Credit Reporting Statute of Limitations for Bad Credit

State Peculiarities and Preemption

Although some states may offer consumers greater protection than that afforded by the FCRA, federal law preempts state law for the following types of subject matter:¹⁹

• Relating to the creation and use of prescreened reports.²⁰
• Relating to the users of prescreened reports, limited to the duties of creditors and insurance companies that use reports for solicitations of such, where the consumer didn’t initiate the transaction and involve a firm offer.²¹
• Relating to the time requirements in which an agency must respond to consumer disputes and reinvestigations, including notices.

This does not apply to states that had laws in effect prior to September 30, 1996.²² Any laws enacted after that are preempted.²³

Relating to the duties of persons who take adverse actions against consumers based on reports or information provided by third parties (not credit reporting agencies).²⁴

• Relating to subject matter of FCRA § 605 (§ 1681c), contents of consumer reports, e.g., obsolescence standards, reports of account closings, and those transactions not covered due to the size or amount (seven-year rule exemptions listed earlier). This doesn’t apply to states that had laws in effect prior to September 30, 1996. Any laws enacted after that are preempted.²⁵
• Relating to furnishers of information; preemption rules for all states except Massachusetts and California. Massachusetts requires furnishers to report voluntary account closures and must include consumer disputes and commencement dates of any delinquencies when reporting them. Though California requires creditors to notify the consumer before reporting adverse information to a reporting agency,²⁶ this now includes all states under FACTA.²⁷
• Relating to affiliate sharing of information. Vermont is not preempted in this regard.²⁸
• The summary of consumer rights that must be provided to consumers by credit reporting agencies,²⁹ and under FACTA:

- The obligation for a business to provide identity theft victims with transaction information upon request.³⁰
- The right to opt out of certain types of solicitations.³¹
- The requirement for users to disclose to credit applicants when they are offering credit on “material terms
that are materially less favorable” than what’s offered to other consumers.³²

Many states have laws on the books regarding furnishing to bureaus that were enacted after September 30, 1996. Such laws are all arguably preempted by federal law. Examples are state laws that require cosigners to be notified before adverse information is reported, such as in Illinois and Michigan. A Utah law requires notification to consumers before adverse information is reported to a bureau, just like California, but it came after 1996. Colorado requires furnishers to use SSNs when reporting information (to prevent or mitigate file mergers), yet this too is preempted. Other states have laws concerning furnishing by public agencies to bureaus regarding child support, and those laws are also preempted.³³

The NCLC’s Fair Credit Reporting manual states that the preemption laws are broad, and their reach goes beyond state FCRA laws, extending to state laws in general. However, the preemptions are temporary to a point, since as of January 2004 states can enact new laws that give consumers greater protection. Those will not be superseded.³⁴

In addition to subject matter preemption, FACTA added “conduct required by” preemptions as well. This includes the free annual report provision, the blocking of accounts based on identity theft, obligations of merchants to truncate credit and debit card numbers, fraud alerts, military alerts, and more. They can be found in FCRA § 625(b) and 15 U.S.C. § 1681t. Furthermore, FACTA added other preemptions, such as those regarding summary of rights to obtain reports and scores, fraud victim disclosures, and required disclosure of credit scores by lenders and bureaus.

1. FTC Official Staff Commentary § 605 item 4.
2. Trans Union Credit Info. Co., 102 FTC 1109; 1983; consent order.
3. 15 U.S.C. § 1681c(a)(1).
4. 15 U.S.C. § 1681c(a)(2). See also Beaver v. TRW Corp., 1988 WL 123636 (W.D.N.Y. 1988) (a satisfied judgment less than seven years may be reported); Mulkey v. Credit Bureau, Inc., [1980-1989 Decision Transfer Binder], Consumer Cred. Guide (CCH) k 96,739 (D.D.C. Feb. 18, 1983), aff'd, 729 F.2d 863 (D.C. Cir. 1984).
5. FTC Official Staff Commentary § 605(a)(2) item 2. Cf. Grays v. TransUnion Credit Info. Co., 759 F. Supp. 390 (N.D. Ohio 1990).
6. 15 U.S.C. § 1681c(a)(3).
7. FTC Official Staff Commentary § 605(a)(3) item 1.
8. 15 U.S.C. § 1681s-1. Since January 1, 2004, states are able to legislate when they can require child support agencies to provide this information to credit reporting agencies, and the notification requirements to the debtor in the event such information is furnished.
9. 15 U.S.C. § 1681c was amended in 1998 to exempt indictments and convictions of crimes from the seven year limit, retroactive to September 30, 1997.
10. 15 U.S.C. § 1681b (c)(3).
11. 20 U.S.C. § 1080a, as amended by Pub. Law 102-325, § 424, 106, Stat. 543 (July 23, 1992).
12. The Higher Education Act of 1965, section 430(a)(f); NCLC Fair Credit Reporting § 8.3.9 (5th ed. 2002 and 2005 Supp.). Special thanks to the NCLC for making the statute intelligible. See Chapter 10 for special methods on how to fix bad credit student loan entries.
13. FTC Official Staff Commentary § 605 item 5.
14. FTC Official Staff Commentary § 605 item 6.
15. NCLC Fair Credit Reporting § 8.2 (5th ed. 2002 and 2005 Supp.).
16. The Supremacy Clause, Article VI: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”
17. 15 U.S.C. § 1681c(a)(4). Student loans are exempt, as well as the exemptions listed above. Check with an attorney.
18. 15 U.S.C. § 1681s-2(a).
19. Does not apply to business credit reports or business insurance reports. NCLC Fair Credit Reporting § 10.4.4 (5th ed. 2002 and 2005 Supp.).
20. 15 U.S.C. § 1681t(b)(1)(A). See 15 U.S.C. §§ 1681b(c), (e). Kennedy v. Chase Manhattan Bank, 2003 WL 21181427 (E.D. La. May 19, 2003).
21. 15 U.S.C. § 1681t(b)(1)(D); § 1681m(d).
22. The following states prohibit a 15-day extension to perform reinvestigations: Arizona, Maryland, Massachusetts, Nevada, New Hampshire, Rhode Island, Vermont, and Washington. Maine has a 21-day cap to perform reinvestigations and immediate notification that a dispute is deemed frivolous. Maryland requires notification within seven days if information is considered accurate or inaccurate and seven days if determined to be frivolous. Texas requires items disputed and found inaccurate or incomplete investigations to be corrected within five business days; it also requires that consumers receive notice if there is insufficient time to conduct a reinvestigation within 30 days. Washington and California permit reinvestigations to be completed within 30 business days, though the FCRA cap of 30 days should trump any state laws that offer less consumer protection.
23. 15 U.S.C. § 1681t(b)(1)(B); § 1681i.
24. 15 U.S.C. § 1681t(b)(1)(C); §§ 1681m(a), (b).
25. 15 U.S.C. § 1681t(b)(1)(E). See 15 U.S.C. § 1681c.
26. Some California laws are preempted, while others are not. Even though the California law that prohibits reporting of information the furnisher “knows or should know” is inaccurate is not preempted, “the California law providing for a private right of action to enforce the prohibition is preempted” (Lin v. Universal Card Services Corp., 238 F. Supp. 2d 1147 [N.D. Cal. 2002]). See also Riley v. General Motors Acceptance Corp., 226 F. Supp. 2d 1316 (S.D. Ala. 2002) (cannot assert state law claims for violation of § 1681s-2(a)); NCLC Fair Credit Reporting § 10.4.4 (5th ed. 2002 and 2005 Supp.).
27. 15 U.S.C. § 1681s-2(a)(7)(A)(i), “If any financial institution that extends credit and regularly and in the ordinary course of business furnishes information to a consumer reporting agency described in section 603(p) furnishes negative information to such an agency regarding credit extended to a customer, the financial institution shall provide a notice of such furnishing of negative information, in writing, to the customer.” 15 U.S.C. § 1681s-2(a)(7)(B)(i), “The notice required under subparagraph (A) shall be provided to the customer prior to, or no later than 30 days after, furnishing the negative information to a consumer reporting agency described in section 603(p).”
28. 15 U.S.C. § 1681t(b)(2). See 15 U.S.C. § 1681a(d); NCLC Fair Credit Reporting § 2.4.2 (5th ed. 2002 and 2005 Supp.). The Vermont law is referred to as § (a) and (c)(1) of § 2480e of title 9, Vermont Statute Annotated; Bank of Am., N.A. v. City of Daly City, Cal., 279 F. Supp. 2d 1118 (N.D. Cal. 2003) (preempting information-sharing ordinance).
29. 15 U.S.C. § 1681t(b)(3). See, e.g., Connecticut (possibly as relates to summary of federal rights). See 15 U.S.C. § 1681g(c).
30. 15 U.S.C. § 1681g(e), added by Pub. L. No. 108-159, § 151 (2003). See also NCLC Fair Credit Reporting § 16.6.1a.1.2 (5th ed. 2002 and 2005 Supp.).
31. 15 U.S.C. § 1681t(b)(3) (citing § 1681g(c)). See also NCLC Fair Credit Reporting § 16.6.1a (5th ed. 2002 and 2005 Supp.).
32. 15 U.S.C. § 1682t(b)(1)(H), added by Pub. L. No. 108-159, § 214d(2)(B) (2003). See also NCLC Fair Credit Reporting § 16.6.1a (5th ed. 2002 and 2005 Supp.).
33. Connecticut, Georgia, Hawaii, Kansas, Michigan, Missouri, Montana, New Jersey, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, West Virginia, and Wisconsin. See NCLC Fair Credit Reporting §§ 10.4.4, 13.2.8.4 (5th ed. 2002 and 2005 Supp.).
34. 15 U.S.C. § 1681t(d).