A District Court judge in California has refused to dismiss a consumer’s Fair Credit Reporting Act lawsuit accusing three credit reporting agencies of inaccurately reporting his final car loan payment as overdue after a lender failed to process an automatic payment that he had authorized and funded on time.
The background: The case grew out of a single missed payment at the very end of a six-year auto loan.
- The plaintiff financed a car in December 2018 and agreed to pay $407.14 a month for 72 months, enrolling in the lender’s AutoPay feature so the money came out of his checking account automatically each month.
- For 71 straight months the payments processed without a problem. But in December 2024, when the last installment was due, the lender failed to pull the payment and never told him. The following month, it reported him to the three agencies as 30 days delinquent.
- The plaintiff learned of the delinquency from his credit monitoring service, called the lender, and was told the payment was still outstanding and that nothing would be done about the reporting. The lender finally deducted the payment on February 5, 2025, the same day he began disputing the entry with the agencies.
- He disputed the debt twice. The second time he attached proof of his AutoPay enrollment and proof that he had the money in his account when the payment should have been processed. Two agencies said the lender had verified the entry as accurate; the third updated its file but kept the delinquency.
- He then sued, alleging violations of the FCRA and the California Consumer Credit Reporting Agencies Act. The agencies moved to dismiss, arguing the late mark was simply accurate.
The ruling: Judge Vince Chhabria of the District Court for the Northern District of California denied the motion, finding that the plaintiff had plausibly alleged the reporting was inaccurate.
- The judge rejected the agencies’ argument that the real fight was over who was at fault for the missed payment, a legal question they said they had no duty to resolve. If a consumer authorized a payment on time and had the funds available, the judge reasoned, reporting it as overdue is at best misleading about his creditworthiness.
- He compared it to dropping a check in the mail before the due date, writing that if a lender loses a check after receiving it on time, “that does not mean that the payment was made late.” There is no meaningful difference, he added, between setting up AutoPay and mailing a check or instructing an agent to process a payment.
- The judge acknowledged that most other district courts have gone the other way on failed-AutoPay claims against reporting agencies, noting the agencies were “in good company.” But he found those decisions impossible to square with the cases that let identical claims proceed against the furnishers who supply the data. If information is inaccurate coming from a furnisher, he reasoned, it is just as inaccurate when an agency repeats it, and any rule that turned on which type of company is the defendant “can’t be right.”
- In a pointed footnote, the judge observed that the lender “wisely decided not to file a motion to dismiss.”
