Archive for the ‘Uncategorized’ Category

The FCRA does not apply to plaintiffs who are turned down for business credit

October 7, 2016 Leave a comment

This month’s post will attempt to establish something that I’ve always vaguely known to be true, but never had occasion to fully research:  the FCRA applies to consumers who are trying to get personal credit, not credit for their business.

Most courts treat this as a well-established point.  See, e.g.,  Frydman v. Experian Info. Solutions, Inc., No. 14-cv-9013, 2016 U.S. Dist. LEXIS 107139, *29 (S.D.N.Y. Aug. 11, 2016) (stating that “[T]he FCRA does not apply to consumers’ business transactions” ); Boydstun v. U.S. Bank Nat’l Ass’n ND, 187 F. Supp. 3d 1213, 1217 (D. Or. May 11, 2016) (citing 14 cases and referring to “many others” which support the proposition that “the statutory text, legislative history, and administrative interpretation of the FCRA and concluded that it “does not cover reports used or expected to be used only in connection with commercial business transactions”).

The point is well-established because courts have been making it since just after the FCRA became law in 1970.  See, e.g., Wrigley v. Dun & Bradstreet, Inc., 375 F. Supp. 969, 970-971 (N.D.Ga. 1974) (“The court is constrained to the view that both the legislative history of the Act and the official administrative interpretation of the statutory terminology involved compel the conclusion that the Act does not extend coverage to a consumer’s business transactions.”).

The point is also well-established because several circuit courts have made it as well.  See, e.g., Bacharach v. Suntrust Mortg., 827 F.3d 432, 435 (5th Cir. 2016) (“Numerous courts have concluded that the FCRA does not cover reports used or expected to be used only in connection with commercial business transactions”); Matthews v. Worthen Bank & Trust Co., 741 F.2d 217, 219 (8th Cir. 1984).

The point sometimes gets muddied, because there are a number of court cases which involve an entity that pulls someone’s credit report not to help him (or his business) get credit, but rather in hope of finding some dirt to use to discredit him.

Defendants in those cases have sometimes argued that precisely because they didn’t pull the credit report to help the plaintiff get a loan, the report was not a “consumer report” and plaintiff’s FCRA claims must therefore be dismissed.

At least one court has looked to those cases and come away unsure of whether a plaintiff who fails to get credit for his business can sue  under the FCRA.  Breed v. Nationwide Ins. Co., No. 3:05CV-547-H, 2007 U.S. Dist. LEXIS 30714, *5 (W.D. Ky. April 24, 2007)  (citing such cases and then claiming that “The Circuits are split as to whether the consumer’s purpose in obtaining credit [i.e., for personal or business purposes] necessarily determines whether the report is a consumer report under the FCRA”).

However, the cases that Breed cited all involved plaintiffs who never sought a loan, but rather learned that someone had pulled their credit report without their permission, and filed suit for damages.  See, e.g.,  St. Paul Guardian Ins. Co. v. Johnson, 884 F.2d 881 (5th Cir. 1989); Heath v. Credit Bureau of Sheridan, Inc., 618 F.2d 693, 696 (10th Cir.1980); Hansen v. Morgan, 582 F.2d 1214 (9th Cir. 1978); but see Ippolito v. WNS, Inc., 864 F.2d 440, 452 (7th Cir. 1988) (cited by Breed as support for what Breed called a circuit split, but actually finding that a credit report that a franchisor pulled to evaluate a franchisee did not give the franchisee a viable FCRA claim, and stating that “In enacting the FCRA, Congress sought to regulate the dissemination of information used for consumer purposes, not business purposes”).  For this reason, one district court expressly declined to follow what it called Breed‘s “cautious approach.”  Tilley v. Global Payments, Inc., 603 F. Supp. 2d 1314, 1329 (D. Kan. 2009) (noting that the rule against FCRA claims applying to business loans applies even where the plaintiffs are running unincorporated businesses under their own names).

Before closing, I feel that I should address the fact that in one case, the Ninth Circuit held that a plaintiff who “hoped to start a business” had a viable FCRA claim when he was turned down for a loan due to incorrect information on his credit report.  Dennis v. BEH-1, LLC, 520 F.3d 1066, 1068 (9th Cir. 2008).  But in that case, the plaintiff was turned down for a personal loan, not a business loan:  he applied for the personal loan in the hope of establishing “a clean credit history when he sought financing for [his] venture.”  Id.

Dennis doesn’t really pertain to the proposition here, which is that if a plaintiff gets turned down for a business loan due to inaccurate information on his credit report, he doesn’t have a valid claim under the FCRA.



Categories: Uncategorized

The FCRA’s statute of limitations: an update (Part 2 of 3)

December 4, 2015 1 comment

A few years back, I wrote a post which stated that district courts in the Ninth Circuit were interpreting the FCRA’s “new” statute of limitations in a plaintiff-friendly way.

Since then, courts in other jurisdictions have interpreted the FCRA’s statute of limitations differently, which suggests that it is time for my prior post to be updated.  I’m going to do the update in three parts:  1) how the old FCRA statute of limitations worked; 2) how it was revised in 2003, and how these revisions led at least some courts to read the statute in a plaintiff-friendly way in 2009 and 2010; and 3) how decisions since then interpreted the “new” (amended in 2003) statute.

Part 2:  How the FCRA’s statute of limitations was revised in 2003, and how these revisions led some courts to read the statute in a plaintiff-friendly way in 2009 and 2010

In our last post, we reviewed the Supreme Court’s 2001 reading of the “old” or pre-2003 version of the FCRA’s limitations provision (15 U.S.C. Sec. 1681p).  That reading was that, absent special cases involving a defendant’s misrepresentations, the FCRA’s two-year limitations period began to run on the date that the defendant engaged in the act that (allegedly) violated the FCRA, and not when the plaintiff discovered those alleged violations.

In 2003, Congress amended the FCRA’s limitations provision and adopted its current form, which states that FCRA claims must be brought:

(1)  2 years after the date of discovery by the plaintiff of the violation that is the basis for such liability; or
(2) 5 years after the date on which the violation that is the basis for such liability occurs.
On first glance, and knowing the history, you might read this and think that Congress’s 2003 amendment was intended to un-do the Supreme Court’s 2001 interpretation of the FCRA’s limitations provision.
One court, in a decision that inspired the prior blog post that I am updating here, stated that “Indisputably, the plain language of the statute now turns upon the date that a plaintiff acquires knowledge of the alleged violation–not the date of the alleged violation itself.”  Andrews v. Equifax Info. Servs. LLC, 700 F. Supp. 2d 1276, 1278 (W.D. Wash. 2010).
The Andrews court surveyed the limited precedent discussing the “new” version of 1681p and tried to apply it to a case where:  i) the plaintiff disputed information with Equifax in 2004 and 2005; ii) was denied credit in 2006; but iii) did not file suit until 2008.  Equifax contended that the events of 2004-2006 all triggered the statute to start running; plaintiff contended otherwise.  The court found that:
Equifax does not not explain how, from the information it sent, Plaintiff could discern whether the company’s procedures in ensuring accuracy or reinvestigating her dispute were reasonable, indicating a violation of Secs. 1681e(b) or 1681i.
such that
The Court thus finds the conclusion inescapable that there is a material dispute of fact as to when Plaintiff discovered the alleged violations at issue here.

Id. at 1279.

In my post, I didn’t agree that the Andrews court’s conclusion was “inescapable.”  But I did find that if its reasoning were adopted by other courts, then the two-year limitations period would be worthless to defendants, because they would never be able to prove, at summary judgment, that a plaintiff had discovered an alleged FCRA violation.

As it turns out, the Andrews court’s reasoning was not adopted by other courts.  More on that in Part 3 of 3.


Categories: Uncategorized

The FCRA’s statute of limitations: an update (Part 1 of 3)

November 6, 2015 1 comment

A few years back, I wrote a post which stated that district courts in the Ninth Circuit were interpreting the FCRA’s “new” statute of limitations in a plaintiff-friendly way.

Since then, courts in other jurisdictions have interpreted the FCRA’s statute of limitations differently, which suggests that it is time for my prior post to be updated.  I’m going to do the update in three parts:  1) how the old FCRA statute of limitations worked; 2) how it was revised in 2003, and how these revisions led at least some courts to read the statute in a plaintiff-friendly way in 2009 and 2010; and 3) how decisions since then interpreted the “new” (amended in 2003) statute.

Part I:  How the old FCRA statute of limitations worked.

Prior to 2003, the FCRA’s statute of limitations provision at 15 U.S.C. Sec. 1681p stated that:

An action to enforce any liability created under [the Act] may be brought . . . within two years from the date on which the liability arises, except that where a defendant has materially and willfully misrepresented any information required under [the Act] to be disclosed to an individual and the information so misrepresented is material to the establishment of the defendant’s liability to that individual under [the Act], the action may be brought at any time within two years after discovery by the individual of the misrepresentation.

That version of the statute said that plaintiffs typically had to file an FCRA lawsuit “within two years from the date on which the liability arises.”  The Supreme Court addressed that version of the statute in TRW Inc. v. Andrews, 534 U.S. 19 (2001).

In Andrews, the plaintiff contended that Experian (then known as TRW) provided credit reports about her to four lenders; that Experian did this when it knew or should have known that an impostor was using her social security number, last name, and first initial to apply for credit from those lenders; and that Experian thus violated the FCRA’s anti-identity theft provision at Sec. 1681e(a).  Experian’s reports were created on four separate occasions (July 25, 1994; September 27, 1994; October 28, 1994; January 3, 1995); the plaintiff discovered this on May 31, 1995; and she filed suit on “October 21, 1996, almost 17 months after she discovered the Impostor’s fraudulent conduct and more than two years after TRW’s first two disclosures.”  Id. at 24-25.

The question presented was whether the FCRA’s two-year statute of limitations began to run on the date of each report (in which case her claims as to the first two reports were time-barred) or on the date that she discovered what had happened (in which case her claims were timely as to all four reports).

The Supreme Court took the case because the Ninth Circuit had answered the question one way, and the Third, Seventh, Tenth, and Eleventh Circuits had answered it another way.  Predictably, the Supreme Court found that the Ninth Circuit’s interpretation was wrong.

The Ninth Circuit “appl[ied] what it considered to be the ‘general federal rule . . . that a federal statute of limitations begins to run when a party knows or has reason to know that she was injured.'”  Id. at 26.  The Supreme Court disagreed that any such rule applied to the FCRA, because “The most natural reading of Sec. 1681p is that Congress implicitly excluded a general discovery rule by explicitly including a more limited one.”  Id. at 28.  Specifically:

[I]ncorporating a general discovery rule into Sec. 1681p would not merely supplement the explicit exception contrary to Congress’ apparent intent; it would in practical effect render that exception entirely superfluous in all but the most unusual circumstances. A consumer will generally not discover the tortious conduct alleged here — the improper disclosure of her credit history to a potential user — until she requests her file from a credit reporting agency. If the agency responds by concealing the offending disclosure, both a generally applicable discovery rule and the misrepresentation exception would operate to toll the statute of limitations until the concealment is revealed. Once triggered, the statute of limitations would run under either for two years from the discovery date. In this paradigmatic setting, then, the misrepresentation exception would have no work to do.

Id. at 29.

In summary, under the “old” or pre-2003 version of the FCRA’s statute of limitations, the two-year period for FCRA claims began to run on the date that a defendant engaged in some conduct that violated the FCRA.  The only exception to this was when a defendant “materially and willfully misrepresented” information that:  1) it was obligated to provide to plaintiff; and 2) would have put plaintiff on notice that the defendant had violated the FCRA.


Categories: Uncategorized

Reseller Liability: An Update

October 2, 2015 Leave a comment

A year ago, I concluded a series on whether resellers – who create “tri-merge” reports that contain credit data from Experian, Equifax, and Trans Union – can be liable under 15 USC 1681e(b) if one bureau reports inaccurate information, the other two don’t, and the reseller reports it all without comment.

In recent weeks, two courts have issued new opinions on this question, one on one side and one on the other.  This post will briefly explain each opinion and then comment on them together.

In Baker v. Experian Info. Solutions, Inc., No. 14-cv-1011, 2015 U.S. Dist. LEXIS 82845 (C.D. Cal. June 22, 2015), plaintiff Danny Baker alleged that when he applied for a loan, the lender obtained tri-merge reports from Credco which contained accurate data from Equifax and Trans Union, but inaccurate data from Experian.  Specifically, he alleged that Experian’s reports listed a number of his late father’s debts as pertaining to him, and that by repeating this, Credco’s tri-merge report prevented him from getting credit.  Id. at **5-8.  

The court stated that “The essence of Plaintiff’s argument is that if Defendant gets information from Experian, Equifax, or TransUnion that is not included on a report by the other, then that provides notice that the information is inaccurate information” and, under existing precedent, is enough to make the reasonableness of Credco’s procedures a jury question for trial.  However, the court disagreed with this argument and found that Credco’s “procedures were reasonable as a matter of law.”  The court reached this conclusion as follows: there is no evidence that all three credit bureaus need to report the same information, which means that “the type of information reported by Experian does not by its existence show inaccuracy,” which means that Credco’s reports did not contain a “patent error” and were not “incorrect on their face,” which means that Credco, as an intermediary, had no duty to notice or correct the latent errors.  Id. at **12-14.  Notably, the court considered some of the decisions going the other way (discussed in my prior posts), but distinguished them on the grounds that they involved reports with patent errors.

In Ocasio v. CoreLogic Credco, LLC, No. No. 14-cv-1585, 2015 U.S. Dist. LEXIS 130990 (D.N.J. Sept. 29, 2015), plaintiff Gardenia Ocasio alleged that when she applied for a loan, the lender obtained tri-merge reports from Credco which contained debts that pertained to her grandmother and not to her, and that she was unable to obtain credit for this reason.  Id. at *2.  Unlike the Baker court, the Ocasio court did not note whether all three bureaus had been reporting her grandmother’s accounts as pertaining to her, or just one or two.  Id.  

The Ocasio court found that “Plaintiff has shown the inaccuracy of this information was obvious on the face of her credit reports which reported accounts owned by individuals with different birth years (1938 vs. 1987).”  Id. at *8.  For this reason, the court rejected Credco’s argument that “its procedures were reasonable as a matter of law because it accurately complied and reported information collected from the credit bureaus.”  Id.  (The court also rejected another legal argument, which has been rejected by other courts in the past, namely that “the statutory definition of ‘reseller’ exempts resellers from the duties of consumer reporting agencies,” id. at *11).

In comparing these two decisions, the most obvious difference (besides the fact that one granted Credco’s motion for summary judgment and the other court denied it) is the fact that the Baker court did not find discrepancies between the bureau reports to be “patent errors” which made the reports “incorrect on their face,” whereas the Ocasio court did.

Does the fact that the Ocasio reports contained credit accounts belonging to people with different birthdays mean that Credco could have decided which accounts were right, and which were wrong?  The court seemed to think so.  But without looking at the Ocasio reports, which were not re-printed in the court’s opinion, it is hard to know whether to agree. Even if the bureaus reported credit accounts that belonged to people with different birthdays, it does not necessarily follow that Credco had the power to see which accounts belonged to the person born in 1938, and which to the person born in 1987.  The Ocasio court apparently thought that Credco had the ability to do this, but the opinion doesn’t say why.

Categories: Uncategorized

Seventh Circuit Reiterates Its Position on an FCRA Plaintiff’s Burden of Proof

September 4, 2015 Leave a comment

The FCRA requires that every consumer reporting agency follow “reasonable procedures to assure maximum possible accuracy” of the information that it reports.  15 U.S.C. Sec. 1681e(b).  If a plaintiff can prove that a CRA didn’t follow reasonable procedures, then he or she can obtain actual damages and/or punitive damages, plus costs and fees.  Id. at Secs. 1681n, 1681o.

In general, the federal courts have never been very clear about what evidence the plaintiff must have to show that a CRA didn’t follow reasonable procedures.  Most of them say that it varies depending on the circumstances and is therefore usually a question for juries to decide.  See, e.g., Philbin v. Trans Union Corp., 101 F.3d 957 (3d Cir. 1996).

The Seventh Circuit is a notable exception to this general reluctance to tell parties what sort of evidence is sufficient to show a “reasonable procedures” violation.  In Sarver v. Experian Info. Solutions, 390 F.3d 969 (7th Cir. 2004), the plaintiff argued that Experian didn’t use reasonable procedures, because it reported that one of his credit accounts had been listed in bankruptcy, while at the same time showing that he had no public record of having filed for bankruptcy.  The plaintiff suggested that a reasonable procedure would have been for “each computer-generated report [to] be examined for anomalous information,” such as a conflict between an account in bankruptcy and an absence of a bankruptcy filing “and, if it is found, an investigation be launched.”  Id. at 972.  The Seventh Circuit rejected this position and said that the plaintiff had to present evidence “of prevalent unreliable information from a reporting lender, which would put Experian on notice that problems exist.”  Id. at 972.  In other words, merely saying that a computer process might allow inaccurate reports to be created is not enough: the plaintiff must go further and show that the defendant had notice of a problem with the computer process but hadn’t taken steps to correct it.

Recently, the Seventh Circuit followed (but didn’t cite) Sarver in Childress v. Experian Information Solutions, Inc., 790 F.3d 745 (7th Cir. 2015).  In Childress, the plaintiff argued that Experian’s practice of tracking bankruptcy court filings was unreasonable.  Experian used a computer to track electronic court records which showed when a person filed for bankruptcy, and later, what the outcome of that filing was (e.g., the petition for bankruptcy was dismissed or granted).  The plaintiff argued that this process was unreasonable because it didn’t show whether, when a bankruptcy petition was dismissed, that happened because the consumer withdrew it, or because the court deemed it insufficient.  The plaintiff argued for a manual system in which every time a bankruptcy petition was dismissed, someone would look at it and record whether that dismissal was voluntary or not.

The Seventh Circuit rejected this argument and stated that requiring a manual review of every court record “would put an enormous burden on the consumer credit-reporting agencies. Or so it seems; it was the plaintiff’s burden to establish the reasonableness of her proposed procedure.” 790 F. 3d at 747.

This decision is helpful to FCRA defense lawyers in two ways.  First, it suggests that CRAs are not required across the board to manually review the information they report before they report it.  Second, it reiterates that plaintiffs have the burden to prove that a different procedure would be reasonable, especially where the procedure seems like one that would impose “enormous costs” on the CRAs for little if any gains in accuracy.

Categories: Uncategorized

Should employers be able to use credit reports to decide whether to hire someone?

August 7, 2015 Leave a comment

The mayor of New York City recently signed a bill that will preclude public or private employers from using a credit report to help them decide whether or not to hire someone.  This month’s blog post will ask whether this kind of ban is a good idea.  LIke most of my blog posts, it will present the question but won’t leave you with a firm answer.

On the one side, any number of consumer advocates say that there is no evidence to suggest that a person with a poor credit history will also be a bad worker.  One group in NYC lists five reasons why credit reports shed no light whatsoever on a person’s job performance.  One of them is the fact that someone at Trans Union allegedly admitted, under oath, that “we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”  (I haven’t been able to find a copy of this transcript and would invite readers to let me know if they do.)  Senator Elizabeth Warren has introduced federal legislation that would extend NYC’s upcoming ban nationwide; she says that “research has shown that an individual’s credit rating has little to no correlation with his or her ability to be successful in the workplace” but, again, doesn’t cite the research.

On the other side, some employers claim that “there is abundant research suggesting that financial stress has a negative impact on job performance.”  I was able to find some of the research that they are referring to, including this study which found that a large minority of employees had found personal financial issues to be a distraction at work, and this study which found that 20% of employees said they had skipped at least one day of work to deal with a financial problem.  However, these studies are not peer reviewed; they may be based on small or aberrational samples; they may be biased due to bad survey questions; and even if they show that financial issues can distract workers, they don’t take the next step and show that an employer, given access to a credit report, will be able to pick these people out in advance and hire workers with a better ability to focus.

Long story short, lots of people are making lots of claims about whether employers should be able to use credit reports when they hire people.  There is some evidence to suggest that they should, but both sides seem to be making arguments that outrun their evidence.

Categories: Uncategorized

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.  

Categories: Uncategorized

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.

Categories: Uncategorized

Can a bureau resolve a dispute with an automated form? Sometimes.

May 1, 2015 Leave a comment

Sometimes consumers find what they think are errors on their credit reports, either after the information has been reported to a lender (via a “consumer report”) or before that has happened (via a consumer’s request to see his “consumer file”).  If a consumer contacts a bureau to dispute these errors, the bureau has a duty under 15 U.S.C. Sec. 1681i to conduct a “reasonable reinvestigation” of the dispute, and to correct any actual errors.

Typically, a bureau responds to a dispute by sending an Automated Consumer Dispute Verification form – an ACDV – to the creditor that furnished the information which is being disputed.  So if Jack Stack disputes a Capital One account that as reported by Trans Union, then TU will send an ACDV to Capital One and ask how the account should have been reported.  If Capital One doesn’t timely respond, or if it does respond and confirms that the account should not have been reported as it was, then TU will make a change.  However, if – as often happens – Capital One simply confirms that the account had been reported correctly, then TU will continue to report it that way.

Consumers have long had a problem with this process, as it seems to involve taking the creditors’ word over the consumers’ word.  In the example above, if Jack Stack says that he never had an account with Capital One, but Capital One says that he did, the ACDV process will see TU resolve the dispute in Capital One’s favor.  When this happens, consumers have a right to place a written dispute on future reports (e.g., any future reports about Jack Stack that said he had a Capital One account, would also note that he said otherwise).  But consumers often decide not to bother making any written disputes, and even when they do, they typically have no effect on the consumer’s credit score.  For these reasons, consumers and their lawyers often challenge the ACDV process as not being the “reasonable reinvestigation” that 1681i requires.

This brings us to the question presented in this month’s blog post:  when, if ever, is simply sending an ACDV to a creditor, and reporting whatever comes back, a “reasonable reinvestigation?”  Case law answers the question as follows.

First, the Third Circuit has categorically rejected the proposition that a bureau can simply send an ACDV to a creditor, report whatever comes back, and meet its duty under 1681i.  Cushman v. Trans Union Corp., 115 F.3d 220, 225 (3d Cir. 1997) (stating that “The “grave responsibility” imposed by 1681i(a) must consist of something more than merely parroting information received from other sources”).

Next, the First Circuit, in an opinion that collected cases from around the country, stated that if the consumer is disputing not a factual but a legal aspect of the debt – such as whether he failed to ratify the debt such that he doesn’t owe it – then no process that the bureau could have used would have resolved the issue, so if the bureau only used the ACDV process, it is still not liable for an unreasonable investigation.  DeAndrade v. Trans Union LLC, 523 F.3d 61, 68 (1st Cir. 2008).

Finally, some courts have suggested that if the consumer simply denies owing the debt without explaining why, or if the consumer otherwise makes a broad dispute without any detail, then the ACDV process may be sufficient as a matter of law.  Compare Okocha v. Trans Union LLC, 2011 U.S. Dist. LEXIS 39998 (E.D.N.Y. Mar. 31, 2011) (granting summary judgment to bureau that used ACDV process because “Plaintiff’s dispute letters sent during the relevant time period contained little more than categorical disputes as to the validity of the debt”), aff’d per curiam, 488 Fed. Appx. 535 (2d Cir. 2012) with Gorman v. Experian Info. Solutions, Inc., 2008 U.S. Dist. LEXIS 94083 (S.D.N.Y. Nov. 19, 2008) (finding material dispute of fact as to whether a bureau violated 1681i, where “Plaintiff sent a copy of his Grant Deed in Lieu of Foreclosure, as well as a detailed letter explaining the inaccuracies, to Experian” and it relied on the ACDV process).

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Update: when must a debt collector report a debt as disputed?

April 3, 2015 Leave a comment

This month’s post will be a follow-up to my post on January 9, regarding when a debt collector must tell a consumer reporting agency (CRA) that a consumer has disputed a debt.  In that post, I discussed cases which say that if a debt collector knows that a debt is disputed, and subsequently reports the debt to a CRA, then the collector must tell the CRA about the dispute; but that if the debt collector reports first, and learns about the dispute afterward, it need not tell the CRA about the dispute.

I then suggested that the rule might be as follows:

[I]f a debt collector tries to collect a debt in Year 1; reports the debt to the CRAs in Year 2, and only afterward receives notice of the dispute in Year 3, then the collector need not report the dispute to the CRAs. [But], if the debt collector later updates its reporting in Year 4, then its update must mention that the debt was disputed in Year 3.

Questions about that statement have caused me to look into whether my suggestion had any direct support in case law.  It turns out that my suggestion may not actually be the law.  Here’s the story:

A.  Nearly every case that discusses this issue involves facts which are a little bit different than the one in my hypothetical.  For example, the cases that I cited in my initial post, Rogers and Wilhelm, both involved situations where a debt collector reported a debt to a CRA on date 1; received notice of a dispute on date 2; and never updated the report after that.  So those cases don’t answer the question of whether a debt collector who reports a debt; receives a dispute; and then updates its report, must mention the dispute in the update.

B.  Both Wilhelm and the FTC commentary on which it relied contain statements that could be taken in support of either position.  They say that:

1. Disputed debt. If a debt collector knows that a debt is disputed by the consumer . . . and reports it to a credit bureau, he must report it as disputed.
2. Post-report dispute. When a debt collector learns of a dispute after reporting the debt to a credit bureau, the dispute need not also be reported.

The first of these two statements suggests that if a debt collector reports a debt, learns of a dispute, and updates the report, it must mention the dispute in the update.  But the second of these two statements does not.

C.  There is very little case law on the precise question at issue here.  I found two cases, and they give conflicting answers. In O’Fay v. Sessoms & Rogers, P.A., No. 5:08-CV-615-D, 2010 U.S. Dist. LEXIS 104307 (E.D.N.C Feb. 9, 2010), a debt collector reported a debt to the CRAs in 2007 or earlier; the plaintiff disputed the debt with the collector in February 2008; the debt collector updated the report in March 2008 and May 2008 but did not note the dispute; and then the debt collector updated it a third time in July 2008 and did note the dispute.  Plaintiff filed suit six months later, in December 2008, and the court found that the March and May updates were violations of the FDCPA (i.e., the debt collector was required to mention the dispute whenever it updated its report after receiving the dispute).  But in Hinds v. AR Resources, Inc., No. 12-2567, 2013 U.S. Dist. LEXIS 61200 (D. Minn. Apr. 30, 2013), a debt collector reported a debt to the CRAs before April 2012; the plaintiff disputed the debt with the CRAs in April 2012; the debt collector updated the report in July 2012 and did not note the dispute; and the plaintiff filed suit in October 2012.  The court held that the plaintiff did not plead facts to indicate that the debt collector had notice of the July 2012 dispute and dismissed the plaintiff’s claim.

D.  The courts that have addressed the broader question of whether a debt collector must update its report to the CRAs after receiving notice of a consumer’s dispute, have all suggested that there is no “continuing duty” to do this, and that any failure to update or related mistake would be subject to the FDCPA’s one year statute of limitations.  In Rogers, the district court refused “to interpret [15 U.S.C.] Section 1692e(8) as imposing a continuing duty on debt collectors to advise consumer reporting agencies that a debt has been disputed.”  And in Wilhelm, the Tenth Circuit stated that in the absence of any evidence that the debt collector “communicated any credit information about [plaintiff] to any person within the one-year limitations period,” a claim based on updates made prior to that period “is clearly time barred.”

In summary, there is some authority for the proposition whenever a debt collector gets notice of a consumer’s dispute, the FDCPA requires it to make sure that any updates to the CRAs mention that dispute.  However, there is some authority that goes the other way, and there is also some authority that any mistake only subjects the debt collector to liability if the consumer files suit within a year of an update that fails to mention the consumer’s dispute.

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