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When a bureau doesn’t fix its file, “no harm, no foul” may not apply.

June 5, 2015 Leave a comment

In last month’s post, I discussed how a consumer can claim that a bureau violated the FCRA by failing to conduct a “reasonable reinvestigation” of a dispute, as required by 15 U.S.C. Sec. 1681i.

This month, I want to discuss an interesting (perhaps!) split of authority on when a consumer can be harmed by a bureau’s failure to conduct a “reasonable reinvestigation” of his dispute.

Up until recently, the law appeared to be that if you disputed something with a credit bureau, and it failed to conduct a “reasonable reinvestigation” and thus failed to resolve the dispute in your favor, then you had only gone part of the way toward making out a viable claim under 1681i.  To get all the way there, you also needed to show that the bureau’s failure to fix its error, in response to your dispute, either caused you actual harm or was so reckless that it entitled you to seek punitive damages.  See Gorman v. Experian Info. Solutions, Inc., 2008 U.S. Dist. LEXIS 94083 (S.D.N.Y. Nov. 19, 2008) (holding that plaintiff had no claim for actual damages, because he failed to prove that any creditors relied on information he unsuccessfully disputed when they allegedly denied him loans, but that he did have a claim for punitive damages, because he gave Experian plenty of reason to uphold his dispute, but it relied on the ACDV process and took the creditor’s word over his).

However, the Eleventh Circuit released an opinion earlier this year which raises questions about whether the law is what I just described it as being.  In Collins v. Experian Info. Solutions, Inc., 775 F.3d 1330 (11th Cir. 2015), the plaintiff showed that after a debt collector sued him in court and lost, he checked his “credit file” and found that the debt was listed there.  He disputed it with Experian – telling it to check the court docket to see that he won the case and thus showed that he didn’t owe any debt – but it relied on the ACDV system and took the debt collector’s word over his.  When the plaintiff sued Experian for failing to check the docket and update his report, the trial court found in favor of Experian, on the ground that the plaintiff hadn’t suffered any actual harm because nobody had ever seen a “consumer report” with the disputed debt on it (remember, he disputed what was in his “credit file” and not what appeared on a “consumer report” based on that file).

The plaintiff appealed this decision, and the Eleventh Circuit reversed the trial court’s ruling:  it stated that “the plain language of the FCRA contains no requirement that the disputed information be published to a third party in order for a consumer to recover actual damages under 1681i.”  Id. at 1335.

 

I can see both sides of this one.  One the one hand, if a consumer has to jump through multiple hoops to get a bureau to correct his “credit file” so that any future consumer reports will be accurate, that seems to be something that he should be able to win damages for – which is what the Eleventh Circuit just said.  On the other hand, there is an age-old rule that many people live by – “no harm, no foul.”  It suggests that if a consumer never gets denied for a loan or otherwise suffers real harm  – if all that he does is correct an entry in a database that nobody other than him and the credit bureau have ever seen – then why should he be able to hit a credit bureau for damages plus costs and attorney fees?  Isn’t that just going to induce plaintiffs’ lawyers to encourage people to dispute entries in their file, so that if they are unsuccessful, the lawyers can sue and reap a reward?

Because this question has two sides, and because only one circuit has as of yet directly addressed it, it will be interesting to see what happens if and when it gets taken up by other judges down the road.

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