Ninth Circuit Holds Reporting Fraudulent Accounts As Lost or Stolen May Violate FCRA

FCRA Consumer Reporting

On August 7, the U.S. Court of Appeals for the Ninth Circuit revived a consumer’s suit against his bank and a consumer reporting agency (CRA) in which he alleges that the bank and CRA violated FCRA in connection with a fraudulent account opened in the consumer’s name. Drew v. Equifax Info. Servs. LLC, No. 11-15008, 2012 WL 3186110 (9th Cir. Aug. 7, 2012). The consumer claims that though his account was actually fraudulent, the bank reported it as lost or stolen. He alleges the bank violated FCRA when, after receiving a “fraud block notification” from the CRA, the bank (i) failed to conduct a sufficient investigation, (ii) continued to report the fraudulent account as belonging to the consumer, and (iii) reported the fraudster’s address as the consumer’s address. The district court granted summary judgment on these claims in favor of the bank and granted summary judgment to the CRA based on its argument that the consumer’s claims exceeded the statute of limitations. The appeals court agreed that the bank’s investigation was legally sufficient, but held that material issues of fact remained with regard to the consumer’s other claims. The court reasoned that a jury could find (i) that reporting a fraudulently opened account as a lost or stolen account belonging to the consumer was untrue or facially inaccurate in violation of FCRA and (ii) that reporting the fraudster’s address as the consumer’s address violated FCRA’s requirement to correct inaccurate information. The court also found that the consumer presented evidence of emotional distress sufficient to allege emotional damages, and that such damages are cognizable under FCRA. Finally, the court held that facts regarding the timing of the consumer’s knowledge remain in dispute and overturned the district court’s holding that the consumer’s suit exceeded the statute of limitations.