On the Docket: Recent Federal Court Opinions
FAIR CREDIT REPORTING ACT
The Ninth Circuit rejects Fair Credit Reporting Act (FCRA) claims against a consumer reporting agency resulting from a furnisher's error.
Shaw v. Experian
Information Solutions, Inc., 891 F.3d 749 (9th Cir. 2018). 
Plaintiffs filed a
class-action lawsuit against Experian Information Solutions, Inc. (Experian), a consumer reporting agency, alleging
several FCRA violations because of the manner in which it reported its mortgage short sales. While applying for
mortgage loans with lenders using Fannie Mae's Desktop Underwriter software, the plaintiffs learned that the
software identified their short sales as foreclosures. Fannie Mae imposes a seven-year waiting period for
applicants with foreclosures in their credit history but only a two-year waiting period for short sales. The
complaint alleged that Experian's practice of erroneously coding short sales as foreclosures violated FCRA
provisions requiring consumer reporting agencies 1) to use reasonable procedures when preparing consumer reports to
assure maximum possible accuracy (accuracy claim), 15 U.S.C. §1681e(b); 2) to accurately disclose information
in the credit reports provided to consumers (disclosure claim), 15 U.S.C. §1681g; and 3) to conduct a
reasonable reinvestigation of information in a consumer's credit file if a consumer disputes it (reinvestigation
claim), 15 U.S.C. §1681i.
To prevail on the accuracy and reinvestigation claims, the Ninth Circuit held that the plaintiffs must establish inaccurate reporting, which the court defined as information that is “patently incorrect” or “misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.” Because Experian coded the short sales with a code (9-68) that corresponded to short sales, the court found that the information was accurate. Similarly, the court found that Experian's coding was not misleading because the problems arose from how Fannie Mae treated the data Experian provided, and not how Experian reported it, stating “[t]he FCRA does not suggest that Experian should be liable for the misconduct of one of [its] 15,000 subscribers, even if that subscriber is as well known as Fannie Mae.” Regarding the plaintiffs's claim that Experian did not disclose the information properly in the plaintiffs's credit reports, Experian listed the plaintiffs's short sales as “account[s] legally paid in full for less than full balance,” which the court deemed accurate. Accordingly, the court affirmed the district court's summary judgment in favor of Experian.
FAIR CREDIT REPORTING ACT
The Ninth Circuit rejects the FCRA claim that displaying a debit card expiration date on a printed receipt was traceable to subsequent fraudulent activity on the card.
Daniel v. National Park
Service, 891 F.3d 762 (9th Cir. 2018). The FCRA prohibits any person who accepts
credit or debit cards from printing the expiration date or more than the last five digits of the card number on any
receipt provided to the cardholder at the point of sale. In Daniel, the plaintiff filed a class-action
lawsuit against the National Park Service alleging it violated the FCRA by printing her debit card's expiration
date from her receipt after she purchased an entrance pass to Yellowstone National Park. The plaintiff claimed that
her debit card was used fraudulently thereafter and that she suffered damages because of her stolen identity. She
also alleged that this was partially a result of the National Park Service's inclusion of the card's expiration
date on her receipt.
The district court dismissed the lawsuit. On appeal, the Ninth Circuit affirmed, finding that the plaintiff failed to establish that she had legal standing under the Supreme Court's decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). Under Spokeo, a plaintiff must establish an injury “that is fairly traceable to the challenged conduct.” The plaintiff failed to allege that fraudulent use of her debit card was “fairly traceable” to the National Park Service's issuance of the receipt with the card expiration date. The court held that merely asserting that the theft occurred at an unspecified time after the debit card transaction was not sufficient to satisfy the “fairly traceable” requirement. Further, the Ninth Circuit determined that the FCRA does not waive the federal government's sovereign immunity, so the National Park Service was immune from suit.
FAIR DEBT COLLECTION PRACTICES ACT
The Seventh Circuit rules that a debt collector who was told that alleged debt amounts were “not accurate” violated the Fair Debt Collection Practices Act (FDCPA) when reporting the debt to consumer reporting agencies without indicating they were disputed.
Evans v. Portfolio Recovery Associates, LLC, 889 F.3d 337 (7th Cir. 2018). Under the FDCPA, when debt
collectors report a consumer's debt to consumer reporting agencies that they know or should know is disputed, they
must indicate the debt is disputed. In Evans, a debt collector sought to collect from four separate
consumers who had defaulted on their credit card debts. Over 30 days after receiving the debt collector's
validation notices describing the debt amounts, the consumers sent letters through counsel to the debt collection
agency, each stating that “the amount reported is not accurate.” The debt collector nevertheless
communicated each consumer's debt information to the consumer reporting agencies without noting that the debt was
disputed.
The Seventh Circuit determined that the consumers had been harmed because of the risk of damage to their credit scores and accordingly had standing to bring suit against the debt collection agency. The court held that the debt collector violated the FDCPA because it did not report that the debts were disputed. The court explained that, regardless of whether their disputes were valid or reasonable, it was sufficient that the plaintiffs simply had called into question the amount owed (even though they did not use the word “dispute” or send the letters to the agency's special disputes department). The court also explained that it was irrelevant that the consumers’ letters were sent outside of the 30-day period under Section 1692g of the FDCPA, which specifies that consumers can submit written disputes to trigger debt verification procedures because the requirement that a debt collector notify the consumer reporting agencies that a consumer disputes the debt arises under Section 1692e(8), a different section of the FDCPA. Finally, the court addressed an issue of first impression for the Seventh Circuit in determining that a debt collector's failure to inform a credit reporting agency of the disputed nature of a debt will always have a material influence on the debtor and thus is an actionable violation under the FDCPA.
REGULATION Z — TRUTH IN LENDING ACT (TILA)
The Third Circuit rules that when a disputed credit card transaction is removed from a billing statement and subsequently reinstated, the cardholder's 60-day deadline for disputing the charge begins on the date of the billing statement in which the charge is reinstated.
Krieger v. Bank of America, N.A., 890
F.3d 429 (3d Cir. 2018). The plaintiff disputed
a charge on his credit card statement, and the
issuer agreed to remove it. But the card issuer later reinstated the charge on a subsequent statement and refused
to remove it because the issuer stated that it had received evidence that the transaction was “valid.”
The district court ruled in favor of the card issuer, finding that the consumer was required to dispute the charge
in writing within 60 days of the first statement in which it appeared, rather than 60 days from the statement with
the reinstated charge. The district court also determined that the Truth in Lending Act (TILA) provision that
limits a cardholder's liability to $50 for unauthorized use of a credit card does not provide a cardholder with a
right to be reimbursed.
On appeal, the Third Circuit reversed both rulings. Regarding the timeliness of the dispute, the Third Circuit held that requiring the consumer to dispute the charge after it was removed and before the issuer reinstated it would be “nonsensical” because it would require consumers to file a written notice of a billing statement error, even when the consumer reasonably believes that the card issuer already remedied the error. Instead, in cases in which a disputed charge is removed and reinstated, the 60-day period in which a consumer must file a written dispute begins when the consumer receives the first billing statement that reinstates the charge. The Third Circuit also found that the TILA provision on private right of action provides for a right to recover “actual damages,” to which the cardholder in this case was entitled.
REGULATION X — REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
The Eighth Circuit agrees with the district court that when a mortgage loan servicer responds to a borrower's qualified written request with an investigation and explanation, that investigation must be reasonably thorough.
Wirtz v. Specialized Loan Servicing,
LLC, 886 F.3d 713 (2018). The Real Estate
Settlement Procedures Act (RESPA) gives
mortgage loan servicers three options for appropriately responding to borrowers's qualified written requests.
These
options include that a servicer may, “after conducting an investigation,” provide the borrower with a
statement explaining why the servicer believes the borrower's account is correct, or “after conducting an
investigation,” provide the information requested by the borrower or an explanation of why the requested
information is unavailable. If a mortgage loan servicer fails to comply with its duties to respond to a qualified
written request, the borrower is entitled to actual damages stemming from the failure as well as statutory damages
up to $2,000 and costs and attorney's fees.
In Wirtz v. Specialized Loan Servicing, the Eighth Circuit ruled that any investigation conducted in response to a borrowers's qualified written request must be reasonably thorough for it to satisfy the RESPA requirements. The court determined that, because the mortgage loan servicer failed to obtain and review the borrower's loan payment history upon request from the borrower, the loan servicer had not conducted a reasonable investigation. However, the court ultimately reversed the district court's award of damages finding that the borrower did not establish an essential element of his RESPA claim because he did not show that he suffered any actual damages as a result of the mortgage loan servicer's failure to meet the qualified written request requirements.