Vast FCRA Horizon: Court Casts Simple Breach of Contract as Potential FCRA Violation
This case from the Southern District of West Virginia was brought by a husband and wife, alleging that furnisher Ally Financial (“Ally”) violated the FCRA by failing to conduct a reasonable reinvestigation following their dispute regarding the accuracy of information furnished by Ally. In denying Ally’s Motion to Dismiss, the court found that what constitutes a “reasonable reinvestigation” and when information is misleading to the point that it is no longer “accurate” for FCRA purposes are usually matters for a jury. But this case also caught my eye for another reason- the court recast what was essentially a claim by plaintiffs that Ally breached a contract into an FCRA violation.
In connection with the resolution of a previous dispute regarding an auto loan, the plaintiffs and Ally entered into a settlement agreement pursuant to which Ally agreed to request that the credit bureaus delete from plaintiffs’ files all negative information regarding Ally tradelines. Interestingly, the settlement agreement did not waive the plaintiffs’ account balance or release the debt. Three years later, plaintiffs applied for an auto loan and did not receive a favorable interest rate, based in part on negative tradeline information in their credit report relating to their previous account with Ally. The plaintiffs then filed disputes with the CRA that issued the report and Ally directly, alleging that the information reported was inaccurate. Ally verified that the negative information reported was accurate, notwithstanding Ally’s settlement agreement with the plaintiffs. The plaintiffs then sued Ally and the CRA.
What constitutes a “reasonable” reinvestigation? The court held that a furnisher must conduct a “reasonable,” rather than a superficial or minimal investigation. To satisfy the reasonable investigation standard, a furnisher must conduct a “searching inquiry” into the dispute. Such an investigation “requires the data furnisher to go beyond a cursory review of internal records.” “Nor may a data furnisher restrict an investigation to information provided by the CRA.” Although the court didn’t apply these standards to the facts in this case, the facts suggest that when Ally performed its reinvestigation, it did not take into account the settlement agreement. The court also noted that it is generally a question of fact for the jury as to whether a data furnisher conducted a reasonable investigation.
OK, but wasn’t the information that Ally reported technically accurate? Ally argued that the FCRA claims should be dismissed because the disputed information was accurate- the debt had not been released and so Ally could not have failed to conduct a reasonable investigation of their dispute. The court found Ally’s assertion to be “meritless.” The Fourth Circuit has held that “a consumer report that contains technically accurate information may be deemed ‘inaccurate’ if the statement is presented in such a way that it creates a misleading impression.”
The court noted that although the settlement agreement did not release the debt, Ally did agree to delete the negative tradeline. The complaint alleges that the tradeline continues to appear on their credit reports despite Ally’s assurance to plaintiffs that the tradeline would be deleted. Therefore, the plaintiffs have sufficiently alleged creation of a misleading impression constituting inaccurate information under the FCRA. The court also noted that whether technically accurate information is sufficiently misleading to be considered inaccurate for FCRA purposes is typically a question for a jury.
This case provides a helpful summary of the law on reasonable reinvestigation requirements and what constitutes misleading (and so inaccurate) information in the Fourth Circuit. It is also interesting that what is essentially a claim by plaintiffs that Ally breached a contract has been leveraged into an FCRA violation. That is, the only reason that the court believes the plaintiffs have plausibly alleged an FCRA violation is that the information in question was reported in violation of a contract not to do so. All parties agree that the information was technically accurate and it’s far from clear how any third party lender, employer or insurance carrier would be misled by the information appearing in plaintiffs’ consumer report, since the information is indeed accurate.
We’ll see how this case develops! In any event, it provides helpful insight into how some judges can creatively interpret the law when a sympathetic plaintiff is before them. It’s also a good reminder that reinvestigations need to be thorough and that ensuring the technical accuracy of consumer report information is not the end of the analysis- the information must also not be misleading as presented.
 Saunders v. Branch Banking and Trust Co. of VA, 526 F.3d 142, 148 (4th Cir. 2008).
 AT Beckley Daniel Price & Lisa Price v. Equifax Info. Servs., No. 5:19-cv-00886, 2020 U.S. Dist. LEXIS 87367 (S.D. W. Va., 2020).