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Reseller liability: series summary

October 3, 2014 1 comment

Beginning in April, this blog has posted a series on “resellers,” which are companies that obtain data from the three credit bureaus (Experian, Equifax, and Trans Union), and merge it into a single “tri-merge” report for use by a client, typically a mortgage lender or auto lender.  A typical tri-merge report will contain at least some inconsistencies – e.g., one bureau may report that X lived in Wisconsin whereas the other two bureaus may report that X only lived in California; or two bureaus may report that Y filed for bankruptcy in 2011 whereas the other bureau may not.  The question we’ve been addressing is this:  if a reseller simply reports what each bureau is telling it, without making any effort to reconcile inconsistencies of this type, has it violated 15 USC 1681e(b), which requires consumer reporting agencies to “follow reasonable procedures to assure maximum possible accuracy of the information” in its reports?

In this series, I have reviewed six (6) court opinions that addressed this question:  Perez; Stublaski; Dively; Waterman; Willoughby; and Starkey.  None of them are published decisions, and all of them were by trial courts as opposed to courts of appeals.  For both reasons, none of them are “precedential,” or binding on other courts.  However, they nevertheless give some insight into how courts are looking at this question.

The first thing we see is that the courts have, so far, favored plaintiffs and not resellers: of the six opinions, five of them refused to grant a reseller’s motion to dismiss or motion for summary judgment on a plaintiff’s claim.

The second thing we see is that the unsuccessful resellers have made some common “mistakes,” that is, they have each made one or two of the same arguments, which multiple courts have found unpersuasive.  These arguments are:

1.  In Waterman and Willoughby, the reseller defendants argued that a reseller is not bound by the “reasonable procedures” duty at 1681e(b); a reseller is only bound by the more limited duty at 1681e(e).  The courts have rejected this argument, and rightly so:  a reseller is by definition a “consumer reporting agency” (1681a(u)); and 1681e(b) applies to consumer reporting agencies, so 1681e(b) applies to resellers.

2.  In Perez, Dively, and Starkey, and to a lesser extent in Waterman, the reseller defendants argued that they should be permitted to rely on the data that they receive from each of the three bureaus.  There is some precedent for this – in Henson v. CSC Credit Servs., 29 F.3d 280 (7th Cir. 1994), a court of appeals said that a credit bureau can report what a court docket is saying about a court case, without actually pulling and reading the underlying court files to confirm things.  But there are some obvious differences between a bureau’s decision to rely on a court docket, and a reseller’s decision to rely on the credit bureaus:  for example, court dockets are widely considered to be accurate, whereas news reports suggest that most bureau reports have at least some inaccuracies; and there is typically only one court docket which says, without contradiction, what happened in a lawsuit, whereas there are three bureaus and (as we’ve seen) they don’t often all report the exact same things.  When a reseller poses the question under 1681e(b) like this – “can I rely on a bureau report without doing anything more; even if the bureaus are saying different things” – the courts have been unwilling to say “yes.”

I have some ideas on how a bureau should ask a court to dismiss one of these claims under 1681e(b) against it.  I used some of them in Stublaski, and I may use those and others in future cases.  I don’t for a minute believe that the question at issue here is settled; it won’t be until multiple courts of appeal, each having had the benefit of better arguments than the two bad ones just listed here, decide the question.

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Categories: 1681e(b), reseller