The Court of Appeals for the Fourth Circuit has overturned the dismissal of a Fair Credit Reporting Act case in favor of the defendant, ruling whether a dispute is legal or factual has no bearing on the furnisher’s duty to investigate the dispute.
The background: The case stems from a dispute between the plaintiff and her former landlord over charges she believed were fabricated. The plaintiff had vacated the apartment, but the landlord retained her $500 security deposit and sent a $791.14 invoice for additional damages, including the purchase of a new stove. The plaintiff argued that the charges were false, so she refused to pay. The landlord then referred the debt to the defendant.
- A month later, the collection agency sent a notice demanding payment for the $791.14 debt. The plaintiff’s father, who was the guarantor for the lease, disputed the claim in a letter, stating that the debt was both retaliatory and fabricated. The collection agency reported the debt to the credit reporting agencies, noting that the debt was “disputed.”
- When the plaintiff later sought to rent an apartment in 2022, she realized the disputed debt was affecting her ability to secure housing. She disputed the debt directly with the credit agencies, who notified the collection agency. In response, the collection agency contacted the landlord and asked them to confirm the validity of the debt. The collection agency did nothing more than this before continuing to report the debt as disputed. The plaintiff again disputed the debt, but the collection agency continued to recertify the debt without conducting further investigation.
- The plaintiff then sued the collection agency, claiming that it violated the Fair Credit Reporting Act by failing to conduct a reasonable investigation of her dispute. The district court dismissed the case, ruling that the plaintiff’s dispute involved a legal issue rather than a factual inaccuracy, and thus the FCRA did not require the collection agency to investigate.
The ruling: On appeal, the Fourth Circuit disagreed with the district court’s interpretation. The court held that the FCRA requires furnishers of information, like the collection agency, to investigate disputes regarding the accuracy of information, regardless of whether the dispute is legal or factual. The court ruled that the plaintiff did not need to allege that the debt was legally invalid but rather that the debt was objectively verifiable as inaccurate or incomplete.
- The court emphasized that the key issue is whether the disputed information is “objectively and readily verifiable,” not whether the dispute involves legal or factual matters.
- “What it means for a dispute to be objectively and readily verifiable requires some fleshing out,” the Appeals Court wrote. “Inaccuracy or incompleteness under the FCRA is not synonymous with legally recoverable or legally valid. For instance, a dispute that involves complex fact-gathering and in-depth legal analysis of the sort that courts would typically perform is not objectively and readily verifiable. A dispute that implicates unsettled questions of law and requires credibility determinations and quasi-discovery isn’t either. Inaccuracies that are objectively and readily verifiable do not include claims of tortious conduct that require a furnisher to evaluate the subjective nature of the parties’ actions — such as claims of fraud or retaliation.”
- The appeals court vacated the district court’s ruling and remanded the case for further proceedings. The case now returns back to the district court to assess whether the plaintiff has sufficiently alleged that the debt reported on her credit report was inaccurate or incomplete and if the collection agency’s investigation was reasonable.
