Home > Uncategorized > Is reinserting inaccurate information always a violation of 15 USC 1681e(b)? It shouldn’t be.

Is reinserting inaccurate information always a violation of 15 USC 1681e(b)? It shouldn’t be.

August 19, 2011

The FCRA tells us that consumer reporting agencies must “follow reasonable procedures to assure maximum possible accuracy of the information” in their reports.  15 USC 1681e(b).  In doing a little research on this provision, I noticed that courts have applied it differently to a common fact pattern.

The fact pattern is this:  suppose an agency reports information from an underlying source (say a bank) that turns out to be inaccurate.  The consumer notices the error, disputes it, and the agency agrees with the consumer and removes the inaccurate information.  But a year later, the inaccurate information reappears on the consumer’s report.  Is that an automatic violation of 1681e(b)?

Some courts have suggested that allowing inaccurate information to reappear is, in fact, an automatic violation of 1681e(b).  But at least one court has bucked the trend and held otherwise.  This post is going to try and explain how the “automatic violation” idea took root and why it is mistaken.

The seed of the “automatic violation” idea comes from the case of Morris v. Credit Bureau of Cincinnati, 563 F. Supp. 962 (S.D. Ohio 1983).  In that case, plaintiff Joe T. Morris married Loraine Schreve, who had filed for bankruptcy before the wedding.  When plaintiff tried to borrow money, he was denied because defendant’s credit report included some of his wife’s information and thus indicated that he had filed for bankruptcy.  Plaintiff disputed the bankruptcy, and defendant deleted it.  But later, plaintiff again had a loan denied because his wife’s bankruptcy information reappeared on his credit report.  The data reappeared because the creditor had asked defendant for a credit report about “Joseph T. Morris” (plaintiff had always gone by Joe) with a social security number that included a 9 (plaintiff’s had a 4) who nevertheless lived at plaintiff’s address and shared other characteristics.  This caused defendant to create a completely new credit file, in which it repeated the mistake of including the wife’s bankruptcy information.

Defendant had procedures in place to determine if the completely new credit file resembled any existing files.  If they had worked in this case, the procedures would have noted that the new file resembled plaintiff’s existing file, which contained a note that the bankruptcy information did not belong to plaintiff and shouldn’t appear on his credit reports.  But the procedures didn’t work.  The court held, following a bench trial, that defendant’s procedures were insufficient, and that defendant had negligently violated 15 USC 1681e(b).

The Fifth Circuit later summarized the Morris court’s holding as follows:  “Allowing inaccurate information back onto a credit report after deleting it because it is inaccurate is negligent.”  Stevenson v. TRW, Inc., 987 F.2d 288 (5th Cir. 1993) (citing Morris).  That summarized holding has since been quoted in other court opinions.  See, e.g., Philbin v. Trans Union Corp., 101 F.3d 957 (3d Cir. 1996) (“As other courts have held, ‘allowing inaccurate information back onto a credit report after deleting it because it is inaccurate is negligent'”) (quoting Stevenson).

In this way, the Morris court’s specific finding, on facts presented in a bench trial, that one consumer reporting agency was negligent when it allowed inaccurate data to reappear on one plaintiff’s credit report, has morphed into the holding that if any agency allows any data to reappear on anyone‘s credit report, it is always negligent.

This “automatic violation” theory is problematic because it overstates the underlying decision in Morris, and because it doesn’t make sense in light of other FCRA opinions (which will likely be discussed in a future post) holding that consumer reporting agencies aren’t “strictly liable” for errors in their reports.

The good news for FCRA defendants is that one court ignored the “automatic violation” theory and held, on summary judgment no less, that a defendant which allowed inaccurate information to reappear on a plaintiff’s credit report was nevertheless not negligent under 1681e(b).  Anderson v. Trans Union, 367 F. Supp. 2d 1225 (W.D. Wisc. 2005).

In Anderson, plaintiff had a credit card with a local bank.  When plaintiff’s street was renamed, a bank employee changed the credit card account to reflect the new name and, in doing so, inserted a “flag” which told consumer reporting agencies that plaintiff was deceased.  Plaintiff noted the error on subsequent credit reports, and the agencies used a procedure to ignore the flag with the deceased notation while continuing to report the other information about the account.  But when the bank later converted the credit card from Mastercard to Visa, that change caused the agencies to “see” the flag once again and so to report the plaintiff as deceased.  Plaintiff alleged by allowing the inaccurate data to reappear, the agencies had violated 1681e(b).

The court held otherwise, at least as to Trans Union.  I’m going to quote its opinion at length:

“It is evident that the mistakes that haunted the parties were anomalies and were not the kind of mistakes that a furnisher would make regularly or even frequently. It would be unreasonable to require a consumer reporting agency to develop systems that would catch infrequent and irregular mistakes that furnishers might make. The Act does not impose such requirements. Its goal is to have consumer reports that are fair and accurate; it does not demand perfection from an industry that deals in billions of pieces of information.

“Although courts should not countenance sloppy performance from consumer reporting agencies or tolerate inadequate procedures, they cannot hold consumer reporting agencies responsible for every problem a system can develop, including those that are novel and unanticipated. Doing so would be a misreading of the statutory obligations imposed by the Act.”

I think that Anderson is right and that the Stevenson and Philbin courts’ summarizes of Morris are misleading.  Reinserting inaccurate information into a consumer’s credit report may be a violation of 1681e(b).  Or it might not be.

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