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June 17, 2009

New FCRA case regarding inaccurate credit reporting

A new opinion was released on June 15, 2009 by the United States District Court for the Middle District of Florida. The case is styled Welch v. Target National Bank. District Judge John E. Steele penned the decision. Dianne M. Welch, the Plaintiff in this case, had a Target credit card that was included in her Chapter 7 bankruptcy. The debt to Target was discharged in the Plaintiff's bankruptcy.

Despite the discharge, Target continued to report the discharged debt to the credit bureaus as having a current past due balance of over $6000. Target should have reported the account as "included in bankruptcy" with a $0 balance and no late payment history. Despite numerous disputes, Target refused to correct the way the account was being reported on the Plaintiff's credit reports.

The Plaintiff brought three claims, one under the Fair Credit Reporting Act, one under the Florida Consumer Collection Practices Act and one for violation of the discharge injunction. Target moved to dismiss all three claims.

The Court correctly held that the Plaintiff's FCRA claim should not be dismissed because there is no restriction that only a consumer reporting agency may provide notice of a dispute. It is unclear from the facts what exactly happened as far as the disputes so I am not sure what the Court meant by this statement. Regardless, the Plaintiff's FCRA claim survived.

The Court also correctly held that the Plaintiff's claim under the Florida Consumer Collection Practices Act should survive. Target claimed that the FCRA preempts the Florida Consumer Collection Practices Act. The Court correctly disagreed. While the FCRA does preempt state credit reporting acts (except for the two that are excluded from preemption), the Florida state law at issue governed collection of debts, not credit reporting. Thus, Judge Steele correctly held that the FCRA does not preempt the Florida Consumer Collection Practices Act.

Finally, the Court held that the Plaintiff's claim that Target violated the bankruptcy's discharge injunction against collecting a discharged debt could only be heard in a bankruptcy court, so the Court dismissed this claim.

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