Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—S.D.N.Y.: Fair Credit Reporting Act preempted consumer protection claims in credit reporting dispute, (Mar 25, 2014)

By Jody Coultas, J.D.

A vehicle purchaser’s New Jersey Consumer Fraud Act (CFA) claims were preempted by the Fair Credit Reporting Act (FCRA), the federal district court in New York City has held (Mendy v. JP Morgan Chase & Co., March 24, 2014, Gardephe, P.). The purchaser, a resident of New Jersey, lacked standing to assert New York consumer law claims.

After purchasing a vehicle financed by Chase, the buyer was charged for late payment of sales tax on the vehicle. The parties disputed whether the vehicle was registered late because the purchaser failed to provide the necessary information or whether Chase was solely responsible. The purchaser disputed the charges and refused to pay, leading to Chase reporting the loan balance to credit reporting agencies without mentioning that the balance was in dispute.

The New Jersey CFA applied to the purchaser’s claims rather than the New York General Business Law, according to the court. Given the language of the choice-of-law provision in the parties’ contract, it did not apply to the tort claims. The jurisdiction with the greatest interest in adjudicating a claim is the one in which the injury to the plaintiff is suffered. The purchaser resided in New Jersey and suffered the alleged injury in New Jersey. The purchaser also lacked standing to assert New York GBL claims because consumers do not have standing to assert violations of the consumer fraud statutes in which they do not reside.

The purchaser’s allegations that Chase induced payments with the false promise that there would not be any adverse late payment notation on his account or credit file was preempted, according to the court. The FCRA regulates credit reporting procedures and prohibits knowingly reporting inaccurate information. If a consumer disputes a report, the credit agencies and reporting company must reasonably investigate and verify the information. All of the purchaser’s allegations fell squarely within the subject matter of the FCRA.

The court denied Chase’s motion to dismiss the purchaser’s claim that Chase unlawfully increased the interest rate applied to the loan. The interest rate specified in the parties’ agreement did not fall within the FCRA

The case is No. 12 Civ. 8252 (PGG).

Attorneys: Robert Wilk (Windels Marx Lane & Mittendorf, LLP) for JPMorgan Chase & Co. and Chase Auto Finance Corp.

Companies: JP Morgan Chase & Co.

Cases: StateUnfairTradePractices NewYorkNews