Richardson v. Fleet Bank of Massachusetts
2001 U.S. Dist. LEXIS 22581, 190 F.Supp.2d 81, 2001 WL 1771902 (2001)
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Rule of Law:
Under the Fair Credit Reporting Act (FCRA), a credit reporting agency has a duty to follow reasonable procedures to ensure maximum possible accuracy of information and, once notified of a dispute, must conduct a reasonable reinvestigation that may require going beyond merely re-verifying with the original source if that source is known or should be known to be unreliable.
Facts:
- In April 1988, Denise and Robert Richardson obtained a $50,000 equity loan from Shawmut Bank of Hampshire County.
- In 1992, the Richardsons discovered Shawmut had not credited their extra payments to their loan account, leading to an attempted refinancing failure.
- In December 1994, the Richardsons settled a lawsuit against Shawmut, where Shawmut released them from the remaining $20,000 on the loan and agreed not to report derogatory information, but subsequently classified the discharged $20,000 as a “charge-off.”
- In December 1995, after the Richardsons complained about debt collection attempts, Shawmut issued a letter promising to notify credit reporting agencies of its error and change the “700 account” status to “paid as agreed.”
- In May 1996, after Fleet Bank acquired Shawmut, Denise Richardson obtained credit reports and discovered Fleet was reporting the discharged mortgage as a charge-off, leading Fleet agent John Wasik to assure her of correction and send a Universal Data Form (UDF) to credit agencies with inaccurate account data.
- In March 1997, the Richardsons obtained an Equifax credit report showing their “700 account” as charged-off and a second account (“567 account”) also reported as charged-off.
- In August 1997, the Richardsons were denied credit card applications by BP Oil, which cited “derogatory information on credit file” and named Equifax as the reporting agency.
- In November 1997, after the Richardsons sent a dispute letter, Equifax reported that Fleet had verified the accuracy of both accounts, and later, Fleet sold the account to Portfolio Recovery Assets (PRA).
- In September 1999, after PRA attempted to collect an alleged balance, the Richardsons ordered new Equifax reports and found multiple charge-offs, prompting them to directly dispute these items with Equifax, which resulted in the deletion of “567 accounts” but verification of a “700 account” charge-off through Fleet for Robert Richardson.
Procedural Posture:
- Denise M. Richardson and Robert L. Richardson (plaintiffs) filed an action against Equifax Credit Information Services (defendant) in the Massachusetts Hampshire County Superior Court, alleging violations of the FCRA, the MCCRA, Mass.Gen.Laws ch. 93A, defamation, and intentional infliction of emotional distress.
- Equifax joined in a notice of removal, transferring the case from the state court to the United States District Court for the District of Massachusetts.
- Equifax filed a motion for summary judgment on all claims.
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Issue:
Does a credit reporting agency, when notified by a consumer of inaccurate information, fulfill its FCRA duties to maintain reasonable procedures and conduct a reasonable reinvestigation by merely re-verifying with the original credit grantor, and can consumers recover for emotional distress damages without out-of-pocket expenses?
Opinions:
Majority - FREEDMAN, Senior District Judge
No, a credit reporting agency does not necessarily fulfill its FCRA duties by merely re-verifying with the original credit grantor when notified of a dispute, as genuine issues of material fact exist as to whether Equifax maintained reasonable procedures and conducted a reasonable reinvestigation. Furthermore, Yes, consumers can recover for emotional distress damages without requiring out-of-pocket expenses. The Court denied Equifax's motion for summary judgment regarding the plaintiffs' claims under FCRA and MCCRA for failure to maintain reasonable procedures and failure to reinvestigate, reasoning that once a credit reporting agency is notified of a dispute, its exclusive reliance on the information provided by the original creditor becomes questionable. The court cited precedents like Henson v. CSC Credit Servs. and Bryant v. TRW to establish that an agency that knows or should know its source is unreliable must go beyond mere re-verification. The plaintiffs presented evidence of multiple notices sent to Equifax regarding the inaccuracies, including a copy of the discharged mortgage, and that Equifax continued to rely solely on Fleet's information. The court found that a jury could reasonably infer that Equifax maintained unreasonable procedures, especially given that the UDFs, despite some errors, contained sufficient identifying information for clarification. Regarding damages, the court affirmed, citing Casella v. Equifax Credit Info. Servs., that actual damages under FCRA can include humiliation and mental distress even without out-of-pocket expenses, and the plaintiffs' allegations were sufficient. On causation, the court found the BP Oil denial letters, which explicitly cited Equifax reports as the 'primary reason,' constituted sufficient evidence for a jury to infer that the inaccurate reports were a substantial factor in the denial of credit. However, the court granted summary judgment for Equifax on claims for willful violations of FCRA, ruling that the plaintiffs failed to present evidence of Equifax knowingly committing an act in conscious disregard of their rights or adopting a policy with reckless disregard for consumer rights. The court also granted summary judgment on the Chapter 93A claim due to its duplicative nature with the FCRA claims, on the defamation claim because FCRA preempts such claims absent malice or willful intent (which was not shown), and on the intentional infliction of emotional distress claim due to lack of evidence of extreme and outrageous conduct or intent to cause distress.
Analysis:
This case significantly clarifies the duties of credit reporting agencies under the FCRA regarding both initial data accuracy and dispute reinvestigation. It establishes that while initial reliance on credit grantors is permissible, such reliance becomes unreasonable and potentially actionable once a consumer provides notice of inaccuracies, requiring the agency to conduct a more thorough investigation. The ruling reinforces that emotional distress, even without direct pecuniary loss, is a valid component of 'actual damages' under the FCRA, lowering the evidentiary bar for consumers seeking compensation. Conversely, it sets a high standard for proving 'willful noncompliance' for punitive damages, requiring evidence of conscious disregard or reckless policy adoption, not just a failure to correct errors. This balance encourages diligent reporting practices while limiting broad punitive liability, shaping how credit agencies manage disputes and how consumers prove harm.
