The CFPB and the FTC recently filed an amicus brief in an appeal to the Second Circuit, arguing that the Court should reject the District Court’s “unduly narrow” interpretation of the FCRA requirement that consumer reporting agencies (CRAs) follow reasonable procedures to assure accuracy of information included in consumer reports.
In Sessa v. Trans Union, LLC, Plaintiff-Appellant brought a putative class action alleging that TransUnion reported she owed a “balloon payment” on a vehicle lease, but then inaccurately reported the amount owed as the vehicle’s residual value, which was an optional amount to purchase the vehicle at the end of the lease and greater than the actual amount owed.
The District Court for the Southern District of New York granted summary judgment to TransUnion holding that Plaintiff failed to make the “threshold showing” of inaccuracy on the consumer report. First, the court drew a distinction between factual and legal inaccuracies and held that a CRA cannot be held liable when the issue requires a legal determination as to the validity of the debt the agency reported. In the court’s view, whether Plaintiff in fact owed a balloon payment at the end of the lease was a “legal dispute” that requires “a legal interpretation of the loan’s term.” Second, the court concluded that the information in the credit report was factually accurate because TransUnion reported the exact information it received from the data furnisher.
On Plaintiff’s appeal to the Second Circuit, the CFPB and FTC filed an amicus brief where they argue that the text of the FCRA makes no distinction between factual and legal inaccuracies, and that importing a distinction between factual and legal inaccuracies into the law is unworkable in practice. They argue that most, if not all, inaccuracies in consumer reports could be characterized as legal, which would create an exception that would swallow the rule, effectively rendering the reasonable procedures section of the FCRA a nullity. More specifically, debts are creatures of contract and any inaccurate representation pertaining to an individual’s debt obligations could arguably be characterized as a legal inaccuracy insofar as determining the truth or falsity of the representation requires contractual interpretation. Whether an error is defined as factual or legal, a consumer report may still be incorrect.
The FTC and the CFPB further argue that the mere fact that a CRA reports the exact same information provided by a furnisher is not a proper basis to reject a reasonable procedures claim. They argue that, although reliance on a furnisher may constitute some evidence of the reasonableness of the CRAs procedures, whether those procedures are reasonably designed to assure the maximum possible accuracy of the information in a consumer report is a fact-intensive question that usually cannot be resolved at summary judgment.