North Carolina Senate Introduces Bill to Provide Private Rights of Action for Inaccurate Credit Reporting

The North Carolina Senate has introduced a bill which will create a private right of action for inaccurate credit reporting. Senate Bill 357 proposes to include new provisions to both Chapters 58 and 75.  The proposed bill will provide a private right of action to consumers when a creditor, collection agency, or debt buyer fails to correct inaccurate information in a credit report after receiving notice of a dispute directly from a consumer.  The bill provides two provisions, one directed to those collecting debt on their own behalf and one directed to collection agencies and debt buyers. 

The Bill proposes amendments to Article 2 of Chapter 75 (the “North Carolina Debt Collection Act”) and Article 70 of Chapter 58.  It provides as follows:

§75-57. Duty to correct incorrect information reported to credit reporting agencies.

A debt collector shall have a duty to verify the accuracy of, and to correct any incorrect information in, any report made by the debt collector to a credit reporting agency upon notification by a consumer that the information is incorrect. Failure to comply with this section within 60 days of receipt of written notification from a consumer that the debt collector has included inaccurate information in a report to a credit reporting agency shall be an unfair and deceptive trade practice under G.S. §75-1.1.

§58-70-170. Duty to correct incorrect information reported to credit reporting agencies.

A collection agency shall have a duty to verify the accuracy of, and to correct any incorrect information in, any report made by the collection agency to a credit reporting agency upon notification by a debtor that the information is incorrect. Failure to comply with this section within 60 days of receipt of written notification from a debtor that the collection agency has included inaccurate information in a report to a credit reporting agency shall be an unfair and deceptive trade practice under G.S. 75-1.1.

The federal Fair Credit Reporting Act likewise requires that data furnishers provide correct information to credit reporting agencies and correct inaccurate information. It, however, does not provide a private right of action when the consumer directly disputes inaccurate or incomplete information with the data furnisher.  See 15 U.S.C. §1681s-2(a)(2) and (c)(1).  Directly in conflict with the FCRA, the proposed North Carolina legislation appears to provide a private right of action under those circumstances.

Analysis of proposed N.C.G.S. §75-57 and its Impact on Original Credit Furnishers:

In its simplest terms, Article 2 of Chapter 75 applies to creditors collecting consumer debts on their own behalf.   See N.C.G.S. §75-50.  Article 2 of Chapter 75 provides consumers with a private right of action and provides for the recovery of actual damages and statutory civil penalties of $500-$4,000 per violation.  If passed, Section 57 will provide a private right of action in instances where a consumer directly disputes an item on its credit report with the creditor/furnisher.  The provision is problematic because: (a) it provides no guidance as to what would constitute a reasonable investigation; (b) it provides no definition or fleshing out of what constitutes “notice” by the consumer; and (c) it ignores the reality that, while credit furnishers may request information on a credit report be updated, the credit reporting agencies themselves are the only entities that can correct the credit report.  Proposed Section 57 would apply to banks, credit card companies, finance companies and other creditors who furnish information to credit reporting agencies regarding consumers.

Analysis of proposed N.C.G.S. §58-70-170 and its Impact on Collection Agencies and Debt Buyers:

The implications for collection agencies and debt buyers are largely the same as set forth above. Adding to those issues, however, the bill is unclear as to whether there is a private right of action and if so, the measure of damages.  In its current form, Article 70 only addresses liability and private rights of action for violations of Part 3 of Article 70.  As drafted, proposed N.C.G.S. §58-70-170 is added as Part 6 of Article 70.  As there is no provision in existing Article 70 which will address the measure of damages, the proposed provision leaves open the measure of damages, as well as whether or not a private right of action is even available.

Adding to these concerns is the question of whether this legislation is preempted by the FCRA.  We strongly suggest this is the case.  The FCRA expressly provides that “[n]o requirement or prohibition may be imposed under the laws of any State with respect to any subject matter regulated under section 1681s-2…of this title, relating to the responsibilities of persons who furnish information to consumer reporting agencies” except for states which previously received a carve out (specifically, Massachusetts and California).  15 U.S.C. §1681t (b)(1)(F);  see also Ross v. Fed. Deposit Ins. Corp., 625 F.3d 808, 812 (4th Cir. 2010).   The proposed bill is directly in conflict with this provision.

The Bill’s primary sponsor is Stan Bingham, representing District 33.  The Bill has bi-partisan support from Senators Brent Jackson, Michael V. Lee, Gladys A. Robinson and Joyce Waddell.  The Bill passed its first reading on March 24, 2015 and has been referred to committee.  If passed, the legislation will take effect October 1, 2015.