District Court (Cal.) Says that Consumer’s CCRAA Claim Might Arise under Section 1785.25(a) Instead of Section 1785.25(e) and, Therefore, Would Not Be Pre-empted

In her complaint, Espinoza alleges that Merrick violated § 1785.25(a). See Compl. ¶ 51. Thus, on the face of her complaint, Espinoza’s CCRAA claim is not preempted by the FCRA. See U.S.C. § 1685t(b)(1)(F). Merrick, however, argues that Espinoza’s CCRAA claim is really a claim under § 1785.25(e), which is not saved from FCRA preemption. See Dkt. No. 50 at 10–12. Section 1785.25(e) provides that:

Cal. Civ. Code § 1785.25(e). Merrick argues that the allegedly inaccurate reporting was obligated by § 1785.25(e), not § 1785.25(a), because the date of Espinoza’s last payment is the “approximate commencement date of the delinquency which gave rise to” its collection attempt in state court. Id. Thus, according to Merrick, Espinoza’s CCRAA claim arises under § 1785.25(e) and is preempted.  The Court is not convinced by Merrick’s argument. Section 1785.25(e) is narrow. It only governs a person’s reporting obligations when that person furnishes information in connection with “plac[ing] a delinquent account for collection [or] charg[ing] the delinquent account to profit or loss.” Id. It does not govern a creditor’s reporting obligations at any other time. Indeed, § 1785.25(e) expressly acknowledges that a furnisher of information does not need to report the delinquency date if “that date was previously reported ….” Id. On the other hand, § 1785.25(a) has a much broader reach. It generally prohibits furnishing information to a consumer reporting agency that is “incomplete or inaccurate” in any context not specifically addressed by another section. See Cal. Civ. Code § 1785.25(a).  Put another way, a furnisher of information violates § 1785.25(e) only when it reports inaccurate information about the commencement date of a delinquency in connection with a report that it has placed a delinquent account for collection or charged that account to profit or loss. See Cal. Civ. Code § 1785.25(e). Reporting inaccurate information about the commencement date of a delinquency at any other time is simply beyond the reach of § 1785.25(e).  For example, if Merrick inaccurately reported Espinoza’s last payment date to Equifax or TransUnion on June 24, 2017—the day after it placed her account for collection (see Compl. ¶ 22)—Merrick’s inaccurate reporting would be a violation of § 1785.25(e). On the other hand, if Merrick reported Espinoza’s last payment date to Equifax or TransUnion on August 3, 2013, that reporting would not be governed by § 1785.25(e), because the information was not “include[d]” with “information … regarding” placing an account for collection or charging the account to profit or loss. Id.  Espinoza’s complaint does not make clear when Merrick reported the allegedly inaccurate information to the consumer reporting agencies. In Exhibit 2 to her complaint, the delinquency is listed as reported to the consumer reporting agencies on July 13, 2017. See Dkt. No. 1-2 at 2 (excerpts from Espinoza’s Equifax and TransUnion credit reports). This report is subsequent to Merrick placing her account for collection. Thus, this report is likely governed by § 1785.25(e) and therefore preempted by the FCRA. However, in paragraph 53 of her complaint, Espinoza vaguely alleges that Merrick violated its CCRAA obligations “numerous times by furnishing inaccurate information regarding the date of the last payment made ….” See Compl. ¶ 53. If one of those times was prior to Merrick placing the account for collection, Espinoza’s claim would be governed by § 1785.25(a) and is not preempted by the FCRA. The burden of establishing preemption, however, lies with Merrick. See Jimeno, 66 F.3d at 1526 n.6. Because Merrick has not shown that Espinoza’s CCRAA claim is preempted, the Court DENIES Merrick’s motion to dismiss.