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Financial Services Law Insights and Observations

7th Circuit: CRAs not required to make legal determinations under FCRA

Courts Appellate FCRA Seventh Circuit Credit Reporting Agency

Courts

On July 15, the U.S. Court of Appeals for the Seventh Circuit affirmed the rulings from a district court in a consolidated appeal finding that it is up to the court, not a consumer reporting agency, to decide if a creditor possesses the proper legal relationship to a debt. In each case, the plaintiff allegedly had a debt that was purchased by a debt buyer, who reported the unpaid debts to the credit reporting agencies. The plaintiffs contacted the debt buyers and disputed the information being furnished on the basis that the creditors did not actually own the debts. The plaintiffs also contacted the consumer reporting agencies to request that they reinvestigate the accuracy of their credit reports. The reporting agencies contacted the creditors, confirming that they were the legitimate owners of the debts but did not provide additional information. The plaintiffs sued, alleging that the defendants violated the FCRA by not fully investigating the disputes. The district court, relying on a 2020 decision in Denan v. TransUnion LLC (previously covered by Infobytes), held that determining ownership of a debt is a legal question, not a duty imposed on the furnishers under the FCRA.

On appeal, the 7th Circuit affirmed the district courts’ decisions, establishing that the key inquiry is “whether the alleged inaccuracy turns on applying law to facts or simply examining the facts alone.” because “consumer reporting agencies are competent to make factual determinations, but they do not make legal conclusion like courts and other tribunals do.” The appellate court further noted that “[b]ecause the plaintiffs in these cases asked the consumer reporting agencies to make primarily legal determinations, they have not stated claims under the [FCRA].”

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