Home > Uncategorized > Can procedures be reasonable as a matter of law?

Can procedures be reasonable as a matter of law?

September 9, 2011

As regular readers know – because I’ve been saying it in every post for the past few weeks – the FCRA requires consumer reporting agencies to follow “reasonable procedures to assure maximum possible accuracy” of the information in their reports.  If a plaintiff comes forward with a report that is inaccurate in some way, the court must decide whether the agency followed “reasonable procedures” or not.  If the agency did follow reasonable procedures, then it isn’t liable, because – as we’ve noted before – the FCRA doesn’t make agencies strictly liable for inaccuracies.  However, if the agency didn’t follow reasonable procedures, then it is liable for damages caused by an inaccuracy.

All this begs the question of what makes a procedure “reasonable.”  It is now very well established that “The issue of whether the agency failed to follow “reasonable procedures” will be a “jury question[] in the overwhelming majority of cases.”  Dalton v. Capital Assoc. Indus., Inc., 257 F.3d 409, 416 (4th Cir. 2001) (citations omitted).  Judges don’t want to decide what’s reasonable; they’d rather let juries do that.

However, there are some occasions when a judge will decide that an agency’s procedure is reasonable as a matter of law – i.e., it is so obviously reasonable that it would be a waste of time to ask a jury whether it’s reasonable.  I thought I’d take a look at case law to see how many times a judge has done this.  My conclusion, based on an extensive but not necessarily comprehensive search:  it hasn’t happened often, and when it has, it happened in the Seventh Circuit (i.e., a federal court sitting in Illinois, Indiana, or Wisconsin).

In Henson v. CSC Credit Servs., 29 F.3d 280 (7th Cir. 1994), Greg Henson borrowed money to buy a Camaro, and then his brother Jeff Henson borrowed money to buy the car from Greg, which he did by paying off Greg’s loan.  After the Camaro was stolen, Jeff stopped making payments to his lender, who eventually repossessed the car and successfully sued Jeff for the balance of his loan.  In recording the lender’s judgment against Jeff, the court clerk made a mistake and said that the lender’s judgment was against Jeff and Greg.  Greg later sued a consumer reporting agency for reporting that he (Greg) was liable for this judgment.  The court found that the agency had simply relied on what the court docket said, which was a reasonable procedure under the circumstances.  Therefore, the agency’s reliance on the court docket was reasonable as a matter of law.  Id. at 285-86.

In Crabill v. Trans Union, L.L.C., 259 F.3d 662 (7th Cir. 2001), plaintiff Jerry Crabill had a brother named John Crabill, and their social security numbers differed only by one digit.  After numerous mix-ups in which a creditor who asked for one brother’s report received the other’s, Trans Union adopted the procedure of sending BOTH reports to creditors who asked for Jerry’s, with the note that Jerry’s should not be confused with John’s.  The court found that this procedure was reasonable, and Judge Richard Posner explained that decision as follows:  “Trans Union defends its program, pointing out that two files with similar though not identical identifying data may actually be referring to the same person, the differences in data being the result of errors in data collection or compilation, and so it was useful for creditors to have both Crabills’ files and make their own judgment of whether they were different persons. We think this is right, and that the statutory duty to maintain reasonable procedures to avoid inaccuracy does not require a credit agency to disregard the possibility that similar files refer to the same person.”

In Quinn v. Experian Solutions, No. 02 C 5908, 2004 U.S. Dist. LEXIS 4812 (N.D. Ill. Mar. 24, 2004), plaintiff alleged that Experian violated 1681e(b) by reporting a Wal-Mart account that did not belong to him.  Experian moved for summary judgment and argued that it acted reasonably by reporting account information that Wal-Mart furnished to it.  The judge granted Experian’s motion for summary judgment because “Quinn has not presented evidence that Wal-Mart is an unreliable source of information.”  Id. at *10.  In other words, it was reasonable, as a matter of law, for Experian to report specific information from Wal-Mart unless Experian was on notice that the specific information was inaccurate or that Wal-Mart’s information was generally not reliable.

In Anderson v. Trans Union, LLC, 367 F. Supp. 2d 1225 (W.D. Wisc. 2005), a case we discussed a few weeks ago, plaintiffs were listed as deceased due to mistakes that their bank made in coding their credit card account after:  1) the name of their street changed; and 2) the card provider changed from MasterCard to Visa.  The judge granted an agency’s motion for summary judgment, finding that the bank’s information was normally reliable and that the agency had done everything possible to account for the possibility that some information was not:

“Defendant has procedures in place to check the accuracy of the information their furnishers send it; it conducts training sessions for its furnishers when they become subscribers; it audits the furnishers routinely; and it has triggers to warn of unusual numbers of complaints or a higher than expected number of “conditions” showing up on the furnishers’ reports, as bankruptcy proceedings, Despite these procedures, Cross Country Bank’s error made its way into defendant’s system and defied both the bank’s and defendant’s efforts to eliminate it. That it did so was unfortunate for plaintiffs, who had to deal with the error on their credit report, but in and of itself, it is not evidence that defendant’s procedures were unreasonable.”

Id. at 1237.

In summary, agencies whose reports contain inaccurate information will generally not be able to convince a court that their procedures are reasonable as a matter of law, such that they aren’t liable for damages caused by the inaccuracy.  But agencies have been able to convince courts in the Seventh Circuit that a few procedures are reasonable as a matter of law.  They are:

1.  Relying on court docket summaries in the absence of information to the contrary;

2.  Relying on account information from a generally reliable source (e.g., Wal-Mart) in the absence of information to the contrary;

3.  Relying on procedures that preclude the vast majority of errors but allow unprecedented (and therefore hard-to-detect) errors to occur; and

4.  Relying on novel procedures for relatives with extremely similar names and social security numbers.

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