No Willful Violation of Fair Credit Reporting Act If Report Technically Accurate, Even If Misleading, Given Split on “Maximum Possible Accuracy”

In Pedro v. TransUnion LLC, 2017 WL 3623926 (11th Cir. Aug. 24, 2017), the Eleventh Circuit concluded that a consumer reporting agency did not adopt an “objectively unreasonable interpretation” of the Fair Credit Reporting Act (“FCRA”) when it stated on a consumer’s credit report that she was an authorized user of her parents’ credit card account (which later went into default) and also included the account when calculating her credit score, causing the score to fall.

The plaintiff, Kathleen Pedro, complained it was inaccurate for TransUnion (and Equifax, which she later dismissed) to list her parents’ credit card account on her credit report, because, although she was indeed an authorized user of the card, listing it on her report implied that she was liable on the account when she was not. Pedro alleged that this practice was a willful violation of the FCRA, specifically 15 U.S.C. § 1681e(b), which requires a consumer reporting agency to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.”

The agencies moved for dismissal under Rule 12(b)(6), and the motions were granted. The district court determined that the complaint failed to allege a willful violation of § 1681e(b) because it was not objectively unreasonable for the credit reporting agencies to read that section to permit them to report information about accounts for which the consumer is an authorized user.

The Eleventh Circuit affirmed the dismissal in an opinion authored by Judge William Pryor and joined by Judge Martin and Judge Rosenbaum, who also wrote a concurring opinion.

Before turning to the merits of the FCRA claim, the court addressed TransUnion’s argument that Pedro had no standing to raise the claim because she had not alleged an injury in fact. Other than quoting it, the court did not directly address the Supreme Court’s decision in Spokeo, Inc. v. Robins, but the court’s analysis was aimed at the question of whether “inaccurate” credit reporting can be an injury in itself without some further showing of harm.

The court evaluated the alleged injury as an “intangible harm,” looking to “both history and the judgment of Congress” and at whether the alleged harm “has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English of American courts.” Here, the reporting of inaccurate information about Pedro’s credit to a credit monitoring service has a close relationship to the harm caused by the publication of defamatory information, which has long been a basis for a lawsuit in English and American courts.  Additionally, Pedro alleged she lost time trying to resolve the inaccuracies, and her credit score dropped 100 points as a result.  This was concrete injury enough to establish standing.

Turning to the merits of the FCRA claim, the court concluded that the district court properly dismissed the complaint for failure to allege a willful violation of § 1681e(b), which requires knowing or reckless violation of the statute. Under this standard, there is no willful violation when a consumer reporting agency adopts a reading that is “not objectively unreasonable” based on the text of the Act, judicial precedent, and administrative guidance.  As long as the interpretation adopted was not objectively unreasonable, the court will not look to the credit reporting agency’s subjective intent.

Here, the court determined, TransUnion’s adopted interpretation of the phrase “maximum possible accuracy” was objectively reasonable. That is, “TransUnion could have reasonably interpreted the Act to permit it to report that Pedro was an authorized user on her parents’ credit card account because it could have understood [that standard] to require only that TransUnion report information that is just technically accurate.”

This interpretation, the court concluded, is not objectively unreasonable, because it has a foundation in the statutory text and “a sufficiently convincing justification.” Specifically, some courts have ruled that § 1681e(b) requires only that credit reporting agencies report information that is “technically accurate”—i.e., not false.  The only cases cited by the court as having adopted this interpretation were from district courts (in Alabama, Maryland, and Connecticut).  Federal courts of appeals (the Fourth, Fifth, and D.C. Circuits) have ruled, on the other hand, that this section requires credit reporting agencies to report information that is not only “technically accurate” but also “not misleading or incomplete.”

Without explicitly adopting either interpretation, the court seemed inclined to follow its sister circuits, noting that “the better reading of the Act requires that credit reports be both accurate and not misleading.” Because, however, multiple courts have been persuaded to adopt an interpretation requiring only technical accuracy, that reading is not “objectively unreasonable.”  And “TransUnion could not have willfully violated the requirement [of § 1681e(b)] that it adopt reasonable procedures to assure maximum possible accuracy if, under a reasonable interpretation of the Act, the information it reported met the standard of maximum possible accuracy.”

The court rejected Pedro’s argument that TransUnion committed a willful violation even under the “technical accuracy” approach. The account was listed on her report with the notation “authorized user,” which she admits she was.  And it was objectively reasonable for TransUnion to determine that information about a credit card account for which an individual is an authorized user “concerned” that individual.  The court also rejected the contention that willfulness is a question of fact not suited to a motion to dismiss, noting that courts often determine that pleadings fail to plead willfulness on the basis that the credit reporting agency’s interpretation of a statute was not objectively unreasonable.

Judge Robin Rosenbaum concurred in the opinion but wrote separately to further discuss the meaning of the phrase “maximum possible accuracy.” First, all four federal appellate courts to address the issue—those for the Third, Fourth, Fifth, and D.C. Circuits—have held that “maximum possible accuracy” means that a report “must not be misleading or incomplete.”  The concurring opinion also quoted with approval the explanation from former U.S. District Judge Harold Fong on the difference between a report that is “technically accurate” and one that has “maximum possible accuracy”:  “it’s the difference between ‘report[ing] that a person was “involved” in a credit card scam’ and ‘report[ing] that he was in fact one of the victims of the scam’” (quoting Alexander v. Moore & Assocs., 553 F. Supp. 948, 952 (D. Haw. 1982)).

Judge Rosenbaum also noted that § 1681e(b) limits the burden of compliance by providing only that a credit reporting agency “follow reasonable procedures” to assure “maximum possible accuracy.” As construed by the D.C. Circuit, this language imposes a balancing test, under which the court “weigh[s] the potential that the information will create a misleading impression against the availability of more accurate [or complete] information and the burden of providing such information” (quoting Koropoulos v. Credit Bureau, Inc., 734 F.2d 37, 42 (D.C. Cir. 1984)).

Under this standard, TransUnion’s inclusion of the information about Pedro’s parents’ delinquent account on her credit report was “misleading in a harmful way.” But the other side of the equation requires an examination of the burden on TransUnion to provide the information in a way that is not misleading.  Because evidence about this burden is uniquely in the credit reporting agency’s possession, this part of the inquiry into a claim for violation of § 1681e(b) often will be inappropriate for resolution through a motion to dismiss.  Here, however, because Pedro alleged only a willful violation, the motion to dismiss was properly granted.

Posted by Stacey Mohr.

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