A District Court judge in New York has partially granted a defendant’s motion for summary judgment in a Fair Credit Reporting Act case, ruling it did not knowingly violate the statute, but denied the motion on the grounds it recklessly violated it as a result of its dispute investigation procedures.
The Background: There is a lot in the background and the ruling to unpack and it’s likely that some parts are going to get skipped, so I definitely recommend reading the whole ruling for the full picture. That being said …
- The plaintiff contacted the entity that was servicing a credit card issued by the defendant in May 2020. During the conversation, the representative informed the plaintiff that if she were to be enrolled in a disaster recovery program that was implemented due to the COVID-19 pandemic, she would receive a number of benefits, including not having any late payments reported to the credit bureaus.
- The plaintiff made a payment in June 2020. In July and August of that year, the defendant sent notices to the plaintiff that her account was past due and began reporting the delinquency to the credit bureaus.
- In December 2021, the plaintiff notified the servicer that she was applying for a mortgage and inquired about the debt being reported as delinquent.
- After some more back and forth, including complaints filed with the Consumer Financial Protection Bureau, the servicer sent the plaintiff a notice, informing her that it reviewed the payment history and determined that the plaintiff did not make a minimum payment for July or August 2020. But the agent during the initial call did not thoroughly explain the terms of the program and it was requesting the credit bureaus remove the delinquency from the plaintiff’s credit report.
- The servicer notified the credit bureaus to remove the delinquency notation from the plaintiff’s account.
- The plaintiff had also disputed the debt with the credit bureaus on six occasions, each of which triggered an investigation by the defendant.
- The investigations only looked at the plaintiff’s payment history and, in each case, verified the delinquency that was being reported.
- The plaintiff filed suit, accusing the defendant of violating Section 1681s-2(b) of the FCRA.
The Ruling: Judge Kenneth M. Karas of the District Court for the Southern District of New York, was asked to determine whether the defendant knowingly and willfully violated the FCRA.
- There was no evidence of any deliberate activity to forego its statutory responsibilities, Judge Karas determined. “Even if Defendant’s approach to those investigations was unreasonably risky, the fact that it acknowledged and nominally exercised that duty ‘cuts against a finding’ a knowing violation,” he wrote.
- On the count that the defendant was reckless in how it handled the investigations, though, the judge was not as kind to the defendant. Noting that a “reasonable” investigation is one where there is “some degree of careful inquiry” Judge Karas determined the defendant did not provide enough evidence to meet its burden. “If no one can testify to what the investigations actually entailed, there is a fact dispute about whether any investigation that did occur was reckless,” he wrote.
