FAIR CREDIT REPORTING ACT
Rubin v. HSBC
Date: Feb. 16, 2024
Issue: Whether the reasonableness of an investigation into an alleged identity theft is a factual question under the Fair Credit Reporting Act (FCRA).
Case Summary: A New York federal court denied a motion for summary judgment filed by HSBC in an FCRA lawsuit because the plaintiff alleged identity theft and a reasonable factfinder could determine the issuer’s investigation was willfully unreasonable under the FCRA.
In 2019, HSBC shipped a credit card to David Rubin’s address. Rubin claimed he never received the card and reported the theft to the New York Police Department and the U.S. Postal Service. A caller using Rubin’s telephone number activated the account by providing the credit card number, the three-digit CVC number, and the last four digits of his social security number. Rubin suspected a thief may have used a “spoofing” method to disguise the call from his phone number. HSBC had no anti-spoofing measures in place at the time. On the same day, a large purchase was made at a BJ’s warehouse store where he had no membership and was over 100 miles away from Rubin. Rubin contested the charge with HSBC. However, HSBC’s policy was to deny disputes if the card appeared to be activated from the consumer’s telephone number, unless the consumer knew who stole and activated the card. Rubin refused to pay the charge and HSBC reported the account as delinquent to the consumer reporting agencies (CRAs). Rubin disputed the reporting with the CRAs, but HSBC denied the dispute and verified the charges.
Rubin sued HSBC alleging it violated the FCRA by failing to conduct a proper investigation into his dispute. Section 1681s-2(b) requires furnishers to determine if furnished information is “incomplete or inaccurate,” and furnishers must undertake a reasonable investigation of consumers’ disputes. HSBC moved the court for summary judgment, arguing Rubin did not satisfy the inaccuracy element of his FCRA claim. According to HSBC, Rubin improperly relied on a disputed legal question instead of any factual inaccuracy. HSBC also contended it conducted a reasonable investigation of the dispute, and even if an FCRA violation occurred, it did not act willfully. In opposition, Rubin argued his dispute was a factual dispute, and a reasonable jury could find that HSBC acted willfully by not conducting a sufficient investigation in his disputes.
Senior District Judge Federick Block of the Eastern District Court of New York denied HSBC’s motion. The court noted the focus is on whether the reporting of an account is inaccurate and, if so, whether that inaccuracy is factual or legal. The court relied on two recent Second Circuit cases (Mader v. Experian and Sessa v. TransUnion), which clarified the question is whether the information in dispute is “objectively and readily verifiable.” On that basis, the court noted the issue in this case is purely factual: whether Rubin or someone else activated the card and made the purchase. The court found that the credit card issuer was in the best position to undertake this inquiry.
Next, the court examined the reasonableness of HSBC’s investigation. The court emphasized the question of reasonableness in FCRA cases generally presents a fact question, and this case was no different. According to the court, Rubin provided specific evidence contesting the allegedly fraudulent charge including: GPS data indicating that Rubin was not at the store while the charge was made; a witness prepared to testify that Rubin was not at the store; and the filed police report. The court determined Rubin presented sufficient evidence to defeat HSBC’s motion for summary judgment. Rubin also detailed HSBC’s policy and procedure of denying fraud claims where cards were activated with proper verification. The court pointed out that Rubin compellingly argued HSBC’s internal process was insufficient. For these reasons, the court opined a reasonable factfinder could conclude that HSBC failed to reasonably investigate Rubin’s dispute.
Finally, the district court addressed HSBC’s argument it did not willfully violate the FCRA. According to the court, “willfulness can be found on either a knowing or reckless basis.” The court highlighted that Rubin presented evidence showing HSBC had a policy not to consider any information Rubin provided to the CRAs, because HSBC already determined his claim was not fraudulent. The court emphasized a reasonable jury could conclude HSBC’s policy of not reviewing additional information Rubin provided to the CRAs recklessly violated its statutory investigatory duties under the FCRA.
Bottom Line: A jury will determine whether HSBC negligently or willfully violated the FCRA by failing to reasonably investigate Rubin’s dispute and damages.
Documents: Motion
