Archive for May, 2014

Reseller Liability, Part II: District of Minnesota grants reseller’s motion to dismiss

May 2, 2014 1 comment

As I explained last month, this blog is doing a series of posts about cases that discuss whether a reseller, whose reports contain inconsistent information from the three credit bureaus about the same person (e.g., one bureau says he went bankrupt and the other two don’t), has violated its duty to “follow reasonable procedures to assure maximum possible accuracy.”  15 USC Sec. 1681e(b).

The second case in the series is Stublaski v. RELS, Case No. 0:09-cv-01635-PAM-JJK, slip op. at ECF No. 28 (D. Minn. 2009).  Plaintiff Stublaski applied for a mortgage from Wells Fargo, which obtained a tri-merge credit report about her from RELS.  That report showed that Experian was reporting a great deal of negative credit information about her which the other two bureaus were not reporting.  She disputed the information with Experian and got it corrected, and then sued both Experian and RELS for failing to use “reasonable procedures” as required by the FCRA.

RELS moved to dismiss, arguing that as a reseller, it was not responsible for reconciling inconsistent information from the three bureaus, but rather was only required to accurately report what each bureau was saying about Plaintiff (which it did).  Careful to avoid the mistake in Perez, which we discussed last month, RELS did not argue that the bureau reports were inherently reliable and that RELS was therefore justified in taking them at face value.  Rather, RELS argued that resellers, which by definition don’t have a database of credit information that they can check for accuracy, are simply not in a position to do what plaintiffs like Stublaski want them to do (i.e., to compare information from the three bureaus and decide that some of it is wrong).  RELS noted that the FCRA recognizes this at 15 USC Sec. 1681i(f), which governs what a credit reporting agency must do when a consumer disputes information in a report.  If a consumer contacts a reseller and disputes information, the reseller is not required to correct the information itself (again, it has no database, so it can’t); rather, the reseller is simply required to tell the bureau which gave it the disputed information, and the bureau is then required to do an investigation and correct the report if need be.

The District of Minnesota accepted this argument and granted RELS’ motion to dismiss.  It stated:

[Plaintiff] asks the Court to infer that RELS did not follow reasonable procedures from the
fact that the March 2009 report contained information that RELS knew was inaccurate.
The FCRA is not a strict liability statute, however, and a violation of § 1681e(b)
requires more than Stublaski has alleged here …. The duties Stublaski
attempts to impose on RELS under § 1681e(b) are simply not supported by the FCRA.
Absent some allegation that RELS inaccurately reported the information given to it by
Experian, Stublaski has failed to make out a claim under § 1681e(b).

This is not a published opinion, and it is not precedential.  But it suggests that at least one court has found that the common theory in all recent 1681e(b) cases against resellers – which is that resellers must review and reconcile inconsistent information that they receive from the three bureaus before reporting any of it to a mortgage lender or other creditor – is not supported by the FCRA, given its definition of resellers at 15 USC 1681a(u) and its special treatment of them at 1681i(f).

Again, full disclosure: I represented the reseller defendants in Perez and in Stublaski.

Categories: 1681e(b), reseller