Courts Hold Contract Disputes Not Actionable Under FCRA

A recent string of U.S. District Court decisions has clarified liability for furnishers of credit information under the Fair Credit Reporting Act (FCRA), specifically 15 U.S.C. § 1681s-2(b), in situations where consumers dispute the legal validity of a reported debt. In those cases, the courts held that legal challenges to the validity of the contract underlying a reported debt did not amount to the factual inaccuracy required to raise a § 1681s-2(b) claim.

Recent cases have decided claims against furnishers under 15 U.S.C. § 1681s-2 in a variety of factual circumstances. In Edwards v. Med-Trans Corporation, Case No. 2:20-CV-00114-CLM, 2021 WL 1087228 (N.D. Ala. Mar. 22, 2021), the Northern District of Alabama considered a claim that an air ambulance company (“Med-Trans”) violated § 1681s-2 by continuing to report a debt as delinquent even after the consumer disputed the validity of the underlying contract. The plaintiff, Edwards, was flown from Chattanooga to Birmingham by Med-Trans while in a medically-induced coma following a heart attack. When Med-Trans sought to collect amounts charged for Edwards’s air ambulance flight, Edwards claimed that the debt was invalid because he did not have a valid contract with Med-Trans. The court found that Edwards was not alleging that the amount of the reported debt was inaccurate, but rather than he was not contractually obligated to pay the reported amount. As with similar claims against CRAs (see Chuluunbat v. Experian Info. Sols., Inc., 4 F.4th 562, 568 (7th Cir. 2021)), this contractual dispute required resolution by a court of law. Accordingly, the court dismissed Edwards’s FCRA claim against Med-Trans, with prejudice, for failure to state a claim.

Other district courts across the country have similarly held that furnishers were not liable under § 1681s-2(b) for continuing to report a debt over a variety of consumers’ legal objections, such as: that the consumer’s prepayments on a loan rendered the scheduled payments in question inapplicable (Wilson v. SunTrust Bank, Inc., No. 2:20-CV-20, 2021 WL 2525585, at *3 (S.D. Ga. Apr. 9, 2021)); that the note evidencing the reported debt was a forgery (Uppal v. Wells Fargo Bank, NA, Case No. 8:19-cv-1334-T-02JSS, 2020 WL 6150923 (M.D. Fla. Oct. 20, 2020)); that the amount owed was offset by a statutory penalty (Scaife v. National Credit Systems, Inc., Case No. 1:20-cv-00379-CLM, 2021 WL 1610620, at *6 (N.D. Ala. Apr. 26, 2021)); and, that the consumer was not required to continue to make monthly payments on a loan after defaulting on the loan (Mayer v. Holiday Inn Club Vacations Inc., Case No. 6:20-cv-2283, 2021 WL 2942674, at *2 (M.D. Fla. Mar. 9, 2021)). In each of those cases, the court held that the plaintiff’s § 1681s-2(b) claim against a furnisher could not proceed because the alleged inaccuracy on the plaintiff’s consumer report was subject to a legal dispute, and was therefore not factually inaccurate as required for an FCRA claim.

It makes sense that if the courts have not held furnishers who are parties to the disputes liable under the FCRA, then the consumer reporting agencies (CRAs) that are reliant on the furnishers’ reporting of information are not liable under the FCRA. Courts in multiple circuits have held that plaintiffs cannot raise FCRA claims against CRAs based on legal disputes regarding a reported debt. Courts recognize that CRAs are not tribunals and “[t]he power to resolve [] legal issues exceeds the competencies of consumer reporting agencies.” Denan v. Trans Union LLC, 959 F.3d 290, 295 (7th Cir. 2020). Whether a debt is legally valid “can only be resolved by a court of law” and is “a legal issue that a credit agency…is neither qualified nor obligated 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 furnisher of the information or append a note to the credit report to show the claim is disputed.”). A legal challenge to the validity of a debt “is alone insufficient to make a report of that debt factually inaccurate.” Holland v. Chase Bank USA, N.A., 475 F.Supp.3d 272, 276 (S.D.N.Y. 2020) (citing Chiang v. Verizon New Eng. Inc., 595 F.3d 26, 38 (1st Cir. 2010)). Accordingly, consumers cannot state claims against CRAs under 15 U.S.C. § 1681e(b) or 15 U.S.C. § 1681i based on allegations that a CRA reported a debt for which the claims to not be liable.

In light of this trend, furnishers faced with § 1681s-2(b) claims and CRAs faced with § 1681e(b) claims should carefully consider whether the inaccuracy the plaintiff alleges is actually a legal dispute regarding the legal validity of the legal obligation underlying the reported debt.

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