It is one of the most common claims in FCRA world.  A consumer claims he or she does not actually owe a debt that is being reported to the CRA because a legal defense to the debt exists.  The consumer contests the validity of the transaction with the CRA, although the CRA relies on certain information supplied by the furnisher as part of its own “reinvestigation” of the matter.  Can the consumer successfully sue the CRA for a failure to reasonably reinvestigate under these circumstances?

Nope.

Here’s the background.

In Batterman v. BR Carroll Glenridge, the Plaintiff sought to terminate his apartment lease early after it flooded and was rendered uninhabitable by toxic mold growths.  No. 1:19-CV-1598-CC-RDC, 2020 U.S. Dist. LEXIS 63117, at *3 (N.D. Ga. April 10, 2020).  Although the Plaintiff’s landlord accepted the early lease termination, the landlord concurrently sought to collect from the Plaintiff $2,816 in liquidated damages, which the Plaintiff refused to pay.  Id.  The situation quickly escalated from there.

The $2,816 charge was sent to two collections agencies, which then reported to CRAs that the Plaintiff was delinquent on an account.  Id.  The Plaintiff responded to two CRAs that the representations from the furnishers was false and requested the CRAs conduct their own reinvestigation of the matter.  Id. at *4.  The Plaintiff submitted documentation to the CRAs that he claimed supported his position although the CRAs continued to report that the Plaintiff failed to pay liquidated damages to his former landlord.  Id. 

Apparently frustrated by the CRAs failure to respond in a favorable fashion, the Plaintiff filed suit against them which included claims for negligent and willful violations of the Fair Credit Reporting Act (“FCRA”).  After the magistrate judge on the case found that the Plaintiff’s Complaint plausibly asserts a claim for willful violations of the FCRA in a Report and Recommendation, the CRAs entered objections to this finding, among others.  Id. at *9. 

While it is extremely unusual for a district court to grant objections to a magistrate judge’s rulings—amounting to a reversal of the magistrate judge—that is exactly what happened here.

The district court held the magistrate judge had swung and missed because “a factual inaccuracy is required to state an FCRA claim.”  Id. at *14. (emphasis added)

But the Plaintiff in Batterman had not set forth a factual inaccuracy—merely a legal one.  The Plaintiff simply disputed owing the money due to a legal defense. Yet this was insufficient because, as the court held, “[a] reasonable reinvestigation does not require CRAs to resolve legal disputes about the validity of the underlying debts they report.”  Id. at *15.  The court held that the Plaintiff’s claim “fails because his dispute concerning the reported liquidated damages centers on the validity of the underlying debt and not a factual inaccuracy included on his credit reports.”  Id. at *19.

Because of its citation to case law from other jurisdictions, its wide ranging principles supporting dismissal of a FCRA claim on a Rule 12(b)(6) motion, and its language which is highly supportive of industry practices among credit reporting agencies, this case is worth following.  Stay tuned.)