The (Un)Fair Credit Reporting Act: How Courts Have Undermined the Protections of the FCRA

Authors

Jagjot Singh

Document Type

Note

Abstract

(Excerpt)

In 2001, George Saenz ("Saenz") incurred a medical bill amounting to $512.31. Thereafter, Saenz failed to make timely payments, and the bill went into debt collection. The debt was sold to NCO Financial Systems, Inc. ("NCO"), a creditor, and "NCO accepted a compromise payment [amount] of $333 [as] full satisfaction." In 2003, Saenz requested a copy of his credit report from Trans Union, a credit reporting agency. The report listed the $512.31 debt as outstanding, in error, which Saenz disputed. Trans Union initiated an automated consumer dispute verification ("ACDV") procedure, a system that compares the credit reporting agency's data to data provided by the creditor. The system wrongfully verified the information and Trans Union did not amend the credit report. Saenz disputed again with further evidence of payment, and Trans Union initiated a second ACDV without providing the evidence to NCO. The ACDV verified the information again, and Saenz's credit report continued to wrongfully list the debt.

Saenz's story is shared by many others. The Fair Credit Reporting Act ("FCRA") is meant to protect consumers like Saenz. The FCRA imposes a duty on credit reporting agencies to conduct a reasonable reinvestigation when a consumer disputes the accuracy of their individual consumer report. The federal courts have had to decide, under the FCRA, what a reasonable reinvestigation by a credit reporting agency entails when the parties have a legal dispute about the accuracy of information within an individual's consumer report. Furthermore, federal courts have had to decide whether a credit reporting agency can conclude that an item is accurate when the parties have a legal dispute and the credit bureau has not determined that the furnisher is right on the law.

This Note argues that the circuit courts have made the wrong decision in holding that credit reporting agencies are not required to conduct a reasonable reinvestigation when the disputed claim is of legal nature. Further, this Note asserts that based largely on the statutory text and the FCRA's purpose, regardless of what the nature of the dispute is (factual or legal) the credit reporting agencies are required to conduct a reasonable reinvestigation.

Part I of this Note first introduces the FCRA, and the development and history of credit reporting. Part II examines the FCRA's purpose, legislative history, and relevant textual provisions. Part III lays out the basic framework for the dispute process that consumers go through to have an error in their consumer report corrected. This Part also walks through the studies conducted over the last two decades showing the prevalence of inaccuracies contained in these reports. Part IV examines three circuit court decisions that this Note argues came to the wrong conclusion. Finally, Part V examines why these holdings are contrary to the purpose, legislative history, and text of the FCRA.