Landlord/Tenant – Failure to Reasonably Investigate – Verifiable Accuracy in Credit Report

To assert her claim, Plaintiff need only allege facts that, if true, show that a credit report is inaccurate or incomplete based on information that is objectively and readily verifiable by Defendant as the information’s furnisher.

We vacated the district court’s dismissal of Plaintiff’s claims and remanded.

Plaintiff Shelby Roberts believed her former landlord sent her a bogus invoice just because she exercised her rights under the lease. So, when several consumer reporting agencies documented that debt on Roberts’ credit report, Roberts disputed it. Those agencies then notified Carter-Young, the collection agency that had furnished the information about the debt to the agencies, of Roberts’ dispute. Because of that notice, the Fair Credit Reporting Act (FCRA) required Carter-Young to investigate the disputed information. Yet Carter-Young’s only investigation was to confirm the existence of the debt with the former landlord. Believing this effort to be insufficient, Roberts sued Carter-Young for violating its obligation to conduct a reasonable investigation under the FCRA. The district court dismissed her claim, holding that Roberts failed to state a claim because her disputes involved legal, not factual, matters. According to the district court, the FCRA did not require Carter-Young to investigate legal disputes. We disagreed. To assert her claim, Roberts need only allege facts that, if true, show that a credit report is inaccurate or incomplete based on information that is objectively and readily verifiable by Carter-Young as the information’s furnisher. There is no hard line rendering legal disputes unverifiable under this standard.

On appeal, Roberts made two primary arguments: (1) that furnishers are required under the FCRA to reasonably investigate both factual and legal disputes; and (2) that any “legal dispute” exception to a furnisher’s obligation to reasonably investigate indirect disputes would not preclude Roberts’ claim because her dispute contested “the entire factual underpinning” of the debt, “both its existence and its amount.” Conversely, Carter-Young adopted a different position on appeal from the one it advanced below. It no longer argued that Roberts’ complaint should be dismissed because it is a legal, not factual, dispute. Carter-Young now argued that the issues on appeal are: “[w]hether the word ‘accuracy’ used in 15 U.S.C. § 1681s-2(b) of the [FCRA] requires that disputes under that section be ‘objectively and readily verifiable’ to trigger a furnisher’s obligation to conduct an investigation of that dispute” and “[w]hether Roberts sufficiently alleged that she disputed the ‘accuracy’ of the information Carter-Young reported to a [CRA] about her unpaid apartment lease debt.”

The district court held—as Carter-Young urged it to—that Roberts’ complaint “describe[d] a legal dispute to [her] debt, rather than a factual inaccuracy underlying [Carter-Young’s] report” and thus failed to state a claim against Carter-Young for violating the FCRA. And the district court did so in light of decisions issued by other circuits that have distinguished between legal and factual inaccuracies. However, we declined to follow that same rule and instead held that both legal and factual disputes can form the basis of a § 1681s-2(b) claim, so long as they are objectively and readily verifiable. And because the district court did not have the benefit of the rule we now announced, its opinion applying a different rule must be vacated. We vacated the district court’s order as inconsistent with the rule we now announced. And we remanded to the district court to parse Roberts’ complaint and determine whether some or all of her allegations— regardless of whether they are legal or factual—allege an objectively and readily verifiable inaccuracy in her credit report. Further, the district court did not reach the reasonableness of Carter-Young’s investigation because it ruled that Roberts did not allege an actionable inaccuracy under the FCRA. Because we held that inaccuracies—whether legal, factual, or a mix of both— are actionable under § 1681s-2(b) so long as the plaintiff pleads an objectively and readily verifiable inaccuracy, we will not address the reasonableness of Carter-Young’s investigation in the first instance. The district court will have the opportunity to do so when it conducts its analysis of the “inaccuracy” element of an FCRA failure to reasonably investigate claim using our new rule.

An essential element of a claim that a furnisher has violated its duty to investigate indirect disputes of information in a consumer’s credit report is that the information in question was actually inaccurate or incomplete. We now held that, to state a claim, a consumer must allege facts that, if true, indicate an inaccuracy or incompleteness in their credit report that is objectively and readily verifiable. In dismissing Roberts’ complaint, the district court applied a different standard to the meaning of accuracy and completeness.

Vacated and remanded.

Roberts v. Carter-Young Inc. (Lawyers’ Weekly No. 001-086-25, 19 pp.) (A. Marvin Quattlebaum Jr., J.) Appealed from the U.S. District Court for the Middle District of North Carolina, at Greensboro (William L. Osteen, Jr.) Argued: Charles Preyer Roberts III, Summerfield, North Carolina, for Appellant; Jonathan Kyle Aust, Bedard Law Group, PC, Duluth, Georgia, for Appellee; Karen S. Bloom, Consumer Financial Protection Bureau, Washington, D.C., for Amicus Consumer Financial Protection Bureau. Sarah Johnson Auchterlonie, Brownstein Hyatt Farber Schreck, LLP, Denver, Colorado, for Amicus The Association of Credit and Collection Professionals. On Brief: John H. Bedard, Jr., Bedard Law Group, PC, Duluth, Georgia, for Appellee. Seth Frotman, General Counsel, Steven Y. Bressler, Deputy General Counsel, Kristin Bateman, Assistant General Counsel, Consumer Financial Protection Bureau, Washington, D.C.; Anisha S. Dasgupta, General Counsel, Mariel Goetz, Acting Director of Litigation, Federal Trade Commission, Washington, D.C., for Amici Consumer Financial Protection Bureau and Federal Trade Commission; Rebecca E. Kuehn, Jennifer L. Sarvadi, Hudson Cook, LLP, Washington, D.C., for Amicus Consumer Data Industry Association. Leah C. Dempsey, Brownstein Hyatt Farber Schreck, LLP, Washington, D.C., for Amicus The Association of Credit and Collection Professionals. U.S. Court of Appeals for the Fourth Circuit