The Court of Appeals for the Third Circuit has affirmed the dismissal of a Fair Credit Reporting Act lawsuit accusing a credit reporting agency and debt buyer of inaccurately reporting a debt as “active and in collections” after a prior collection lawsuit had been dismissed with prejudice. The ruling is notable because the court stopped short of deciding whether legal disputes about the enforceability of a debt can create an actionable inaccuracy under the FCRA, but still found the plaintiff’s theory failed because the alleged legal issue was not “objectively and readily verifiable.”
The background: The plaintiff sued a credit reporting agency and a debt buyer under the FCRA after a collection lawsuit tied to a credit card debt was dismissed with prejudice in Pennsylvania state court for failure to prosecute.
- The plaintiff did not dispute owing the debt or failing to repay it. Instead, he argued that once the collection lawsuit was dismissed with prejudice, it became inaccurate to continue reporting the account as “active and in collections.”
- According to the plaintiff, the dismissal supposedly meant the debt buyer could never again attempt to collect the debt in court, making the “in collections” description misleading under the FCRA.
- The plaintiff brought claims against the credit bureau for allegedly reporting inaccurate information and against the debt buyer for allegedly furnishing inaccurate information.
The ruling: The Third Circuit affirmed the dismissal of the case, finding the plaintiff failed to plausibly allege an actionable inaccuracy under the FCRA.
- The court explained that even if legal disputes about a debt could sometimes support an FCRA claim, the dispute here was far from clear-cut. The panel noted there is currently a split among courts about whether a legal defense to a debt can make credit reporting inaccurate.
- But the judges concluded the plaintiff failed to show that dismissal of the earlier collection lawsuit permanently barred future collection efforts in a way that was “objectively and readily verifiable.”
- In one interesting section of the opinion, the court pointed out that Pennsylvania law may not even give preclusive effect to dismissals for failure to prosecute, even when those dismissals are entered “with prejudice.”
- The panel also noted the plaintiff repeatedly cited questionable or incorrect legal authorities throughout the litigation. At one point, the opinion stated the plaintiff cited a case that appeared not to exist, while another citation actually pointed to an FDA safety report instead of a court decision.
- Another operational nuance in the ruling involved the court rejecting the plaintiff’s argument that the fact other credit bureaus allegedly removed the account somehow established an FCRA violation. The court explained that actions taken by other credit reporting agencies do not determine whether the reporting at issue was actually inaccurate.
