Eleventh Circuit determines Chase not liable in Fair Credit Reporting Act lawsuit

Fair Credit Reporting Act
Shelley Milgram v. Chase Bank USA
Date: June 8, 2023

Issue: Whether furnishers and Consumer Reporting Agencies (CRAs) must investigate legal disputes and defenses for claims under the Fair Credit Reporting Act (FCRA).

Case Summary: In a 3-0 decision, an Eleventh Circuit panel affirmed a district court ruling and determined Chase Bank did not violate the FCRA.

Milgram sued Chase Bank alleging the bank failed to conduct a reasonable investigation of her credit dispute. Milgram, owner of interior design company, hired Jean Williams, who opened several credit cards in her name without her consent. One of the credit cards was a Chase personal card which accumulated $30,277 in unpaid charges. Williams was prosecuted for theft and pled guilty to all charges. Following its investigation, Chase concluded Milgram was responsible for the charges under the legal doctrine of apparent authority. This is because Milgram’s employee used and paid for the Chase card from a deposit account controlled by Milgram for over two years without objection.

The district court granted Chase’s motion for summary judgment and denied Milgram’s motion for partial summary judgment. The court characterized the investigation duties the FCRA imposes on furnishers, such as Chase Bank, as “procedural” and “far afield” from legal questions. As Milgram did not identify any procedural deficiencies, the court determined there was no genuine dispute whether Chase conducted a reasonable investigation under the FCRA. Milgram appealed on Jan. 19, 2022.

The American Bankers Association and a group of trades (Amici) filed an amicus brief urging the Eleventh Circuit to affirm the dismissal of the FCRA claims against Chase Bank. Amici argued furnishers need not resolve legal disputes under the FCRA because the statute focuses on factual accuracy. Amici asserted a careful examination of the FCRA’s text reveals Congress required furnishers and CRAs to investigate factual inaccuracies rather than legal disputes. Amici also emphasized the FCRA’s structure, purpose, and history confirm the textual focus on factual accuracy. Amici also asserted courts around the country have correctly interpreted the FCRA. The brief explained the First, Seventh, Ninth and Tenth Circuits have held that a CRA’s obligations extend only to “factually inaccurate information, as CRA’s are neither qualified nor obligated to resolve legal issues.

On appeal, a Third Circuit affirmed, ruling Chase conducted a reasonable investigation by taking all necessary investigatory steps. Milgram argued the district court erred in suggesting her disputes were not cognizable under the FCRA when it categorized Milgram’s disputes as legal disputes. She also argued the court erred when it held no genuine issue of material fact existed as to whether Chase’s investigations were reasonable. The panel did not consider whether legal inaccuracies can raise a claim under the FCRA. The panel instead focused on whether Chase’s investigation was reasonable.

The panel emphasized consumers cannot sue furnishers for providing inaccurate information. Instead, consumers can only sue for failure to conduct a reasonable investigation. To succeed on an FCRA claim, a plaintiff must identify both inaccurate or incomplete information the furnisher provided to the CRA, and facts the furnisher could have uncovered to establish the reported information was in fact inaccurate or incomplete. The panel concluded Milgram did not show a genuine dispute of fact whether Chase’s conclusion was unreasonable. Further, Milgram did not explain what Chase should have done differently, whom it should have talked to, or what document it should have considered to impact its analysis.

Milgram also argued Williams’ criminal judgment should have impacted Chase’s conclusion. The panel concluded the criminal judgment was irrelevant to Chase’s apparent authority determination. The panel emphasized Chase was aware of the criminal investigation into Williams. But in the panel’s view, Williams’ conviction was not relevant to Chase’s conclusion declaring Milgram was liable.

In concurrence, Judge Robin Rosenbaum suggested the better course for Milgram to challenge the validity of the debt was to sue for declaratory relief to establish Milgram does not owe Chase money, she and Williams never had a principal-agent relationship, and Chase did not reasonably rely on automated payments. Judge Rosenbaum emphasized with the declaration in hand, Milgram would have a stronger case to force a furnisher to stop reporting debt to a reporting agency.

Bottom Line: As of July 5, 2023, Milgram has not filed an en banc (full panel) petition for a rehearing.

Documents: Opinion