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If a credit bureau relies on the ACDV process, can a consumer win punitive damages? Maybe.

July 3, 2015 Leave a comment

Last month, I discussed a difference of opinion between a New York trial court and a Southern appellate court, on the issue of whether a plaintiff who didn’t suffer any actual damages can sue a credit bureau under 15 U.S.C. Sec. 1681i.  This month, I write to call your attention to yet another (potentially) interesting difference between these two cases.

This month, the question before us is whether a bureau, when it gets a dispute from a consumer who explains in some detail why the bureau has incorrectly reported some aspect of his credit history, acts recklessly insofar as it relies on the ACDV process – that is, is it a reckless violation of 1681i for the bureau to simply send a summary of the dispute to the creditor and then take its word over the consumer’s for whatever the status of the debt might be?  Put differently, if Jack Stack tells Experian that he doesn’t have the Capital One account that is listed in an Experian report or disclosure, because Stack’s wife opened the account and he never signed off on it, and if Experian’s response is to send Capital One an ACDV and then report whatever Capital One tells it to report – has Experian violated 1681i in such a reckless way that Experian can be asked to pay punitive damages?

The two courts that we looked at last month answered this question in two different ways.  A New York trial court held that when a consumer makes a detailed dispute, and the credit bureau relies solely on the ACDV process to respond to that dispute, then there is enough evidence for a jury to find that the bureau recklessly violated 1681i, such that it could be liable for punitive damages.  Gorman v. Experian Info. Solutions, Inc., 2008 U.S. Dist. LEXIS 94083 (S.D.N.Y. Nov. 18, 2008).  However, the Eleventh Circuit Court of Appeals recently went the other way, by holding that when a consumer submitted a detailed dispute of the information in his credit file, and the bureau relied solely on the ACDV process, this was NOT a reckless violation of 1681i.  Collins v. Experian Info. Solutions, Inc., 775 F.3d 1330, 1336 (11th Cir. 2015) (“Taking no steps other than contacting only Equable with an ACDV form regarding the disputed entry might have been negligent, but willfulness or recklessness is a higher standard that has not been met in this case”).

This is the kind of disagreement that keeps lawyers like me busy.  The Gorman court appears to think that because the ACDV process involves “merely parroting” whatever a creditor says is true – conduct which was condemned by the Third Circuit in Cushman v. Trans Union Corp., 115 F.3d 220, 225 (3d Cir. 1997) – then a bureau which continues to use the ACDV process, almost two decades after Cushman, is acting reckless enough to be tagged with punitive damages.  But the Collins court thinks – perhaps because there are some occasions when courts (other than Cushman) have found the ACDV process to be acceptable – that using the ADCV process can be negligent, but it is never reckless.  

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