Courts Decide Contractual Disputes Unjustifiable Under FCRA | Foley & Lardner srl
A recent series of United States district court decisions clarified the liability of credit information providers under the Fair Credit Reporting Act (FCRA), in particular 15 USC § 1681s-2 (b), in situations where consumers dispute the legal validity of a declared debt. In those cases, the courts held that legal challenges to the validity of the contract underlying a declared debt did not amount to the factual inaccuracy required to raise a claim under § 1681s-2 (b).
Recent cases have ruled on claims against suppliers under 15 USC § 1681s-2 in various factual circumstances. In Edwards v. Med-Trans Corporation, Case # 2: 20-CV-00114-CLM, 2021 WL 1087228 (ND Ala. March 22, 2021), the Northern District of Alabama has reviewed an allegation that an air ambulance company (“Med-Trans ”) Would have violated § 1681s-2 by continuing to report an overdue debt even after the consumer contested the validity of the underlying contract. The plaintiff, Edwards, was transported from Chattanooga to Birmingham by Med-Trans while in a medically induced coma following a heart attack. When Med-Trans sought to collect the amounts billed for Edwards’ air ambulance flight, Edwards claimed the debt was invalid because he did not have a valid contract with Med-Trans. The court concluded that Edwards was not alleging that the amount of the stated debt was incorrect, but rather that he was not contractually obligated to pay the stated amount. As with similar claims against rating agencies (see Chuluunbat v. Experian Info. Sols., Inc., 4 F.4th 562, 568 (7th Cir. 2021)), this contractual dispute had to be resolved by a court. As a result, the court dismissed Edwards FCRA’s claim against Med-Trans, with prejudice, for failure to report.
Other district courts across the country have also ruled that suppliers were not liable under Section 1681s-2 (b) for continuing to report debt despite various legal objections from consumers, such as: the consumer’s prepayments on a loan made the payment in question inapplicable (Wilson v. SunTrust Bank, Inc., # 2: 20-CV-20, 2021 WL 2525585, at * 3 (SD Ga. April 9, 2021)); that the note attesting to the declared debt was a forgery (Uppal v. Wells Fargo Bank, NA, Case No.8: 19-cv-1334-T-02JSS, 2020 WL 6150923 (MD Fla. October 20, 2020)); that the amount due has been offset by a legal penalty (Scaife v National Credit Systems, Inc., Case n ° 1: 20-cv-00379-CLM, 2021 WL 1610620, at * 6 (ND Ala. April 26, 2021)); and, that the consumer was not required to continue making monthly payments on a loan after defaulting on the loan (Mayer v. Holiday Inn Club Vacations Inc., Case n ° 6: 20-cv-2283, 2021 WL 2942674, at * 2 (MD Fla. March 9, 2021)). In each of these cases, the court held that the plaintiff’s claim under section 1681s-2 (b) against a provider could not be pursued because the alleged inaccuracy in the plaintiff’s consumption report was wrong. ‘subject to litigation and was therefore not inaccurate as required. for an FCRA claim.
It makes sense that if the courts have not held suppliers who are parties to litigation liable under the FCRA, then consumer information agencies (CRAs) that depend on supplier reporting of information are not. not liable under the FCRA. Courts in several circuits have ruled that plaintiffs cannot raise FCRA claims against ARCs based on legal disputes over a declared debt. Courts recognize that rating agencies are not courts and “[t]he has the power to solve  legal issues are beyond the remit of consumer information agencies. Denan v. Trans Union LLC, 959 F.3d 290, 295 (7th Cir. 2020). The question of whether a debt is legally valid “can only be resolved by a court” and is “a legal question that a credit agency … is neither qualified nor obliged to resolve under the FCRA”. DeAndrade v. Trans Union LLC, 523 F.3d 61, 68 (1st Cir. 2008); see also Wright v. Experian Info. Sols., Inc., 805 F.3d 1232, 1244 (10th Cir. 2015) (“The FCRA expects consumers to dispute the validity of a debt with the information provider or attach a note to the credit report to show that the complaint is contested. ”). A legal challenge to the validity of a debt “alone is insufficient to make a report of that debt factually inaccurate.” Holland v. Chase Bank USA, NA, 475 F. Supp.3d 272, 276 (SDNY 2020) (citing Chiang v. Verizon New Eng. Inc., 595 F.3d 26, 38 (1st Cir. 2010)). As a result, consumers cannot report claims against rating agencies under 15 USC § 1681e (b) or 15 USC § 1681i based on allegations that a rating agency has reported debt for which the claims are not responsible.
In light of this trend, providers facing § 1681s-2 (b) claims and credit rating agencies facing § 1681e (b) claims should carefully consider whether the inaccuracy alleged by the claimant is in effect a legal dispute over the legal validity of the underlying legal obligation. the declared debt.