couple of tries to remedy fully its initial mistake” evidences weakness and unreasonableness of WaMu’s procedures, not malice. The court further noted that “WaMu may be guilty of sloppy recordkeeping, but that is at most negligence, not malice.” 

Notably, by finding the absence of malice, the court avoided having to confront the apparent conflict between Section 1681h(e) and the broad preemption clause of Section 1681t(b)(1)(F).

The court also granted summary judgment to WaMu on Ross’s claim for unfair debt collection practices under Article 2 of NCUDTPA. The court noted that, to the extent her claim was based on the reporting of incorrect information to CRAs, it was preempted. All that remained of Ross’s claim was her allegation that WaMu had made a number of debt collection phone calls to her place of employment. The court concluded that there was no evidence that these phone calls were the proximate cause of any of the injuries or damages allegedly suffered by Ross.