Under the Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq. (“FCRA”), furnishers must investigate disputes received from Credit Reporting Agencies (“CRAs”) and correct inaccurate information. See 15 U.S.C. § 1681s-2(b). However, the FCRA does not define the scope of that duty or when information is deemed “inaccurate.” Moreover, the Courts have provided limited guidance. See e.g. Hinkle v. Midland Credit Mgmt., 827 F.3d 1295, 1303 (11th Cir. 2016) (ruling that an investigation must be “reasonable” under the circumstances and that it will typically be for the fact finder to decide what is “reasonable”). However, a recent trend in the case law has provided notable benchmarks that should enable furnishers to better assess when an investigation is sufficient under the FCRA. See Felts v. Wells Fargo Bank, N.A., 893 F.3d 1305 (11th Cir. June 27, 2018); see also Pittman v. Experian Info. Sols., Inc., 901 F.3d 619 (6th Cir. Aug. 23, 2018); Shaw v. Experian Info. Sols., Inc., 891 F.3d 749 (9th Cir. May 29, 2018).
In Felts, Christina Felts became delinquent under her mortgage loan and subsequently entered into a forbearance agreement requiring her to pay $25.00 per month for six months. Felts, 893 F.3d at 1309-1310. However, despite making payments under the forbearance agreement, the furnisher continued to report the account as “past due” and “delinquent.” Id. at 1310. After disputing the information through the CRAs, Ms. Felts sued the furnisher under the FCRA for failing to conduct a reasonable investigation in response to the disputes under § 1681s-2(b). Id. at 1311-12. The District Court entered summary judgment for the furnisher, concluding that the consumer “failed to make the threshold showing that a reasonable investigation could have uncovered an inaccuracy” because the disputed information was neither inaccurate nor materially misleading. Id. at 1309. In affirming this decision, the Eleventh Circuit reaches two conclusions that could have far-reaching consequences.
First, Felts concludes that “[r]egardless of the nature of the investigation a furnisher conducted, a plaintiff asserting a claim… for failure to conduct a reasonable investigation cannot prevail… without demonstrating that had the furnisher conducted a reasonable investigation, the result would have been different.” Id. at 1313 (emphasis in original). Felts explains that when the information is neither inaccurate nor incomplete, there is nothing for the furnisher to discover that would trigger its obligation to correct any information and, as a result, the consumer could never be injured from the allegedly deficient investigation. Id. Taking this to its logical conclusion, Felts concludes that FCRA cases brought against furnishers require the consumer to make a threshold showing that the reporting was inaccurate or incomplete, or else the furnisher will be entitled to judgment as a matter of law. Id. The reasonableness of an investigation is only material if the consumer can establish that the reporting is inaccurate or incomplete.
Second, Felts concludes that it is not inaccurate or materially misleading to report an account as “delinquent” and “past due” while a consumer is making payments under a forbearance agreement. Id. at 1314, 1318-19. Initially, Felts explains that the furnisher’s reporting obligation is as to a particular loan, in this case the mortgage loan. Id. at 1314. Therefore, unless an agreement legally modifies the loan, it is immaterial that a consumer is making payments under that agreement, even if it is related to the loan (i.e. a forbearance agreement). Id. at 1316-17. Further, Felts rejects the consumer’s assertion that the credit reporting was misleading because she was making the payments requested by the furnisher while simultaneously being reported as delinquent. Id. at 1317, n.5, 1319. Felts draws an important distinction, explaining that the intended recipient of credit reports are prospective lenders, and therefore it is the lenders that the reporting must not mislead, not the consumers themselves. Id. at 1319. This naturally follows from the purpose of the FCRA as explained by the Supreme Court: to “ensure fair and accurate credit reporting [and] promote efficiency in the banking system…” Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52, 127 S. Ct. 2201, 2205 (2007). The FCRA is not designed to give consumers the credit reporting they want, rather it ensures prospective lenders receive accurate information while maintaining fairness as to the consumer. The furnisher’s reporting obligation was for the note Ms. Felts signed and not the short term forbearance agreement. Although difficult to quantify, the fact that Ms. Felts was paying nearly nothing on her loan may have factored into the Court’s decision.
The consequence of the first conclusion cannot be understated – if the credit reporting is accurate and complete, then it is essentially immaterial what investigation was performed by the furnisher. Furnishers can feel confident that an investigation is sufficient no later than when it is determined that the information being reported is accurate and complete. The consequence of the second conclusion is less dramatic, but significant. Specifically, agreements related to a loan can create complicated reporting situations where the agreement allows the consumer to take action inconsistent with the loan itself, but the Eleventh Circuit clearly demarcates when an agreement related to a loan impacts the reporting obligations and distinguishes between a forbearance plan and an actual modification. Also, since the determination of whether information is misleading is made from the perspective of prospective lenders, compliance with industry standards should carry additional persuasive power following Felts.