A District Court judge in Alabama has partially granted a defendant’s motion to dismiss claims it violated the Fair Credit Reporting Act, but denied the motion on a claim over how it conducted its investigation after the plaintiff disputed the debt. The court’s opinion offers a detailed look at what consumers must allege to state a viable report preparation claim and also reinforces the statutory obligations that apply once a dispute is submitted.
The background: The plaintiff refinanced investment properties and learned that a prospective lender had denied an application after receiving a credit report containing a $123 collection account from an entity he claimed not to recognize.
- The plaintiff disputed the entry with the defendant, requested an Automated Consumer Dispute Verification record, and asked for details about the procedures used to verify the debt.
- According to the complaint, the defendant responded that the information had been “verified” but supplied no supporting detail. The plaintiff alleged the inaccurate entry caused credit score damage, emotional distress, and additional financial strain.
The ruling: Judge Harold D. Mooty III of the District Court for the Northern District of Alabama agreed that the plaintiff sufficiently alleged an inaccuracy in the report, noting that he identified “what information is inaccurate and why it is inaccurate” in a way that was “objectively and readily verifiable.”
- Judge Mooty wrote that an alleged debt that never existed can constitute a factual inaccuracy for purposes of the statute. But the court ultimately dismissed the report preparation claim because the plaintiff did not allege that the defendant used unreasonable procedures when preparing the report.
- As the judge put it, the complaint “relies principally on the outcome” rather than identifying any facts about the procedures themselves. Under Eleventh Circuit precedent, inaccuracy alone cannot support liability because the statute does not impose strict liability.
- The reverification claim, however, survived. The plaintiff alleged that the defendant failed to provide the required description of its verification procedures after he requested it.
- Judge Mooty called this a straightforward violation of the statute’s mandatory language and found that the allegations supported both negligent and willful noncompliance.
