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Financial Services Law Insights and Observations

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  • 6th Circuit: FCRA claims require consumer to notify consumer reporting agency of dispute

    Courts

    On August 29, the U.S. Court of Appeals for the 6th Circuit affirmed a district court’s ruling that a bank was not obligated under the Fair Credit Reporting Act (FCRA) to investigate a credit reporting error because the consumers failed to ever notify a consumer reporting agency. According to the opinion, after plaintiffs paid off their line of credit, the bank (defendant) continued reporting the plaintiff as delinquent on the account. After plaintiffs contacted the bank regarding the reporting error, the bank employee ensured plaintiffs that the defendant submitted amendments to the credit reporting bureaus to correct the situation. However, the plaintiffs claimed the error was not corrected until almost a year later. Plaintiffs also alleged that they did not contact the credit reporting bureau in reliance on the bank employee’s statements. The district court granted summary judgment in favor of the bank, concluding that the FCRA requires that notification of a credit dispute be provided to a consumer reporting agency as a prerequisite for a claim that a furnisher failed to investigate the dispute. Since the plaintiffs failed to trigger the defendant’s FCRA obligations because they never filed a dispute with a consumer reporting agency, the defendant’s responsibility to investigate was never activated.

    On appeal, the 6th Circuit agreed with the district court that direct notification to the furnisher of the inaccurate credit report does not meet the FCRA’s prerequisite. Additionally, the plaintiffs’ state common law claims for breach of the duty of good faith and fair dealing and tortious interference with contractual relationships were preempted by the FCRA, and their fraudulent misrepresentation claim was forfeited on appeal.

    Courts Appellate Sixth Circuit FCRA Credit Report Credit Furnishing Consumer Reporting Agency

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  • Ohio Court of Appeals reverses trial court in credit card matter

    Courts

    On February 7, the Ohio Court of Appeals reversed a state trial court’s decision in favor of a national bank, holding that the bank failed to prove it had the right to charge interest exceeding the statutory limit on a credit card account. At trial, the bank sought payment of the consumer’s store credit card debt it acquired in a merger. The consumer argued that the bank had no standing to sue because it failed to prove ownership of the store credit card account. The trial court denied the consumer’s motion to dismiss and granted the bank’s motion for a directed verdict after trial.

    The appeals court agreed that, even though the bank was unable to establish that it acquired the consumer’s account, it had standing to bring its collection action by virtue of its own credit card agreement with the consumer and the consumer’s continued use of the card. But because the bank could only produce periodic statements that included the claimed interest rate, it failed to establish that the consumer “assented to any explicitly set forth interest rate over the statutory limit.” Thus, the trial court “erred in granting [the bank’s] motion for a directed verdict as to the precise amount of damages awarded,” and the appeals court remanded with instructions to determine whether Ohio law, as argued by the consumer, or South Dakota law, as argued by the bank, should be applied to verify the applicable statutory interest rates.

    Courts FCRA State Issues Credit Furnishing Interest Rate

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