A District Court judge in Minnesota has denied a defendant’s motion for summary judgment in a Fair Credit Reporting Act lawsuit over whether it reasonably investigated a consumer’s identity theft disputes.
The background: The case grew out of two nearly identical loans taken three years apart, only one of which the plaintiff admits she authorized.
- The plaintiff obtained a loan-by-mail personal loan for $2,539 in 2017, cashing a check mailed to her New York address, and repaid it in full over about three years.
- In 2020, a second loan for the same amount was issued to the same address and phone number, but the funds were deposited into a checking account belonging to a travel agency. The plaintiff testified that her mother took out this loan in her name without her knowledge or consent, and her mother admitted doing so to keep her struggling travel business afloat.
- The plaintiff said she discovered the 2020 loan when she reviewed her credit report. She later filed an identity theft report with the Federal Trade Commission and a police report naming her mother as the suspect.
- She disputed the debt as identity theft through the credit reporting agencies on several occasions across 2023 and 2024, but the lender repeatedly reported the account as accurate.
- She then sued the lender along with several other furnishers and the national credit reporting agencies. Every defendant except the lender settled.
- The plaintiff argued the lender ignored obvious red flags and never conducted a genuine investigation, and she sought actual, statutory, and punitive damages, plus fees and costs.
- The lender argued its investigation was reasonable as a matter of law, that the plaintiff could not show willfulness, and that she suffered no actual damages because it never reported the account as delinquent.
The ruling: Judge John R. Tunheim of the District Court for the District of Minnesota denied the motion, finding too many unanswered questions about what the lender actually did.
- The lender leaned on a declaration from its credit compliance manager describing the investigation, but it withdrew that declaration after she was unable to confirm at her deposition whether the statements in it were even true.
- Without the declaration, the court could not tell what the investigation involved, and the lender’s corporate representative described only the company’s typical procedures rather than what happened here.
- “An investigation will not be deemed sufficient without at least some evidence of what the investigation actually entailed,” Judge Tunheim noted, quoting another court. With that evidence missing, a jury would have to decide whether the investigation was reasonable and whether any violation was willful.
- The judge also pointed out that the lender never contacted the mother to ask whether she, rather than the plaintiff, had opened the account, echoing a recent case in which a furnisher’s failure to contact a third party left its investigation open to challenge.
- On damages, the plaintiff could not claim economic harm because the account was never reported as delinquent, but her emotional distress claim survived. She sought treatment, was prescribed antidepressants, and described sleeplessness and other physical symptoms, which went beyond the kind of “self-serving and conclusory statements” that fail at summary judgment.
- The lender argued her distress stemmed from her mother’s betrayal and a cross-country move, but the plaintiff tied part of it to her repeated failed efforts to fix her credit, leaving a jury to weigh how much each source contributed.
- Judge Tunheim separately denied the plaintiff’s request for sanctions over the withdrawn declaration, finding no evidence of bad faith and noting that pulling the declaration actually undercut any such inference.
