The Ninth Circuit reverses Nevada District Court’s ruling and allows an FCRA Claim against Credit Agency

In an interesting turn of events, the Ninth Circuit Court reversed the ruling of the Nevada District Court which favored the credit agency, and held the agency liable for reflecting inaccurate information of its consumer, under Sections 1681e and 1681i of the Fair Credit Reporting Act (“FCRA”). Davis v. Experian Information Solutions, No. 20-15667, 2021 WL 2375933 (9th Cir. June 10, 2021)

As per the facts of the case, the Plaintiff filed for bankruptcy and eventually received a discharge in the year 2013. Thereafter, in 2017, Plaintiff’s Experian consumer disclosure showed her Carrington Mortgage Services, LLC (CMS) account as “discharged through Chapter 13 bankruptcy/never late”. However, Plaintiff contended that the CMS account was exempted from the discharge and therefore, could not have been discharged in bankruptcy. Following the same, Plaintiff sent a letter to Experian identifying the disputed mortgage debt. The letter also included documents relevant to the dispute. In a complaint before the District Court, the Plaintiff claimed that Experian violated sections 1681e and 1681i, by “failing to report the timely payments she made on her CMS account and by failing to conduct a reasonable re-investigation into the account to correct her information” following her dispute.[1]

The District Court held that Plaintiff did not notify Experian of the inaccuracy which was asserted by her in the complaint. Thus, Experian was not obligated to re-investigate Plaintiff’s CMS account and whether it was discharged or exempted from bankruptcy. It further held that Plaintiff had not “plausibly alleged that Experian failed to follow reasonable procedures” to decide whether her CMS account had been discharged because Plaintiff’s letter “did not put Experian on notice of the nature of her dispute and…the furnisher’s letter and the bankruptcy documents provided no contrary information”. 

Section 1681e of the FCRA reads as “…(b) Accuracy of report- Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” Therefore, the onus is upon the agency to take reasonable care with regards to accurate information, in preparing the consumer report. Further, Section 1681i deals with procedure in case of disputed accuracy, and its subsection (a)(1)(A) reads as “if the completeness or accuracy of any item of information contained in a consumer’s file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly, or indirectly through a reseller, of such dispute, the agency shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file in accordance with paragraph (5), before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer or reseller.” Therefore, considering this section, it is the duty of the agency to re-investigate the consumer information upon being notified by the consumer.

Relying upon these sections, the Ninth Circuit disagreed with the District Court and held that “a notice of dispute does not require precise language and an adequate notice does not eliminate the duty to re-investigate altogether”. It further stated that “one could plausibly infer from the documents Plaintiff provided that she disputed whether Experian had mischaracterized her mortgage debt as discharged.” Further, it held that it was not clear whether the mortgage was discharged and whether Experian reasonable could have determined the fact. Thus, the Ninth Court reversed the District Court’s finding that Experian “exercised reasonable diligence” in investigating Plaintiff’s mortgage status.

The ruling of the Ninth Court had provided clarity over duty of the agency in reflecting accurate consumer information on the CMS platform. It also brought into light the fact that an inadequate notice from the consumer does not negate the duty of the agency in determining the accurate information. The discussed provisions of the FCRA have been a bone of contention in various matters. In Humphrey v. Trans Union, No. 18-1584 (7th Cir. Jan. 8, 2019) the Seventh Circuit Court had rejected the plaintiff’s argument that the CRAs could face liability under the FCRA by continuing to report the debt even though the plaintiff claimed he had no obligations to make payments. It held that an attack on the validity of a debt is not the CRAs’ fight to fight, ruling “a consumer may not use the Fair Credit Reporting Act to collaterally attack the validity of a debt by challenging a CRA’s reinvestigation procedure.” Therefore, the court limited the scope of the act to avoid frivolous litigations against the credit agencies. In another matter, the reasonableness of CRA’s re-investigation was adjudicated upon. The United States District Court for the Northern District of Illinois held that Trans Union (the CRA) could not have uncovered the alleged inaccuracy if it had reasonably investigated the issue, and further determined that Trans Union had reasonably investigated the issue and properly included its findings of that investigation in its credit report.

[1] 454 F. Supp. 3d 996, 1000 (D. Nev. 2020).