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FCRA Class Action Defense Issues-American Bankers v. Gould: Federal FCRA (Fair Credit Reporting Act) Preempts Portions of California’s Financial Information Privacy Act (SB1) Ninth Circuit Holds

Ninth Circuit Remands Case to Federal District Court to Determine Whether Any Portion of the Affiliate-Sharing Provisions of California’s Financial Privacy Act Survive Preemption Under FCRA

Separate articles concerning class action defense cases and issues discuss the Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., which establishes procedures for reporting and challenging information contained in consumer credit reports, Federal courts have described FCRA’s statutory scheme as “comprehensive” and “complex.” In 2003, California enacted the Financial Information Privacy Act, commonly referred to as SB1, California Finance Code, §§ 4050 et seq., which regulates the disclosure by financial institutions doing business in the State of personal consumer information. In 2004, certain financial lending associations filed suit in federal court alleging that certain provisions of SB1 concerning the sharing of information with affiliates are preempted by FCRA. American Bankers Ass’n v. Gould, 412 F.3d 1081 (9th Cir. 2005). The district court granted summary judgment against the Associations, holding that FCRA’s affiliate-sharing provisions did not preempt SB1. Id., at 1085.

The Ninth Circuit reversed. Congress amended FCRA in 2003 in a manner that expanded the preemption clause concerning sharing of information with affiliates: “Requirements with respect to the use by a person of information received from another person related to it by common ownership or affiliated by corporate control, such as the requirements of this section, constitute requirements with respect to the exchange of information among persons affiliated by common ownership or common corporate control, within the meaning of section 1681t(b)(2) of this title.” Gould, at 1085 (quoting § 1681s-3(c) (italics added by court). The Ninth Circuit held that this clause “preempt[s] all state ‘requirement[s]’ and ‘prohibition[s]’ on the communication of ‘information’ between affiliated parties.” Id., at 1086. It further held, however, that the term “information” as used in FCRA “includes only the sort of information described in the definition of ‘consumer report’ in § 1681a(d)(1),” id.; accordingly, it remanded the case to the district court to “determine whether, applying this restricted meaning of ‘information,’ any provision of the affiliate-sharing provisions of SB1 survives preemption,” id., at 1087.

Download PDF file of American Bankers v. Gould