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From Banking and Finance Law Daily, November 12, 2015

Credit bureaus followed reasonable procedures for reporting, reinvestigating tax lien information

By Thomas G. Wolfe, J.D.

Although a consumer claimed that two national consumer reporting agencies violated the federal Fair Credit Reporting Act (FCRA) and the Colorado Consumer Credit Reporting Act (CCCRA) by failing to follow reasonable procedures to assure the maximum possible accuracy in preparing their credit reports, and by failing to reasonably reinvestigate the consumer’s dispute of tax lien information appearing on his report, the U.S. Court of Appeals for the Tenth Circuit disagreed. In affirming a summary judgment in favor of Experian Information Solutions, Inc., and Trans Union LLC, the Tenth Circuit determined that, based on the factual record, the consumer reporting agencies followed reasonable procedures in reporting and reinvestigating the tax lien information, despite the consumer’s contention that the tax lien not only had been paid but also pertained to a title insurance agency—not him personally (Wright v. Experian Information Solutions, Inc., Nov. 10, 2015, Matheson, S.).

While Judge Robert Bacharach concurred with the majority’s conclusion about the reporting of the tax lien information, he dissented in connection with the federal appellate court’s ruling on the consumer’s reinvestigation claim.

Background. According to the court’s opinion, in late May of 2009, the Internal Revenue Service filed a notice of federal tax lien with a county recorder in Colorado, listing the taxpayer as “Attorneys Title Insurance Agency of Wright Gary A Member.” Previously, in early May of 2009, Gary Wright had sent a check to the IRS for the unpaid employment taxes underlying the lien.

The county recorder listed the lien on its indexing website as being against Gary A. Wright in his personal capacity. In turn, LexisNexis, as the third-party contractor for Experian and Trans Union, picked up this information from the county recorder and transmitted it to the consumer reporting agencies. Experian and Trans Union included this information in their respective credit reports concerning Wright.

Later, in 2011, when Wright tried to refinance his home mortgage, he first became aware that his credit reports included references to the tax lien. Eventually, in July 2012, Wright sent a letter with supporting attachments to the consumer reporting agencies disputing their reports of the tax lien. Among other things, he asserted that the tax lien had been paid in full. Moreover, Wright stated that the tax lien for employment taxes pertained to the Attorneys Title Insurance Agency and was incorrectly attributed as applying to him in his personal capacity.

While neither Experian nor Trans Union removed the tax lien from its credit report, they did change their reports to show that the lien had been “released.” In addition, the consumer reporting agencies provided Wright with summaries of their investigations, indicating that if Wright “disagreed with the results, he could add a statement to his credit report disputing its accuracy or contact the furnisher of the information, apparently the IRS.”

In September 2012, Wright sent a second letter with supporting attachments to Experian and Trans Union requesting that they remove the tax lien information from their credit reports altogether, regardless of the “released” designation. Experian did not perform a second investigation. Rather, it determined that, based on LexisNexis’s earlier investigation, the lien against Wright “was accurately reported” and responded by suggesting Wright contact the “furnisher of the information.” For its part, Trans Union requested LexisNexis to review the documentation. When LexisNexis reported the same result, Trans Union sent a summary of that investigation to Wright.

Complaint. In December 2012, Wright brought a lawsuit against the two consumer reporting agencies, asserting both federal and state claims. He alleged that Experian and Trans Union violated applicable provisions of the FCRA (15 U.S.C. §1681e(b)) and the CCCRA (Colo. Rev. Stat. §12-14.3-103.5) for failing to follow reasonable procedures to assure maximum possible accuracy in preparing the credit report that showed the tax lien was imposed against him. Similarly, Wright lodged a claim under the FCRA (15 U.S.C. §1681i(a)(1)) and the CCCRA (Colo. Rev. Stat. §12-14.3-106) for failing to reasonably reinvestigate his dispute.

Wright maintained that he suffered economic damages and emotional distress as a result of the consumer reporting agencies’ actions. After the federal district court granted summary judgment to Experian and Trans Union on his claims, Wright appealed to the Tenth Circuit.

Reporting tax lien. Since the FCRA does not define “reasonable procedures” and the Tenth Circuit had not yet squarely addressed the term, the court looked to case law in other circuits. Ultimately, the Tenth Circuit concluded that the federal trial court properly granted summary judgment in favor of the consumer reporting agencies on the issue of their following reasonable procedures in reporting the tax lien in their credit reports on Wright.

In reaching its decision, the Tenth Circuit determined that: (i) the information LexisNexis collected from the county recorder’s website and sent to the consumer reporting agencies “was not inaccurate on its face, inconsistent with information the CRAs already had on file, or obtained from a source that was known to be unreliable”; (ii) Wright did not present any evidence “to show the tax lien information taken from the Recorder’s website was inconsistent with the information the CRAs had on file about him” or that “the CRAs knew or should have known that the tax lien information provided to them was inaccurate”; (iii) “the costs to the CRAs of employing individuals trained in American tax law to examine every NFTL outweighs the potential of harm to consumers” like Wright; and (iv) no court has gone that far—requiring employees trained in tax law to examine county recorder filings.

Reinvestigating tax lien. Similarly, the Tenth Circuit concluded that the federal trial court properly granted summary judgment in favor of the consumer reporting agencies on the issue of the reasonableness of their reinvestigation procedures.

The Tenth Circuit acknowledged that while the FCRA does not define the term “reasonable reinvestigation,” it related that “courts have consistently held a reasonable reinvestigation requires more than making only a cursory investigation into the reliability of information that is reported to potential creditors.” The court rejected Wright’s arguments that the entries on the notice of federal tax lien showed the tax lien did not apply to him, “which would have been apparent to the CRAs if they had employed individuals trained in American tax law” to examine it; the CRAs should have contacted the IRS to inquire whether the tax lien applied to Wright; and the CRAs should have determined whether the tax lien applied to Wright.

Dissent. In Bacharach’s dissent from the majority’s opinion concerning the consumer’s reinvestigation claim, he maintained that since the underlying tax-lien notice (provided by the consumer as an attachment to letters to the consumer reporting agencies) was ambiguous, “the fact finder could reasonably determine that the reinvestigation should have led Trans Union and Experian to delete the personal lien from the credit reports,” in keeping with the FCRA’s applicable provision (15 U.S.C. §1681i(a)(5)).

The case is No. 14-1371.

Attorneys: Peter R. Bornstein (Law Offices of Peter Bornstein) for Gary Wright. Nathaniel P. Garrett and Meghan E. Sweeney (Jones Day) for Experian Information Solutions, Inc. Martin E. Thornthwaite and Paul L. Myers (Strasburger & Price, LLP) for Trans Union LLC.

Companies: Attorneys Title Insurance Agency; Experian Information Solutions, Inc.; LexisNexis; Trans Union LLC

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