2nd Circuit: Furnisher’s duty to investigate triggered only after it receives notice of dispute from CRA
On August 10, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal with prejudice of FCRA and related state law allegations against a state bank and trust company, concluding that the bank’s duty to investigate is triggered only after it receive a notice of dispute from a consumer reporting agency (CRA). According to the opinion, the plaintiffs obtained a mortgage from the bank but later defaulted on their payments. The bank initiated foreclosure proceedings, and in 2014 both parties agreed to a deficiency judgment. In February 2016, one of the plaintiffs notified the bank that his credit report “inaccurately indicated ‘that the mortgage. . .was still open and payments had not been made in more than two years.’” The bank acknowledged the error in March, said a correction had been made to report the loan as closed, and indicated that “information [would] be supplied to the credit reporting agencies.” However, the plaintiff claimed the bank did not correct the information until November 2016. In their amended complaint, the plaintiffs alleged the bank violated the FCRA by (i) “negligently and willfully fail[ing] to perform a reasonable reinvestigation and correction of inaccurate information”; and (ii) “engag[ing] in behavior prohibited by [the] FCRA by failing to correct errors in the information that it provided to credit reporting agencies.” The bank countered that its “duty of investigation is only triggered after a furnisher of information receives notice of a dispute from a consumer reporting agency” and that the plaintiffs failed to allege that the bank “‘ever received notice of a dispute from a consumer reporting agency.’” The district court granted the bank’s motion to dismiss with prejudice for failure to state a claim.
On appeal, the 2nd Circuit agreed with district court, concluding, among other things, that the plaintiffs “do not allege that a CRA notified [the bank] of their dispute concerning the information in the [r]eport.” According to the appellate court, the plaintiffs “do not even allege that they notified a CRA of the discrepancy. The [a]mended [c]omplaint alleges only that, after receiving the [r]eport, [the plaintiff] directly notified [the bank] of the [r]eport’s inaccuracy. This alone is insufficient to state a claim under Section 1681s–2(b).”