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From Banking and Finance Law Daily, January 6, 2015

Consumer report not the same as consumer’s credit file

By Richard A. Roth, J.D.

A consumer who complained that a consumer reporting agency did not reasonably reinvestigate his claim that his credit file was incorrect might be able to show actual damages even if the erroneous information never was provided to a third party, the U.S. Court of Appeals for the Eleventh Circuit has decided. Because the Fair Credit Reporting Act distinguishes between a consumer report and a consumer’s credit file, the standards for causes of action under related sections of the act also are different, the court said, ruling in a case of first impression in the circuit (Collins v. Experian Information Solutions, Inc., Jan. 5, 2015, Black, S.).

According to the court’ opinion, the consumer successfully defended against a small claims suit brought by a collection agency, then wrote nationwide consumer reporting agency Experian Information Solutions to demand that the disputed debt be removed from his credit file. Although the consumer provided Experian with the court and case number of the collection suit, the company chose simply to ask the collection agency to verify the validity of the debt.

The collection agency replied that the debt remained valid, so Experian left the disputed information in the consumer’s credit file. The consumer then sued, alleging both negligent and willful violations of the company’s duty to perform a reasonable reinvestigation of the accuracy of the information, as required by 15 U.S.C. §1681i.

District court result. FCRA violations can be either negligent or willful, and the difference is meaningful. If a consumer reporting agency violates the act willfully, it is liable for statutory damages even if the consumer cannot prove actual damages. On the other hand, if the violation is negligent, the agency is liable only for any actual damages the consumer can prove.

The federal district court judge first decided that Experian’s decision to rely solely on the collection agency to validate the debt could not be a willful violation of the company’s duty to perform a reasonable reinvestigation. That meant the consumer was required to prove actual damages.

Experian’s decision to ignore the court information provided by the consumer and rely on the collection agency could have been a negligent violation, the trial court said. However, the consumer had not presented any evidence that the incorrect information had been provided to any third parties. In the absence of a disclosure, the consumer could not have actual damages that resulted from the violation, the district court judge said.

The judge granted summary judgment to Experian, and the consumer appealed.

Negligent violation. Deciding whether proving actual damages requires proving that the erroneous information was disclosed calls for close attention to the specific language of the relevant FCRA section, the appellate court began. The FCRA defines “consumer report” and “file” differently. A consumer’s file comprises all of the information retained by the agency about the consumer, while a consumer report is a communication of information related to the consumer’s credit-worthiness or other characteristics. As a result, reporting agency duties regarding a consumer report are not necessarily the same as the agency’s duties regarding a consumer’s credit file.

The consumer claimed that Experian violated 15 U.S.C. §1681i, which addresses inaccurate information maintained in a consumer’s file, the court observed. Since information was in a file regardless of whether it was disclosed, it was possible that the consumer could have suffered actual damages—in this case, emotional distress—from Experian’s failure to carry out a reasonable reinvestigation of whether inaccurate information was present.

This was different from a violation of a section addressing a consumer report that included inaccurate information, according to the court. Actual damages could result from a violation of such a section only if there actually was a consumer report disclosed to a third party.

The consumer was entitled to an opportunity to show that he suffered emotional distress due to Experian’s failure to perform a reasonable reinvestigation of information in his credit file even if the disputed information never was included in a consumer report, the court determined.

Willful violation. On the other hand, the appellate court agreed with the district court judge that Experian’s choice to rely on the collection agency to validate the debt could not have been a willful violation of its reinvestigation duty. The decision might have been a negligent violation, the appellate court said, but it did not rise to the level of being willful or reckless.

The case is No. 14-11111.

Attorneys: David L. Selby, II (Bailey & Glasser, LLP) for Curtis J. Collins. Gregory Russell Hanthorn (Jones Day) for Experian Information Solutions, Inc.

Companies: Experian Information Solutions, Inc.

MainStory: TopStory AlabamaNews FairCreditReporting FloridaNews GeorgiaNews

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