A Fair Credit Reporting Act claim by any other name is still an FCRA claim. That’s the recent holding by the Northern District of New York in Arnold v. Navient Sols., LLC. Plaintiffs cannot avoid federal court jurisdiction through “artful pleading” when they assert claims relating to the responsibilities of information furnishers.
In 2013, plaintiff John Jay Arnold failed to make payments on three private and one federal student loan. The servicer of his loans, Navient Solutions, LLC, reported the delinquencies to the three major credit reporting agencies (“CRAs”). Arnold settled the private loans for less than the full balance and did not settle the federal loan. Navient then reported the private loans as “paid off but less than the full balance” and continued to report the federal loan as delinquent, noting that the “consumer disputes [the federal loan] account.”
Due to the derogatory student loan account reporting, Arnold alleged his credit score was negatively affected and claimed that he was denied financing to purchase a home. When Navient refused to change the information reported to the CRAs, Arnold sued in New York’s state trial court, alleging deceptive acts in the conduct of business in violation of New York General Business Law § 349. Navient removed the case to federal court, and Arnold moved for remand back to state court.
The Arnold Court held that it had federal question jurisdiction over the action because the FCRA preempted Arnold’s state-law claim. The Court acknowledged that plaintiffs are the masters of their complaint and that they can usually dodge federal court through “artful pleading.” However, Congress can completely preempt areas of state law, and, barring minor exceptions, it did so with respect to claims “relating to the responsibilities of persons who furnish information to [CRAs]” pursuant to 15 U.S.C. § 1681t(b)(1)(F). Because Arnold’s suit was based on Navient’s responsibilities as an information furnisher—namely, its duties to report accurate information and investigate disputed debts—his claims were preempted by the FCRA and, thus, arose under federal law.
The Second, Fourth, and Seventh circuits have likewise held that the FCRA preempts similar state law claims against furnishers of information to CRAs, as demonstrated in Macpherson v. JPMorgan Chase Bank, N.A., 665 F.3d 45, 47 (2d Cir. 2011); Purcell v. Bank of Am., 659 F.3d 622, 625 (7th Cir. 2011); and Ross v. F.D.I.C., 625 F.3d 808, 813 (4th Cir. 2010). These cases serve as a reminder that, in the context of credit reporting disputes, a suit may be removable even though the plaintiff asserts only state law claims.