Even a seemingly minor inaccuracy in a credit report can lead to a consumer being denied a loan, housing, or job. However, credit reporting companies’ customers are usually the lenders, landlords, and employers who purchase credit reports, not the consumers whose financial lives are affected by them. This raises a real concern that credit reporting companies won’t pay enough attention to disputes or other issues that consumers raise about their reports.
Congress recognized this risk and passed the Fair Credit Reporting Act (FCRA) to protect consumers from inaccurate credit reporting. The FCRA, enacted in 1970 and amended several times since, includes a variety of important provisions to ensure that credit reporting companies report accurate information about consumers and give consumers recourse when credit reporting companies fail to live up to this obligation. The FCRA also includes requirements on furnishers – firms, such as lenders or debt collectors, that provide information to credit reporting companies.
Assuring Accuracy in Consumer Reports
In the courts, credit reporting companies have made arguments that could have a far-reaching impact on their obligations to report information accurately. Under the law, when they prepare credit reports, credit reporting companies are required to follow “reasonable procedures to assure maximum possible accuracy” of the information. Similarly, furnishers are required to investigate the accuracy of such information if it is disputed by a consumer. There is no exception for particular types of inaccuracies. Nonetheless, credit reporting companies and furnishers have been arguing in court that their duties don’t apply to certain inaccuracies. They have claimed that they are not violating the law if the question of whether the information is true or false can be characterized as a “legal” issue, rather than a “factual” one. If this were true, it would be a huge loophole in the law’s protection for consumers. In practice, almost any type of inaccuracy could conceivably be characterized as a “legal” issue. For example, credit reporting companies and furnishers have claimed that mistakes about whether a consumer actually owes money fall into this category.
Fortunately, there is no such loophole in the law. Congress was clear that credit reporting companies and furnishers have responsibilities with respect to accuracy – with no exceptions for legal issues. Accordingly, the Consumer Financial Protection Bureau (CFPB) recently filed two friend-of-the-court (“amicus”) briefs standing up for consumers and the law as Congress wrote it.
CFPB Amicus Briefs
Yesterday, the CFPB, together with the Federal Trade Commission (FTC), filed an amicus brief in Sessa v. Trans Union, LLC, a case in which a consumer sued TransUnion, one of three nationwide credit reporting companies, for violating the FCRA. There is no dispute about the facts: TransUnion reported on a consumer’s credit report that she owed nearly $20,000 on a car lease that she actually didn’t owe under the plain terms of her lease.
The consumer sued TransUnion, arguing that it had violated the FCRA by failing to have reasonable procedures to assure the information on her report was accurate. TransUnion argued that it couldn’t be responsible for failing to do its duty because the error was “legal” rather than “factual.” TransUnion also argued that the incorrect information couldn’t be “inaccurate” because it was provided to TransUnion by the company that financed the lease.
The brief filed by the CFPB and FTC points out that the FCRA does not contain an exception for “legal” inaccuracies. Rather, the law commands credit reporting companies to follow “reasonable procedures to assure maximum possible accuracy.” While TransUnion argues that the inaccuracy on the consumer’s credit report was based on a legal dispute, the error was simple and straightforward: TransUnion reported that the consumer owed money that she clearly did not. The brief also points out that information isn’t necessarily accurate just because the credit reporting company got it from somewhere else. The case is currently pending before the U.S. Court of Appeals for the Second Circuit.
Similarly, last month, the CFPB filed an amicus brief in Milgram v. JPMorgan Chase, a case which involves the duty of furnishers to reasonably investigate the accuracy of the information they furnish after it is disputed by a consumer. In that case, a consumer who was the victim of identity theft disputed information on her credit report related to a fraudulently opened Chase credit card account. A state court had found that the consumer was a victim of identity theft and even recommended that credit reporting companies stop reporting the account. But when the consumer disputed the account with Chase, Chase continued to furnish it to the credit reporting companies. The CFPB filed a friend-of-the-court brief to make clear that Chase had the same duty to reasonably investigate the disputed information, regardless of whether the underlying dispute could be characterized as “legal” or “factual.” The case is now pending before the U.S. Court of Appeals for the Eleventh Circuit.
Information in credit reports has critical effects on Americans’ daily lives, and the FCRA plays an important role in ensuring that credit reports are accurate and complete. The CFPB will continue to ensure that the consumer protections passed by Congress are given effect and that credit reporting companies and furnishers do their job.
The cases are Sessa v. Trans Union, LLC, No. 22-87 (2d Cir.) and Milgram v. JPMorgan Chase, No. 22-10250 (11th Cir.).