The Court of Appeals for the Second Circuit has affirmed a lower court’s ruling for a defendant in a Fair Credit Reporting Act case over the reasonableness of a dispute investigation after the plaintiff claimed to be the victim of identity theft. The case was significant enough that it merited an amicus brief from the Consumer Financial Protection Bureau and Federal Trade Commission, who lobbied on behalf of the plaintiff.
The background: The case arose from the plaintiff’s claim that her mother used her identity to open and use a credit card account without her consent. The plaintiff alleged that, while attending college, her mother opened multiple accounts in her name, including one with the defendant, and used them without authorization. Upon discovering the accounts while applying for an apartment in 2019, the plaintiff contacted the bank, submitted a fraud affidavit, and disputed the account with the credit reporting agencies.
- The bank investigated the dispute multiple times, both internally and in response to Automated Consumer Dispute Verification notices after disputes were filed with the CRAs. The mother even called the defendant and confirmed she had opened the account without her daughter’s knowledge.
- The defendant determined that the account was not fraudulent, citing corroborating data such as shared addresses, consistent on-time payments, and use of a joint bank account.
- The plaintiff sued, alleging the bank violated Section 1681s-2(b) of the FCRA by failing to conduct a reasonable investigation.
- A District Court judge granted summary judgment for the bank, ruling that even if the bank’s investigation was flawed, no reasonable investigation would have led to a different outcome.
The ruling: The Second Circuit upheld the district court’s decision, agreeing that while there were factual disputes about the account’s accuracy, liability for not conducting a reasonable investigation under the FCRA does not hinge solely on accuracy. Liability requires that a consumer prove a reasonable investigation would have changed the result.
- Upon review, the court found that even with further inquiry, no new evidence would have led the bank to conclude the account was fraudulent. The plaintiff’s identity theft affidavit was incomplete and failed to follow required instructions, such as not including a police report, and the payment history supported legitimacy.
- “Even assuming the FCRA was violated,” the court wrote, “no jury could conclude that the violation was willful or negligent,” precluding the possibility of damages.
- The court rejected the plaintiff’s arguments that the bank’s rigid investigation process amounted to willful misconduct, citing precedent that an investigation’s reasonableness is not judged by its outcome alone.
