Appeals Court Revives FCRA Case Over Reasonable Investigation Threshold

The Court of Appeals for the Ninth Circuit yesterday reversed a lower court’s summary judgment ruling in favor of a defendant sued for violating the Fair Credit Reporting Act, determining that the “reasonable investigation” it conducted when the plaintiff disputed the accuracy of the information on his credit report needs to be left up to a jury to decide.

A copy of the ruling in the case of Gross v. CitiMortgage can be accessed by clicking here.

The plaintiff defaulted on both a first and second mortgage on his home and the property was sold through the foreclosure process. Years later, the plaintiff attempted to purchase another home, but could not get approved for a mortgage. The plaintiff claimed it was because the defendant was still reporting the second mortgage as “past due” on the plaintiff’s credit report, including interest and late fees that were accruing because of the missed monthly payments.

The plaintiff disputed the debt through a credit reporting agency, which notified the defendant about the dispute. The plaintiff included documentation that state law in Arizona, where he lived, abolished the debt in question. The plaintiff disputed the debt again with the other two major credit reporting agencies, again claiming he did not owe the debt in question.

After receiving the first dispute, the defendant began to report that the plaintiff was 180 days late on his payments, instead of the 120 days it had been reporting and noted that the debt was being disputed. After receiving the second dispute, the defendant changed the balance on the debt to $0 and marked the account as “paid, closed” with a charged-off balance of $38,010.

The plaintiff sued, alleging the defendant violated the FCRA by failing to reasonably investigate the dispute and for reporting inaccurate information. A District Court judge granted the defendant’s motion for summary judgment, ruling the reports it made were accurate as a matter of law.

The state law in question required that the plaintiff’s balance be “abolished,” meaning payments were not late and that interest and fees should not have been accruing, the Ninth Circuit ruled, so it was “patently incorrect” for the defendant to report otherwise. The situation is the same as if the plaintiff had filed for bankruptcy protection, it said.

Noting that the Consumer Financial Protection Bureau filed an amicus brief, the Ninth Circuit ultimately decided that there was a “genuine factual dispute about the reasonableness” of the defendant’s investigation, and thus should be left to a jury to decide.

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