Wolfe v. MBNA America Bank
485 F. Supp. 2d 874, 2007 WL 1219612, 2007 U.S. Dist. LEXIS 33940 (2007)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under Tennessee law, a commercial bank owes a duty of care to non-customers to implement reasonable verification methods before issuing a credit card to prevent identity theft. Furthermore, the Fair Credit Reporting Act (FCRA) preempts state common law tort claims related to furnishing credit information unless they allege malice or willful intent (§ 1681h(e)), but does not preempt claims under general state consumer protection statutes that do not directly regulate credit reporting (§ 1681t(b)(l)(F)).
Facts:
- In April 2000, MBNA America Bank received a credit card application in Mark Wolfe's name from a telemarketer, which listed an address where Wolfe had never resided.
- Without attempting to verify the information on the application, MBNA issued a credit card in Wolfe's name to an unauthorized individual at that address.
- The unauthorized individual charged $864 to the account, which had a $500 credit limit, and subsequently made no payments.
- MBNA declared the account delinquent and reported this negative information to various credit reporting agencies.
- In January 2005, Wolfe was denied a job at a bank because of the poor credit score caused by the fraudulent account.
- Wolfe contacted MBNA multiple times to notify them of the identity theft and dispute the fraudulent account, but MBNA failed to investigate or correct the information with the credit reporting agencies.
Procedural Posture:
- Mark Wolfe filed a Fourth Amended Complaint against MBNA America Bank in the U.S. District Court for the Western District of Tennessee, a trial court of first instance.
- The complaint alleged claims under the Tennessee Consumer Protection Act (TCPA), as well as common law claims for negligence, gross negligence, and defamation.
- MBNA America Bank filed a Motion to Dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).
- MBNA argued it had no common law duty to verify applications and that Wolfe's claims were preempted by the Fair Credit Reporting Act (FCRA).
- The District Court considered MBNA's motion to dismiss.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a commercial bank, under Tennessee common law, owe a duty of care to a non-customer to verify the authenticity and accuracy of a credit card application before issuing a credit card in that non-customer's name?
Opinions:
Majority - Donald, District Judge.
Yes. A commercial bank owes a duty to non-customers to use reasonable verification methods before issuing a credit card because the harm caused by identity theft is foreseeable and preventable. The court rejected the reasoning of other jurisdictions that found the relationship between a bank and a non-customer identity theft victim too attenuated. Given the rise in identity theft, banks are a crucial line of defense and must implement reasonable and cost-effective verification procedures. The court further held that Wolfe's state law claims related to MBNA's reporting of the delinquent account were subject to preemption analysis under the Fair Credit Reporting Act (FCRA). Adopting the 'statutory approach,' the court ruled that: (1) Wolfe's negligence claim for reporting the debt was preempted by FCRA § 1681h(e) because a negligence claim cannot, by definition, meet the required showing of 'malice or willful intent to injure.' (2) Wolfe's libel claim survived preemption under § 1681h(e) because his allegation that MBNA acted 'recklessly' sufficiently pled the required malice. (3) Wolfe's claim under the Tennessee Consumer Protection Act (TCPA) was not preempted by FCRA § 1681t(b)(l)(F) because the TCPA is a law of general applicability and does not directly regulate the furnishing of credit information.
Analysis:
This decision is significant for establishing a common law duty for financial institutions in Tennessee to protect non-customers from the foreseeable harm of identity theft by verifying credit applications, a position not universally adopted in other jurisdictions. It also provides a clear analytical framework for navigating the complex preemption provisions of the Fair Credit Reporting Act (FCRA). By adopting the 'statutory approach,' the court clarifies the distinct roles of § 1681h(e) for common law torts and § 1681t(b)(l)(F) for state statutory claims, preserving state-level consumer protection remedies while upholding the FCRA's specific rules for claims like defamation and negligence against credit information furnishers.
