The Seventh Circuit Court of Appeals has upheld a lower court’s ruling in a class-action Fair Credit Reporting Act suit, affirming that a credit reporting agency does not have to determine the legal validity of a debt when investigating a dispute.
A copy of the ruling in the case of Denan v. TransUnion LLC can be accessed by clicking here.
A pair of plaintiffs separately obtained payday loans from entities that were affiliated with Native American tribes. When one of the plaintiffs stopped making payments on his loan, that information was reported to the defendant. That plaintiff disputed the accuracy of his credit report, alleging that the loan was illegally issued so he was not obligated to repay it. The defendant investigated the dispute, found the information that was furnished by the payday lender to be accurate, but did not investigate the plaintiff’s claim about the legal status of the debt.
The plaintiffs filed suit, alleging the defendant violated Section 1681e(b) of the FCRA, which requires credit reporting agencies “to assure maximum possible accuracy of the information” in a credit report and Section 1681i(a) of the FCRA, which requires credit reporting agencies to reinvestigate disputed items. Rather than dispute the amount or status of the debt, the plaintiffs claimed Trans Union’s reports contained “legally inaccurate” information because they posted “legally invalid debts.”
The defendant filed a motion for a judgment on the pleadings, arguing that its duty was to report factually accurate information, which it did. Because the plaintiffs never alleged that the information that was reported was inaccurate, a District Court judge granted the defendant’s motion.
But, as the Seventh Circuit noted in its ruling, only furnishers are required under the FCRA to report liability; it is not the job of a credit reporting agency because “the power to resolve these legal issues exceeds the competencies of consumer reporting agencies,” it wrote in upholding its ruling.
If the plaintiffs wanted to challenge the validity of their loans, then their recourse was to sue the lender, not the credit reporting agency, the Seventh Circuit noted. If a court had ruled the loans to be invalid and the defendant continued to report them as accurate, then the plaintiffs would have a case against the credit reporting agency, the Appeals Court wrote.