Courts Hold Contract Disputes Not Actionable Under FCRA

29 September 2021 Consumer Class Defense Counsel Blog
Authors: Christi A. Lawson John J. Atallah Andrew C. Gresik

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.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services