Drew v. Equifax Information Services, LLC
2012 WL 3186110, 2012 U.S. App. LEXIS 16378, 690 F.3d 1100 (2012)
Rule of Law:
A furnisher's duties under the Fair Credit Reporting Act (FCRA) to reasonably investigate and correct disputed information are triggered by a “notification” from a credit reporting agency (CRA), regardless of its specific nomenclature, and include modifying, deleting, or permanently blocking inaccurate or incomplete information, such as fraudulent accounts or incorrect addresses.
Facts:
- In September 2003, Eric Drew began receiving experimental leukemia treatment in Seattle.
- Drew soon began receiving letters and calls from banks and financial institutions regarding credit applications and payments for Seattle-based accounts he had never opened.
- Drew filed a police report alleging identity theft in Santa Clara, California, and a hospital phlebotomist in Seattle was later arrested and convicted for stealing his identity.
- In November 2003, Chase Bank sent Drew a letter thanking him for applying for a credit card and issued him a card for a fraudulent account.
- After Drew called Chase to dispute the account in late November 2003, Chase closed the account and reported it to credit agencies as lost or stolen.
- FIA Card Services issued a credit card in Drew's name on January 6, 2004, for another fraudulent account.
- In October 2005, after Chase had deleted the fraudulent account in February 2005, Chase sent follow-up letters to the identity thief’s address with the account number and allegedly re-reported the thief’s Seattle address as Drew’s address.
- As of February 19, 2008, FIA’s computer system continued to list the identity thief’s phone number as the home phone number for Drew.
Procedural Posture:
- Eric Drew filed a First Amended Complaint in the United States District Court for the Northern District of California alleging violations of the FCRA and various California state law claims against Chase Bank USA and FIA Card Services, N.A.
- Drew voluntarily dropped certain California law claims early in the litigation due to a perceived preemption by the FCRA based on existing district court precedent.
- In 2009, the district court initially denied Chase Bank's and FIA Card Services' motions for summary judgment on the FCRA claims.
- Chase Bank and FIA Card Services subsequently filed motions for reconsideration.
- In 2010, the district court reversed its prior decision, granting the banks' motions for summary judgment on the FCRA claims.
- The district court also denied Drew's motion for leave to amend his complaint to reinstate the California law claims.
- Drew appealed both the grant of summary judgment in favor of Chase Bank and FIA Card Services and the denial of his motion for leave to amend to the United States Court of Appeals for the Ninth Circuit.
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Issue:
Does a credit furnisher violate the Fair Credit Reporting Act (FCRA) by failing to reasonably investigate and correct inaccurate or incomplete credit reporting, such as reporting a fraudulent account as "lost or stolen" or misreporting a consumer's address, after receiving a "fraud block notification" from a credit reporting agency?
Opinions:
Majority - McKeown, Circuit Judge
Yes, a credit furnisher violates the Fair Credit Reporting Act (FCRA) by failing to reasonably investigate and correct inaccurate or incomplete credit reporting, such as reporting a fraudulent account as "lost or stolen" or misreporting a consumer's address, after receiving a "fraud block notification" from a credit reporting agency, and such a "fraud block notification" is sufficient to trigger the furnisher's duties. The Ninth Circuit reversed the district court's grant of summary judgment for Chase Bank and FIA Card Services. The court held that Chase’s duties under FCRA § 1681s-2(b) were triggered by the “fraud block notification” from TransUnion in January 2004, despite Chase’s argument that it was merely a “fraud block notification” rather than an “automated consumer dispute verification.” The court emphasized that the statute is concerned with the substance of the notification, not its nomenclature, and that an inadequate CRA notification may limit the scope of the duty but does not eliminate it. The court found that Chase’s initial investigation into the fraudulent account was legally sufficient under subparagraph (A) because it had already concluded the account was fraudulent before receiving the TransUnion notification. However, material issues of fact remained as to whether Chase violated subparagraphs (D) and (E) by continuing to report the fraudulent account as “lost or stolen” belonging to Drew and by allegedly reporting the thief’s address as Drew’s. The court cited Carvalho v. Equifax Info. Svcs., LLC for the principle that information can be “incomplete or inaccurate” if it is patently incorrect or misleading in a way that adversely affects credit decisions. The court determined that the district court erred in excluding the Old Republic Report as hearsay, as it was offered to show the statement was made, not for its truth. The court also held that Drew’s claim of emotional distress damages was cognizable under the FCRA, citing Guimond v. Trans Union Credit Info. Co. Regarding FIA, the court reversed the dismissal on statute of limitations grounds. It reiterated that the ultimate burden is on the defendant to show a reasonably diligent plaintiff would have discovered the violation. The court applied Gorman v. Wolpoff & Abramson, LLP, emphasizing that an FCRA violation for a furnisher is tied to the reasonableness of its investigation, not merely the inaccuracy of the results. Drew's interactions with FIA (collection calls, being informed of an ongoing investigation) did not provide sufficient information for him to know or reasonably discover that FIA’s prior investigation was unreasonable before the critical date. Drew could not have known what information TransUnion provided to FIA or what information FIA had for its investigation to judge its reasonableness. Finally, the court affirmed the district court’s denial of Drew’s motion to amend his complaint to reinstate California law claims, finding no abuse of discretion given the late stage of the request.
Analysis:
This case significantly clarifies the scope of a furnisher's duties under FCRA § 1681s-2(b), establishing that any notification from a CRA regarding a consumer dispute, even a "fraud block notification," triggers the duty to investigate and correct. It holds that reporting a fraudulent account as "lost or stolen" or misreporting a consumer's address can constitute "incomplete or inaccurate" information, creating a material issue of fact for trial. The ruling also reinforces the standard for "discovery" in FCRA statute of limitations cases, requiring defendants to show the plaintiff could have reasonably known the unreasonableness of an investigation, not just the inaccuracy of its results, thereby offering more protection to identity theft victims.
