Credit Reporting Agency’s Procedures and Investigation to Ensure FCRA Accurate Reporting Not Reasonable Enough for Summary Judgment

In Losch v. Nationstar Mortgage LLC, 2021 WL 1653016 (11th Cir. Apr. 28, 2021), the Eleventh Circuit considered whether the defendant Experian violated the Fair Credit Reporting Act’s requirements that a credit-reporting agency employ “reasonable procedures to assure maximum possible accuracy of the information concerning the individual” when preparing credit reports, 15 U.S.C. § 1681e(b), and conduct a “reasonable reinvestigation” of disputed information upon notification of a claimed inaccuracy, id. § 1681i(a).  The plaintiff filed for Chapter 7 bankruptcy and discharged his debts, including his home mortgage.  Soon thereafter, the plaintiff noticed that his credit report continued to show that he was delinquent on his mortgage.  The plaintiff contacted Experian and asked that it correct the error.  In response, Experian forwarded an ACDV form regarding the contested information to its data furnisher, Nationstar.  This inquiry led Experian to inaccurately confirm its reporting.  Because of this, Experian continued to report the outstanding mortgage, and the plaintiff filed suit.

The district court granted Experian’s motion for summary judgment, concluding that under both § 1681e and § 1681i, Experian’s actions were reasonable as a matter of law.  The Eleventh Circuit, however, disagreed that the measures Experian took were reasonable upon the plaintiff’s notification of the inaccuracy in his report.  In an opinion authored by Judge Newsom, the court vacated the district court’s judgment and remanded.

As a threshold question, the court considered whether the plaintiff possessed Article III standing.  Although neither party raised the standing issue before the district court or on appeal, the court considered it because the parties vigorously contested whether the plaintiff demonstrated damages sufficient to survive summary judgment.  The court noted that an intangible injury—such as the FCRA violations alleged here—may constitute a concrete injury.  The plaintiff was not required to show that the false reporting caused his credit score to decline.  Rather, the false reporting itself was the injury.  The court also concluded that the plaintiff demonstrated a concrete injury in the form of his emotional distress and time spent disputing the inaccurate information.

With standing established, the court went on to address the reasonableness of Experian’s report-preparing “procedures” and “reinvestigation.”  While the plaintiff maintained that all of Experian’s violations were willful, the court began by considering his claim for negligence.  As a prefatory matter, the court concluded that Experian reported factually inaccurate information.  The court then turned to the parties’ primary dispute: whether Experian reasonably carried out its report-preparation and reinvestigation obligations.

The court noted that it has not had much occasion to address the meaning of the term “reasonable” under § 1681e or § 1681i, so it looked to other courts for guidance.  In doing so, the court adopted two principles from sister circuits.  First, “a reporting agency’s procedures will not be deemed unreasonable unless the agency has a reason to believe that the information supplied to it by a data furnisher is unreliable.”  This is because consumer reporting agencies receive millions of lender reports each day, so requiring them to examine each report individually for errors would be unduly costly.  Second, when a “credit reporting agency has been notified of potentially inaccurate information in a consumer’s credit report, it is in a very different position than one who has no such notice.”  This is because a consumer reporting agency only incurs the cost of reinvestigating a single piece of information once a claimed inaccuracy is identified.

Applying these principles to the case, the court concluded that it could not say that Experian’s procedures were reasonable as a matter of law, such that it was entitled to summary judgment.  Upon receiving the plaintiff’s notification of the inaccuracy in his report, Experian needed only to investigate this single error, and Experian was in a “very different position” than before the plaintiff contacted it.  Here, the plaintiff provided a sufficiently detailed notice to Experian for it to investigate the potential inaccuracy.  In response, Experian did nothing more than forward the letter to its data furnisher.

The court noted that this holding is narrow, stating that it could not hold that Experian’s procedures were per se reasonable or per se unreasonable.  The court noted that its holding does not mean that in every similar circumstance a credit reporting agency must examine court records to discern the status of a debt.  For example, circumstances may exist where a consumer supplies insufficient detail, so a jury question would not exist about the reasonableness of the agency’s investigation.  Or the facts could show that an agency took alternative steps to verify the allegedly incorrect information, such as contacting the consumer.

Finally, the court considered whether the plaintiff’s additional claim of an FCRA willful violation could proceed.  To prove willfulness, a plaintiff must show that a credit reporting agency knowingly or recklessly violated the FCRA.  A violation is not willful where an agency “followed an interpretation that could reasonably have found support in the courts.”  The court found that here, Experian’s interpretation could reasonably find support in the courts.  The court, therefore, held that only the plaintiff’s claims that Experian negligently violated § 1681e and § 1681i survived summary judgment.

Posted by Laura Smithman.

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