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From Banking and Finance Law Daily, April 14, 2014

Consumer’s fair credit reporting claim barred as untimely

By Thomas G. Wolfe, J.D.

Although a consumer alleged that a financial services company obtained his credit report without a permissible purpose or his consent in violation of the federal Fair Credit Reporting Act (FCRA), the U.S. Court of Appeals for the Fifth Circuit ruled that the consumer’s claim was barred by the FCRA’s two-year statute of limitations. The Fifth Circuit determined that, under the FCRA’s “discovery rule,” the limitations period begins to run when a claimant discovers facts that give rise to a claim, not—as the consumer contended—when a claimant discovers that those facts constitute a legal violation (Mack v. Equable Ascent Financial, LLC., April 11, 2014, Per Curiam).

Background. In December 2011, the consumer filed his pro se complaint in a Texas federal district court against the financial services company, Equable Ascent Financial, LLC, a successor in interest to Hilco Receivables, LLC. The consumer alleged that, in February 2009, Hilco obtained his consumer credit report without a permissible purpose or his consent in violation of the FCRA (15 U.S.C. §1681b); the lawsuit demanded $1,000 in damages plus fees and costs.

Motion for summary judgment. After some discovery took place in the litigation, Equable filed a motion for summary judgment. Among other things, Equable argued that the consumer’s lawsuit was barred by the two-year statute of limitations set forth in the FCRA (15 U.S.C. §1681p(1)). The financial services company pointed out that, in response to its discovery requests, the consumer admitted that his allegations were based on a copy of his credit report that he received from TransUnion in May 2009.

Consumer’s stance. Despite acknowledging receipt of the TransUnion credit report in May 2009, the consumer maintained that “he did not become aware of the actual violation” of the FCRA provision until much later in April 2011. According to the consumer, in April 2011, he studied and researched the FCRA, examined the credit report he had previously received, and then “discovered the violation.”

FCRA limitations provision. Under the FCRA’s statute of limitations (15 U.S.C. §1681p), an action “to enforce any liability created under this subchapter may be brought…not later than the earlier of—(1) 2 years after the date of discovery by the plaintiff of the violation that is the basis for such liability; or (2) 5 years after the date on which the violation that is the basis for such liability occurs.”

Lower court’s ruling. The magistrate judge in the federal trial court decided that the consumer’s action against Equable was barred by the FCRA’s statute of limitations because the consumer failed to timely file his FCRA lawsuit within two years of having received his credit report in May 2009. When the magistrate court accordingly granted the financial services company’s request for summary judgment in its favor, the consumer appealed that ruling to the Fifth Circuit.

Fifth Circuit’s ruling. On appeal, the federal appellate court rejected the consumer’s contention that, due to a 2003 amendment to section 1681p of the FCRA, he could not have “discovered the violation until he had researched the statute.” The Fifth Circuit emphasized that the “material difference” between the pre-2003 version and the present version of the FCRA limitations provision “is that the prior version did not contain a discovery rule for claims that did not involve misrepresentation whereas the current version contains a discovery rule for all claims. Moreover, the plain language of the current version states that the relevant discovery is that of the violation that is the basis for liability.”

Against this backdrop, the Fifth Circuit determined that it was indisputable that the consumer “discovered” in May 2009 that Hilco, the predecessor to Equable, had obtained his credit report without his consent. Consequently, under the discovery rule of the FCRA statute of limitations, the limitations period began to run in May 2009 when the consumer first discovered the facts that gave rise to his claim, not in April 2011 when the consumer later ascertained through his research that those facts constituted a legal violation of the FCRA.

In affirming the federal magistrate court’s judgment in favor of Equable, the Fifth Circuit noted that its ruling was compatible with Fifth Circuit case law decisions made before and after the 2003 amendment to the FCRA limitations provision (15 U.S.C. §1681p). Moreover, the federal appellate court agreed with the lower court that a ruling supporting the consumer’s interpretation of the FCRA provision was not valid or viable because “such a reading would indefinitely extend the limitations period.”

The case is No. 13-40128.

Attorneys: William Keith Wier (Bush & Ramirez, PLLC) for Equable Ascent Financial, LLC.

Companies: Equable Ascent Financial, LLC; Hilco Receivables, LLC; TransUnion

MainStory: TopStory ConsumerCredit FairCreditReporting LouisianaNews MississippiNews TexasNews

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