• Plaintiff’s DTPA Claim is Preempted by the FCRA
  • October 19, 2010 | Author: Jennifer Elizabeth Hawkinson
  • Law Firm: Strasburger & Price, LLP - Frisco Office
  • Garza v. Sallie Mae, Inc., 2010 U.S. Dist. LEXIS 99750 (W.D. Tex. Sept. 21, 2010)

    Facts: Plaintiff filed a complaint against Sallie Mae alleging violations of chapter 392 of the Texas Finance Code (“TFC”), the Deceptive Trade Practices Act (“DTPA”), the FCRA, and breach of contract. Plaintiff was a co-signer for his brother and niece’s student loans. After the commencement of payments, Plaintiff’s brother passed away near Christmas in 2008.  Plaintiff promptly notified Defendant of his death and Defendant agreed to discharge the loan after Plaintiff provided documentation of the death. Plaintiff submitted a death certificate to Defendant in January 2009. After receipt of the death certificate, Defendant began to negatively report the account as overdue. Despite Plaintiff’s numerous disputes, Defendant continued to negatively report the account to all three consumer reporting agencies (“CRA”) until March 2010. Defendant moved for partial dismissal under 12(b)(6) asserting that the claims for violations of the TFC, DTPA, and breach of contract should be dismissed for failure to state a claimThe Court granted Defendant’s motion in part and dismissed Plaintiff’s TFC and DTPA claim and denied Defendant’s motion as to Plaintiff’s breach of contract claim.

    • Preemption. Plaintiff asserted a DTPA claim based on his TFC claim because the Texas Debt Collection Act is a tie-in statute. Defendant asserted that Plaintiff’s DTPA claim was preempted because it was based on the operative facts setting forth a claim for a violation of the FCRA. The Court analyzed the split in authority concerning the preemptive effect of the FCRA noting that neither the Fifth Circuit nor the Supreme Court has addressed this issue. One methodology adopted by some courts applies § 1681h(e) to the preemption of torts and § 1681t(b)(1)(F) to state statutory regulations. While another subset of courts has taken a temporal approach holding that a furnisher’s duties under § 1681s-2(b) arise only after receipt of notice of a dispute from a CRA and therefore, only state law causes of action arising after the notice is received are preempted by the FCRA.  The Court found that because § 1681t(b)(1)(F) does not differentiate between § 1681s-2(a) and (b) and Plaintiff’s DTPA claim imposes requirements and prohibitions that relate to the subject matter of § 1681s-2, his DTPA claim is expressly preempted by § 1681t(b)(1)(F).
    • Debt Collection. Plaintiff asserted that Defendant violated § 395.301(a)(8),which prohibits the use of threats or coercion; and § 392.304(a)(19), which prohibits the use of any false representation or deceptive means to collect a debt or obtain information concerning a consumer. Defendant argued that Plaintiff failed to present any evidence of Defendant’s attempt to collect a debt, let alone collect a debt through threatening, fraudulent, or coercing means. To prevail under the Texas Debt Collection Act, Plaintiff must prove that Defendant was a debt collector. Due to Plaintiff’s total failure to allege that Defendant was a debt collector under the TFC, the Court dismissed his TFC claim.
    • Breach of Contract. The elements of a breach-of-contract claim include: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach. The Court found that Plaintiff raised factual allegations in his Complaint sufficient to sustain his breach of contract claim and denied Defendant’s motion to dismiss.