FAIR CREDIT REPORTING ACT
Ritz v. Equifax Information Services
Date: April 8, 2024
Issue: Whether the Fair Credit Reporting Act (FCRA) requires furnishers to investigate and adjudicate legal disputes.
Case Summary: ABA filed a coalition amicus brief urging the Third Circuit to reject the Consumer Financial Protection Bureau (CFPB)’s attempt to expand the FCRA’s obligations to require consumer reporting agencies (CRAs) and furnishers to adjudicate legal disputes.
Michael and Andrew Ritz (plaintiffs) alleged Nissan violated the FCRA after it informed the CRAs plaintiffs were delinquent on their payments. Plaintiffs leased a car from Nissan and their agreement required them to “return” the car to the dealership at the end of the lease period. If plaintiffs kept possession of the vehicle, they would be assessed a monthly fee. To return the vehicle, plaintiffs had to schedule a mandatory inspection. On the final day of their lease term, plaintiffs brought the car to the dealership without scheduling an inspection, causing the dealership to refuse to accept the return. Nissan charged the monthly fee, concluding plaintiffs did not adhere to the lease’s terms for returning a vehicle. Plaintiffs refused to pay the fee and Nissan informed the CRAs of the delinquency.
Plaintiffs sued Nissan under the FCRA. Under the FCRA, CRAs and the entities furnish information to them are required to investigate whether disputed information in a credit file is “accurate.” Plaintiffs argued Nissan had no “contractual or legal” right to assess additional monthly charges after they returned the vehicle by the lease-end date. Nissan contended plaintiffs’ claim was a legal question rather than a factual inaccuracy, and legal questions cannot support a claim under the FCRA. The district court ruled for Nissan. The district court noted the Third Circuit has not addressed whether a legal dispute on the validity or enforceability of a debt renders that debt a “factual inaccuracy” for an FCRA claim against a furnisher. The court also noted courts across the country, including district courts in the Third Circuit, have ruled such a legal dispute alone cannot maintain an FCRA claim. Plaintiffs appealed the district court’s decision.
The CFPB filed an amicus brief urging the Third Circuit to reject the distinction between factual inaccuracies and legal disputes because it will be unworkable. In its amicus brief, the CFPB argued the FCRA requirement for furnishers to reasonably investigate disputes applies to legal issues, rather than only disputes raising purely factual questions. The CFPB also contended an “atextual” exception for “legal” disputes could swallow the reasonable investigation rule.
ABA filed an amicus brief to provide counterarguments to the CFPB’s amicus brief. First, ABA argued the FCRA addresses factual inaccuracies, not legal disputes. ABA emphasized a careful examination of the FCRA’s text demonstrates that Congress required furnishers and CRAs to investigate factual inaccuracies, not to correctly resolve legal disputes. Section 1681s-2(b)(1) of the FCRA requires furnishers to investigate information whose “completeness or accuracy” is disputed and to modify or delete any item of information found to be inaccurate or incomplete. ABA contended that “completeness and accuracy” are matters of fact or truth, and their definitions require a focus on objectively and readily verifiable information. Thus, the terms exclude circumstances in which parties must debate a legal question, as legal questions “evade objective verification.”
Second, ABA argued the FCRA’s structure, purpose, and history confirm the textual focus on factual accuracy. Congress expressed the FCRA was designed to ensure “fair and accurate credit reporting” because inaccurate credit reporting impairs the efficiency of the banking system. Under the FCRA, the furnisher’s role is to reasonably investigate disputed information to guard against mistakes in a credit report. While furnishers must complete their investigations in 30 days, the short timeframe allows furnishers to uncover objective factual inaccuracies. ABA illustrated that the short timeframe would not make sense if the furnisher’s task were to correctly resolve complex legal disputes.
Third, ABA conveyed courts around the country have correctly interpreted the FCRA. ABA highlighted the First, Seventh, Ninth, Tenth, and Eleventh Circuits have ruled a CRA’s obligations under the FCRA extend only to factually inaccurate information because a CRA is not qualified or obligated to resolve legal issues.
Fourth, ABA argued the CFPB’s FCRA approach is unworkable and inefficient. CFPB contended it would be difficult for courts deciding FCRA cases to determine whether a plaintiff has asserted a factual inaccuracy or a legal dispute. However, ABA pointed out that courts routinely distinguish between factual and legal matters in various contexts. District courts, for example, distinguish between fact and law whenever they determine which issues they must decide, and which must be reserved for a jury. ABA also explained the bureau’s approach is unsound. ABA contended the CFPB’s FCRA framework would not be administrable. Personnel responsible for responding to disputed information in credit reports are not typically lawyers, let alone judges. Under the bureau’s regime, personnel would need to resolve extraordinarily complex legal questions correctly or potentially face lawsuits. ABA highlighted that the elimination of the accepted fact-law distinction would prove unworkable, expensive and inefficient in practice.
Bottom Line: Plaintiffs’ reply brief is due May 22, 2024.
Documents: Brief
