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  • District Court: Failing to invoke the BFE defense does not entitle a plaintiff to judgment as a matter of law

    Courts

    On March 15, the U.S. District Court for the Eastern District of Washington denied a plaintiff’s motion for partial summary judgment, ruling that just because a defendant did not invoke the bona fide error (BFE) defense when accused of allegedly violating the FDCPA it does not mean the defendant has admitted to violating the statute. In 2018, the defendant debt collector attempted to collect unpaid debt in the amount of $786.68 from the plaintiff and began reporting the debt to the consumer reporting agencies (CRAs). In 2021, after the original creditor recalled the account from the defendant for an unspecified reason, the defendant submitted two requests to the CRAs to delete the item from the plaintiff’s credit report and took no further action on the account. Shortly thereafter, the plaintiff noticed a $787.00 debt on one of his credit reports. He contacted the original creditor and was told the company could not find an account in his name that was referred for collection. The plaintiff sued for violations of Section 1692e of the FDCPA and related violations of Washington state law, and later filed for a partial motion for summary judgment contending that the FDCPA “is a strict liability remedial statute that contains a single affirmative defense to liability—the bona fide error defense,” and that because the defendant did not plead the BFE defense “he is entitled to judgment as a matter of law as to Defendant’s liability under the statute.” While the defendant acknowledged that it did not plead the BFE defense, it countered that the plaintiff “cannot prove a prima facie case of liability.”

    The court concluded that “[w]hile the statute is strict liability, ‘a debt collector’s false or misleading representation must be ‘material’ in order for it to be actionable under the FDCPA.” Noting that the alleged violation appeared to be based on the grounds that the defendant reported an inflated account balance ($787.00 versus $786.68), the court stated it “has little trouble in concluding that inflating an account balance by 32 cents is not a materially false representation. To the contrary, it is a ‘mere technical falsehood that mislead[s] no one.’” Moreover, the court stated that because the defendant immediately ceased reporting the account and sent deletion requests to the CRAs after the account was recalled, and that there was no evidence to suggest that the debt collector knew or should have known that it was communicating information that was false, the plaintiff could not show, at this stage of the proceeding, that Section 1692e was violated.

    Courts FDCPA Debt Collection Bona Fide Error Consumer Reporting Agency Consumer Finance

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  • District Court partially grants defendant’s motion in FCRA case

    Courts

    On February 25, the U.S. District Court for the Eastern District of Pennsylvania denied in part and granted in part a defendant’s motion for summary judgment in an FCRA case. According to the opinion, the plaintiffs applied for a loan at a bank to refinance their home mortgage and the bank then engaged a service agency (defendant) to conduct a public records search and provide a report on the plaintiffs. To prepare the report, the defendant allegedly engaged an independent contractor to conduct a physical search of both the open judgment directory and the municipal lien directory. The plaintiffs claimed that the defendant’s report “erroneously” listed outstanding civil judgments against them and that defendant refused to investigate the alleged inaccuracies. The plaintiffs filed suit, alleging that the defendant violated the FCRA by failing to follow reasonable procedures to assure maximum possible accuracy when preparing a consumer report and by failing to conduct a reasonable reinvestigation of the plaintiffs’ dispute.

    The defendant moved for summary judgment, asserting that it was not subject to the FCRA as a matter of law since it was not a consumer reporting agency and that it did not supply “consumer reports” within the meaning of the FCRA. Additionally, the defendant claimed that even if it was subject to the FCRA, no reasonable juror could find that it violated either of those FCRA provisions. The district court found that the defendant is a “consumer reporting agency” under FCRA because its operations met the statutory definition. The court partially granted the defendant’s summary judgment on the plaintiffs’ claims that it willfully violated the FCRA by failing to conduct a reasonable reinvestigation of the plaintiffs’ dispute.

    Courts FCRA Consumer Reporting Consumer Reporting Agency Consumer Finance

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  • 9th Circuit affirms judgment for defendant in FCRA suit

    Courts

    On March 1, the U.S. Court of Appeals for the Ninth Circuit affirmed dismissal in favor of a consumer reporting agency (defendant). The suit accused the defendant of violating the FCRA by failing to disclose certain information about a consumer. The plaintiffs were originally part of a class action alleging FCRA disclosure violations against the defendant, but that case was dismissed. Instead of appealing the suit, three plaintiffs brought a separate proposed class action. The defendant removed the case to federal court and filed a motion to dismiss based on a failure to state a claim. Though the case was again dismissed, the plaintiffs were granted leave to amend their complaint. In their First Amended Complaint, the plaintiffs argued that under the FCRA, the disclosures they received from the defendant did not include, among other things: (i) behavioral data; (ii) “soft inquiries” not initiated by the consumer; (iii) the identity of parties procuring consumer reports; and (iv) the date on which employment data was reported. The district court found that the defendant was not obligated to include the behavioral data in its disclosure since the information alleged to have not been disclosed was not part of the consumer’s “file” under the FCRA and was not information that was or might be furnished in a consumer report.

    On appeal, the 9th Circuit noted that “none of the information [the plaintiffs] contend [the defendant] failed to disclose is of the type that has been included in a consumer report in the past or is planned to be included in such a report in the future.” The appellate court also noted that “the date employment dates were reported can have no ‘bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal, characteristics, or mode of living.’” Since the district court found that the data that the consumers alleged the defendants failed to include in its disclosures is actually not subject to disclosure under the FCRA, the appellate court affirmed the district court’s dismissal.

    Courts Appellate Ninth Circuit FCRA Consumer Reporting Agency Disclosures

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  • 9th Circuit affirms judgment for defendant in FCRA suit

    Courts

    On February 8, the U.S. Court of Appeals for the Ninth Circuit affirmed summary judgment in favor of a consumer reporting agency (defendant). The suit accused the defendant of violating the FCRA by willfully and negligently disclosing a 10-year-old criminal charge that had been dismissed six years prior to an inquiry made on the plaintiff’s credit report. The plaintiff allegedly submitted an application for housing in 2010, which was denied. In 2010, the defendant provided a tenant screening report, which included details of a criminal charge from 2000, which was outside the seven-year window of the FCRA. However, the plaintiff’s criminal charge was dismissed in 2004, which was within the seven-year reporting window. The plaintiff sued under the FCRA, alleging that the defendant reported criminal information older than seven years, failed to maintain procedures designed to avoid violating the FCRA and ensure the maximum possible accuracy of the information in the report, and failed to conduct a reasonable reinvestigation after receiving a consumer dispute.

    In ruling for the defendant, the 9th Circuit stated that “to prove a negligent violation [of the FCRA], a plaintiff must show that the defendant acted pursuant to an objectively unreasonable interpretation of the statute.” The 9th Circuit held that Section 1681c(a)(5) of the FCRA “does not specifically state the date that triggers the reporting window.” Further, the appellate court looked to guidance from the FTC and the CFPB, which “appeared to permit reporting the charge” at the time.

    As the appellate court explained, whether the consumer reporting agency correctly interpreted § 1681c(a)(5) to permit the reporting of a criminal charge that was filed outside of, but dismissed within, the statute’s seven-year window, arose as a matter of first impression. However, the consumer reporting agency introduced evidence that its interpretation was consistent with industry norms and standards. Likewise, FTC guidance on the question, at the time, appeared to permit reporting the charge. The appellate court noted, therefore, that it “cannot say, nor could any other reasonable fact finder, that on this record defendant’s violation of [the FCRA] was negligent, much less willful.” As a result, the 9th Circuit affirmed summary judgment in favor of the defendant.

    Courts Appellate Ninth Circuit Consumer Reporting Agency Consumer Finance FCRA

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  • District Court grants MSJ to creditor in FCRA case

    Courts

    On February 4, the U.S. District Court for the Middle District of Florida granted a defendant creditor’s motion for judgment on the pleadings in a case alleging FCRA violations. The plaintiff alleged that the payment status for a tradeline appearing on her credit report incorrectly showed it as “90 days past due” despite the account being paid and closed. She filed suit against the defendant and two consumer reporting agencies (CRAs) claiming the information furnished by the defendant to the CRAs was inaccurate and that the CRAs prepared and issued credit reports containing “inaccurate and misleading information.” Under the FCRA, entities that furnish information to CRAs are required to ensure the accuracy of the information. If an entity receives a notice of dispute from a consumer it is required to conduct an investigation and report the results to the CRAs—actions, the plaintiff claimed, the defendant failed to do. She further contended that the “pay status” field—which she claimed “is ‘specifically designed to be understood as the current status of the account’”—was causing her credit score to be lower than if it was marked as closed. However, upon review, the court determined that when objectively viewing the plaintiff’s credit reports in their entirety, it is apparent that the account is accurate and not misleading. According to the court, “the only reasonable reading of the [disputed] account is that the account was past due in September 2020, at which time the account was updated one last time and closed—zeroing out the balance. It does not indicate, as [the plaintiff] argues, that she is currently 60 days (or 90 days) past due.” Moreover, no reasonable creditor would look at the report and be misled into believing that the plaintiff had a present pending amount due, the court added.

    Courts FCRA Consumer Reporting Agency Consumer Finance

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  • VA establishes threshold for reporting VA debts to CRAs

    Agency Rule-Making & Guidance

    On February 2, the Department of Veterans Affairs published a final rule in the Federal Register amending its regulations around the conditions by which VA benefits debts or medical debts are reported to consumer reporting agencies (CRAs), and creating a methodology for determining a minimum threshold for debts reported to the CRAs. According to the VA, approximately 5,000 delinquent accounts are reported monthly to credit bureaus, and, in many cases, veterans complained about the loss of security clearance or an inability to obtain credit or rental housing. In amending the rule, the VA acknowledged that certain debts, such as medical debts, “are fundamentally different than consumer debt.” Under the new rule, debts are to be reported to a credit bureau if (i) they are considered to be “currently not collectible,” meaning the VA has exhausted available debt collection efforts; (ii) the debt is not owed by someone who has been determined to be catastrophically disabled or has a gross household income below a certain amount; and (iii) the debt owed is over $25. The rule is effective March 4.

    On February 7, the CFPB published a blog highlighting the changes that the VA made in its final rule. Among other things, the blog discussed changes to VA’s debt collection practices, protections against surprise medical bills, and getting help with medical bills.

    Agency Rule-Making & Guidance Federal Register Department of Veterans Affairs Consumer Reporting Agency Debt Collection CFPB Consumer Finance

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  • CFPB publishes list of consumer reporting companies

    Federal Issues

    On January 27, the CFPB released its annual list of consumer reporting companies, which identifies reporting companies that collect and sell access to people’s data. According to the CFPB, the list can be used “to see what information these firms have, dispute inaccuracies, and file lawsuits if the firms are violating the Fair Credit Reporting Act.” The list also, among other things, permits people to identify which companies provide this information at no cost, as well as search for those that provide specialized reporting by certain markets, including employment, tenant, insurance, and medical. According to a blog post published by the CFPB, features of the list include, among other things: (i) information on how to request a report; (ii) tips for checking specialty reports; and (iii) identity verification information. The CFPB also noted that it previously highlighted consumer complaints concerning nationwide reporting companies. As previously covered by InfoBytes, the CFPB released a report, pursuant to Section 611(e)(5) of the FCRA, covering certain consumer complaints transmitted by the Bureau concerning the three largest nationwide consumer reporting agencies.

    Federal Issues CFPB Consumer Finance Credit Report Consumer Reporting Agency

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  • CFPB reports on NCRA’s complaint responsiveness

    Federal Issues

    On January 5, the CFPB released a report, pursuant to Section 611(e)(5) of the FCRA, on information gathered by the Bureau on certain consumer complaints transmitted by the Bureau to the three largest nationwide consumer reporting agencies (NCRAs). According to the report, the CFPB received over 800,000 credit or consumer reporting complaints between January 2020 to September 2021, and of the complaints, over 700,000 were submitted about the same three NCRAs discussed in the report. According to the Bureau, complaints submitted about the NCRAs accounted for over 50 percent of all complaints received by the Bureau in 2020 and over 60 percent in 2021. The Bureau’s analysis revealed that consumers submitted more complaints in each complaint session and are increasingly returning to the Bureau’s complaint process, with a significant amount of complaints regarding inaccurate information on their credit and consumer reports. The CFPB found that the NCRAs reported relief in less than 2 percent of complaints, which is down from approximately 25 percent of complaints in 2019. Additionally, consumers most frequently complained that the inaccurate information belongs to other individuals, and consumers often described being victims of identity theft. The Bureau, in addition to pointing out how the NCRAs are “fail[ing] to meet [their] statutory obligations” under the FCRA, also noted that medical debts are an “unnavigable quagmire” and needs to be addressed. It reported that the NCRAs “do not take available steps to distinguish between complaints authorized by the consumer and those not authorized by the consumer.” The Bureau also mentioned issues that consumers face when attempting to dispute information on their credit reports, such as, among other things: (i) unsuccessfully disputing information in a timely manner; (ii) frequently expending resources to correct inaccuracies; and (iii) and finding themselves caught between furnishers and NCRAs when attempting to resolve disputes. Other highlights of the report include noting that the NCRA rely “heavily” on utilizing template responses to complaints, despite having 60 days to respond, and that two of the NCRAs mentioned in the report do not give “substantive responses to consumers’ complaints if they suspected that a third-party was involved in submitting a complaint.”

    Federal Issues CFPB Consumer Finance Consumer Reporting Agency Credit Furnishing FCRA

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  • CFPB reaches $850,000 settlement with debt collectors

    Courts

    On October 26, the U.S. District Court for the District of Maryland entered a stipulated final judgment and order against defendants (a debt collection entity, its subsidiaries, and their owner) in an action alleging FCRA and FDCPA violations. As previously covered by InfoBytes, the Bureau filed a complaint against the defendants in 2019 with alleged violations that included, among other things, the defendants’ failure to ensure accurate reporting to consumer-reporting agencies (CRAs), failure to conduct reasonable investigations and review relevant information when handling indirect disputes, and failure to conduct investigations into the accuracy of information after receiving identity theft reports before furnishing such information to CRAs. The Bureau separately alleged that the FCRA violations constitute violations of the CFPA, and that the defendants violated the FDCPA by attempting to collect on debts without a reasonable basis to believe that consumers owed those debts.

    Under the terms of the order, the defendants—who neither admitted nor denied any of the allegations except as specified in the order—are required to, among other things, (i) update existing policies and procedures to ensure information is accurate before it is furnished to a CRA or before commencing collections on an account; (ii) ensure policies and procedures are designed to address trends in disputes; and (iii) hire an independent consultant, subject to the CFPB Enforcement Director’s non-objection, to conduct a review to ensure management-level oversight and FCRA and FDCPA compliance. The defendants must also submit a compliance plan and pay an $850,000 civil money penalty.

    Courts CFPB Enforcement FCRA FDCPA Consumer Reporting Agency Credit Report Debt Collection CFPA

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  • CFPB, FTC, and North Carolina argue public records website does not qualify for Section 230 immunity

    Courts

    On October 14, the CFPB, FTC, and the North Carolina Department of Justice filed an amicus brief in support of the consumer plaintiffs in Henderson v. The Source for Public Data, L.P., arguing that a public records website, its founder, and two affiliated entities (collectively, “defendants”) cannot use Section 230 liability protections to shield themselves from credit reporting violations. The case is currently on appeal before the U.S. Court of Appeals for the Fourth Circuit after a district court determined that the immunity afforded by Section 230 of the Communication and Decency Act applied to the FCRA and that the defendants qualified for such immunity and could not be held liable for allegedly disseminating inaccurate information and failing to comply with the law’s disclosure requirements.

    The plaintiffs alleged, among other things, that because the defendants’ website collects, sorts, summarizes, and assembles public record information into reports that are available for third parties to purchase, it qualifies as a consumer reporting agency under the FCRA. According to the amicus brief, the plaintiffs’ claims do not seek to hold the defendants liable on the basis of the inaccurate data but rather rest on the defendants’ alleged “failure to follow the process-oriented requirements that the FCRA imposes on consumer reporting agencies.” According to plaintiffs, the defendants, among other things, (i) failed to adopt procedures to assure maximum possible accuracy when preparing reports; (ii) refused to provide plaintiffs with copies of their reports upon request; (iii) failed to obtain required certifications from its customers; and (iv) failed to inform plaintiffs they were furnishing criminal information about them for background purposes. The defendants argued that they qualified for Section 230 immunity. The 4th Circuit is now reviewing whether a consumer lawsuit alleging FCRA violations seeking to hold a defendant liable as the publisher or speaker of information provided by a third party is preempted by Section 230.

    In their amicus brief, the CFPB, FTC, and North Carolina urged the 4th Circuit to overturn the district court ruling, contending that the court misconstrued Section 230—which they assert is unrelated to the FCRA—by applying its immunity provision to “claims that do not seek to treat the defendant as the publisher or speaker of any third-party information.” According to the brief, liability turns on the defendants’ alleged failure to comply with FCRA obligations to use reasonable procedures when reports are prepared, to provide consumers with a copy of their files, and to obtain certifications and notify consumers when reports are furnished for employment purposes. “As the consumer reporting system evolves with the emergence of new technologies and business practices, FCRA enforcement remains a top priority for the commission, the Bureau, and the North Carolina Attorney General,” the brief stated. “The agencies’ efforts would be significantly hindered, however, if the district court’s decision [] is allowed to stand.”

    Newly sworn-in CFPB Director Rohit Chopra and FTC Chair Lina M. Khan issued a joint statement saying “[t]his case highlights a dangerous argument that could be used by market participants to sidestep laws expressly designed to cover them. Across the economy such a perspective would lead to a cascade of harmful consequences.” They further stressed that “[a]s tech companies expand into a range of markets, they will need to follow the same laws that apply to other market participants,” adding that the agencies “will be closely scrutinizing tech companies’ efforts to use Section 230 to sidestep applicable laws. . . .”

    Courts CFPB FTC North Carolina State Issues Amicus Brief FCRA Appellate Fourth Circuit Consumer Reporting Agency

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