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Consumer Fair Credit Reporting Actions in Colorado
The federal Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq., is a complicated statutory scheme that generally governs the production of credit reports, how information is reflected in those credit reports, and how credit reports can be used in relation to the consumer.
Due to the structure of the FCRA, the act has far reaching implications and affects a variety of entities, including creditors and banks that lend to consumers, employers that use consumer reports as part of the hiring process, and credit reporting agencies that compile and produce consumer information.
Importantly, because the FCRA is federal law, FCRA actions in Colorado are generally subject to 10th Circuit case law; that is, case law of the federal appeal circuit that governs the federal District of Colorado. While the FCRA has in place since 1970, due to the complexity of the statue, there are still court splits as to how certain provisions of the FCRA should be interpreted. Accordingly, filing an FCRA action in the federal District of Colorado requires careful analysis of the statute as well as relevant case law.
This article addresses FCRA actions in light of applicable Colorado case law and discusses the provisions of the FCRA that most frequently apply to consumers. In particular, this article first provides a general background of consumer FCRA actions; then discusses consumer actions against specific entities regulated by the FCRA; and, lastly, addresses damages and state law claims that are allowable under the FCRA.
Background of Consumer FCRA Actions
The FCRA was originally enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies. See 15 U.S.C. § 1681. Specifically, because the banking institution had developed an elaborate system for evaluating the credit worthiness of consumers, the FCRA was enacted to protect consumers from the willful or negligent inclusion of inaccurate information in their credit reports.
At a high level, the FCRA regulates the collection, dissemination, and use of consumer credit information. The information is typically reported in a “consumer report” which the FCRA specifically defines as:
. . . any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for-
(A) credit or insurance to be used primarily for personal, family, or household purposes;
(B) employment purposes; or
(C) any other purpose authorized under section 1681b of this title.
See 15 U.S.C. § 1681a(d). These types of reports are commonly referred to as credit reports and are generally available through consumer reporting agencies.
Practical examples of the type of information is contained in a consumer report include information about your overall credit rating, bill repayment history, the status of your credit accounts, how much credit you have, how often you make debt payments on time, how much credit you are using, and whether a debt collector is asserting that you owe money. Consumer reports can also include rental information if you are a property renter; and public record information such as liens, judgments, and bankruptcies filed by or entered against the consumer.
With respect to the generation and use of consumer reports, the FCRA regulates three main types of entities or individuals: (1) consumer reporting agencies, (2) users of consumer reports, and (3) furnishers. Definitions for consumer reporting agencies and furnishers are given below.
With respect to “consumer reporting agencies,” the FCRA specifically defines them to include:
. . . any [person or entity] which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.
See 15 U.S.C. 1681a(f). Accordingly, any person or entity who regularly collects information about consumers and provides that information to third parties is a consumer reporting agency within the definition of the statute. Traditionally, the three biggest consumer reporting agencies are the well-known credit bureaus Experian, Trans Union, and Equifax. Their legal entity names in Colorado are Experian Information Solutions, Inc.; Trans Union, LLC; and Equifax Information Services, LLC. Importantly, if the credit bureaus are sued, they must be named properly and sued as the proper entity.
With respect to “furnishers,” while not explicitly defined in the FCRA, furnishers include:
. . . any [person or entity] . . . who regularly and in the ordinary course of business furnishes information to [a consumer reporting agency] with respect to the consumer . . . .
See 15 U.S.C. § 1681e(d)(1)(A). Accordingly, creditors of consumers are a common example of furnishers since they frequently provide consumer payment information to consumer reporting agencies. Specific examples of creditor furnishers include credit card companies, auto finance companies, mortgage banking institutions, collection agencies, lender, and small business. Additionally, state or municipal courts reporting a judgment against a consumer as well as employers can be considered furnishers to the extent they are reporting any information about a consumer to a consumer reporting agency.
FCRA Actions Against Consumer Reporting Agencies
As indicated above, consumer reporting agencies are entities that collect information about a consumer and provide that information to third parties. In order to ensure the accuracy of information provided to third parties and ensure that consumers have recourse where inaccurate information is reported, the FCRA mandates that consumer reporting agencies abide by certain requirements.
In particular, the main requirement that the FCRA imposes on consumer reporting agencies is that they maintain reasonable methods of ensuring the consumer reports they generate are accurate. Where information is incorrectly reported by a consumer reporting agency, a consumer may have an FCRA claim against the agency under 15 U.S.C. § 1681e or 15 U.S.C. § 1681i, the provisions requiring reasonable means for ensuring accuracy.
The relevant subparts for FCRA claims under 15 U.S.C. § 1681e are 15 U.S.C. § 1681e(a) and 15 U.S.C. § 1681e(b). More specifically, 15 U.S.C. § 1681e(a) requires that:
Every consumer reporting agency shall maintain reasonable procedures designed to avoid violations of [15 U.S.C. § 1681c of the FCRA] and to limit the furnishing of consumer reports to the purposes listed under [15 U.S.C. § 1681b of the FCRA]. These procedures shall require that prospective users of the information identify themselves, certify the purposes for which the information is sought, and certify that the information will be used for no other purpose. Every consumer reporting agency shall make a reasonable effort to verify the identity of a new prospective user and the uses certified by such prospective user prior to furnishing such user a consumer report. No consumer reporting agency may furnish a consumer report to any person if it has reasonable grounds for believing that the consumer report will not be used for a purpose listed in [15 U.S.C. § 1681b of the FCRA].
Similarly, 15 U.S.C. § 1681e(b) requires that:
Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.
Accordingly, taken together, the main requirements under 15 U.S.C § 1681e require that consumer reporting agencies maintain reasonable procedures to (1) ensure that only appropriate information is included in consumer reports; (2) ensure that they generate reports only for purposes mandated by the FCRA; and (3) assure the maximum possible accuracy of the reports they generate. If reasonable means are not maintained to ensure these requirements, then an FCRA violation may have occurred.
From a legal perspective, in order to establish a violation under 15 U.S.C. 1681e, the consumer must establish:
(1) The consumer reporting agency failed to follow reasonable procedures to assure the accuracy of their reports;
(2) The report in question was, in fact, inaccurate;
(3) The consumer suffered injury as a result; and
(4) The consumer reporting agency’s failure to follow reasonable procedures caused the injury.
See Eller v. Trans Union, LLC, 739 F.3d 467, 473 (10th Cir. 2013).
Importantly, a critical distinction is that consumer reporting agencies are only required to employ reasonable means of assuring the above requirements are complied with; they are not required to ensure 100 percent accuracy. That is, where a consumer reporting agency receives and publishes inaccurate information in a consumer report, but it reasonably attempted to ensure the accuracy of the information, the consumer reporting agency will not be liable for an FCRA violation. See Birmingham v. Experian Information Solutions, Inc., 633 F.3d 1006, 1012 (10th Cir. 2011) (indicating summary judgment was appropriate in an identity theft case where Experian had maintained reasonable procedures).
Secondly, in addition to violations under 15 U.S.C. § 1681e, consumer reporting agencies also have obligations to conduct reasonable reinvestigations of disputed information under 15 U.S.C. § 1681i.
In particular, 15 U.S.C. § 1681i(a)(1) indicates that:
. . . if the completeness or accuracy of any item of information contained in a consumer’s file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly, or indirectly through a reseller, of such dispute, the agency shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file in accordance with [15 U.S.C. § 1681i(a)(5)], before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer or reseller.
Accordingly, due to 15 U.S.C. § 1681i having similar reasonableness requirements as § 15 U.S.C. § 1681e, courts have determined that the elements necessary to plead a claim under 15 U.S.C. § 1681i are similar to those under 15 U.S.C. § 1681e. However, 15 U.S.C. § 1681i claims require an additional elemen. That is, that the consumer disputed the debt with the consumer reporting agency. The particular elements required to plead a 15 U.S.C. § 1681i claim are:
(1) The consumer notified the consumer reporting agency of the disputed information;
(2) The consumer reporting agency failed to follow reasonable procedures to reinvestigate the disputed information and assure the accuracy of their reports;
(3) The report in question was, in fact, inaccurate;
(3) The consumer suffered injury as a result; and
(4) The consumer reporting agency’s failure to follow reasonable procedures caused the injury.
See Eller v. Trans Union LLC, Civil Action 09-cv-0040-WJM-KMT at n. 3 (Apr. 12, 2013); Wright v. Experian Information Solutions, Inc., Civil Action 12-cv-03268-CMA-CBA (Aug. 14, 2014).
Importantly, while the FCRA imposes no specific requirements under 15 U.S.C. § 1681i on how a consumer reporting agency conducts its reinvestigation of disputed information, it does require that the reinvestigation be reasonable.
Accordingly, some federal courts have recognized that a reasonable reinvestigation may require a consumer reporting agency to expend additional effort in verifying the accuracy of disputed information as opposed to simply relying on the response provided from the original source of information. This is especially true when there is reason to question the accuracy of the source of information; for example, where it is known that the source of information has a contentious relationship with the consumer. See Morris v. Trans Union, LLC, 420 F.Supp.2d 733 (S.D. Tex. Feb. 23, 2006).
Indeed, Colorado courts have agreed with this line of reasoning and have held that a reasonable reinvestigation under 15 U.S.C. § 1681i requires more than simply making a cursory investigation into the reliability of information reported by creditors. See Wright v. Experian Information Solutions, Inc., 805 F.3d 1232, 1242 (10th Cir. 2015); Dennis v. BEH-1, LLC, 520 F.3d 1066 (10th Cir. 2008) (indicating that a reinvestigation that overlooks documents in a court file, which expressly state that no adverse judgment was entered, is negligent as a matter of law).
The reason for this is that when one goes from the general reasonable accuracy requirements of 15 U.S.C. § 1681e to a reinvestigation of disputed information under 15 U.S.C. § 1681i, consumer reporting agencies are put on notice that the reported information may not be accurate and, thus, the likelihood that additional reinvestigation efforts will benefit the consumer shifts markedly in the consumer’s favor. Accordingly, a consumer reporting agency that duplicates the efforts it would take in order to comply with a 15 U.S.C. § 1681e investigation may not be sufficient to meet the reasonable reinvestigation requirements under 15 U.S.C. § 1681i. See Cushman v. Trans Union Corp. 115 F.3d 220, 225 (7th Cir. 1997) (indicating that the factors in determining whether a consumer reporting agency has to go beyond the original source depend on to what extent the source may be unreliable and the cost of verifying the accuracy of the source versus the possible harm of inaccurately reporting information).
Overall, consumer reporting agencies effectively have two major requirements under the FCRA: (1) they must ensure that they have reasonable procedures under 15 U.S.C. § 1681e to ensure the maximum accuracy of consumer reports they generate; and (2) they must reasonably reinvestigate the accuracy of information in those reports when they receive a dispute under 15 U.S.C. § 1681i.
Whether or not a consumer reporting agency meets these requirements and employs reasonable means to ensure reported information is accurate depends on the specific circumstances of each case. What may be reasonable in some circumstances may not be reasonable in others. Accordingly, there are no bright line test for determining whether a consumer reporting agency met its obligations under the FCRA.
However, it is generally accepted that consumer reporting agencies have a higher burden for reinvestigating disputed information under 15 U.S.C. § 1681i in comparison to their general reporting obligations under 15 U.S.C. § 1681e. Where consumer reporting agencies fail to employ reasonable meets for meeting these requirements they’ll be liable for damages under the FCRA.
FCRA Actions Against Users of Consumer Reports
In addition to consumer reporting agencies having obligations under the FCRA, users of consumer reports have obligations as well. More specifically, under the FCRA users of consumer reports must:
(1) Only obtain consumer reports for permissible purposes under the FCRA, which include:
– As ordered by a court or a federal grand jury subpoena;
– As instructed by the consumer in writing;
– For the extension of credit as a result of an application from a consumer, or the review or collection of a consumer’s account;
– For employment purposes, including hiring and promotion decisions, where the consumer has given written permission;
– For the underwriting of insurance as a result of an application from a consumer;
– When there is a legitimate business need, in connection with a business transaction that is initiated by the consumer;
– To review a consumer’s account to determine whether the consumer continues to meet the terms of the account;
– To determine a consumer’s eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant’s financial responsibility or status;
– For use by a potential investor or servicer, or current insurer, in a valuation or assessment of the credit or prepayment risks associated with an existing credit obligation;
– For use by state and local officials in connection with the determination of child support payments, or modifications and enforcement thereof; and
(2) Notify the consumer when an adverse action is taken based on the information in the consumer report; and
(3) Identify the company that provided the consumer report such that the accuracy and completeness of the report may be verified or contested by the consumer.
See 15 U.S.C. § 1681b (indicating the permissible purposes for obtaining a credit reports); 15 U.S.C. § 1681m (governing requirements for users of consumer reports).
Some common examples of people or entities that use consumer reports include creditors using the information to determine loan eligibility, insurance companies, and employers who use background checks to determine hiring eligibility.
Indeed, the most frequent violations users of consumer reports commit are obtaining credit reports without permission from the consumer; for example, an employer or lender obtaining a credit report without first getting permission from the lender. Where a user of a consumer report does not comply with the FCRA, that person or entity will be liable for damages under the act.
FCRA Actions Against Furnishers
In contrast to actions against consumer reporting agencies and users of consumer reports, FCRA actions against furnishers target the sources reporting the information on the report. In other words, FCRA actions against furnishers target the individuals or entities reporting that a consumer owes a particular debt.
In particular, 15 U.S.C. § 1681s-2 governs obligations furnishers have when reporting information to consumer reporting agencies. While there are many requirements furnishers must abide by under 15 U.S.C. § 1681s-2, private rights of action may only be pursued against furnishers under 15 U.S.C. § 1681s-2(b), relating to the investigation of disputed information. See Brunson v. Provident Funding Associates, 608 Fed.Appx. 602 (10th Cir. 2015).
More specifically, 15 U.S.C. § 1681s-2(b) provides:
After receiving notice pursuant to section 1681i(a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall-
(A) conduct an investigation with respect to the disputed information;
(B) review all relevant information provided by the consumer reporting agency pursuant to section 1681i(a)(2) of this title;
(C) report the results of the investigation to the consumer reporting agency;
(D) if the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis; and
(E) if an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation under paragraph (1), for purposes of reporting to a consumer reporting agency only, as appropriate, based on the results of the reinvestigation promptly-
(i) modify that item of information;
(ii) delete that item of information; or
(iii) permanently block the reporting of that item of information.
Additionally, a time frame is imposed by the statute such that the furnishers must generally comply with these obligation within 30 days of receiving the dispute. See 15 U.S.C. § 1681s-2(b)(2).
Accordingly, in light of the statute, courts have determined that a plaintiff must allege three elements in order to state a claim under 15 U.S.C. § 1681s-2(b). Those elements are:
(1) The consumer provided notice to the credit reporting agency disputing the alleged debt;
(2) Sufficient information was provided by the consumer in the dispute such that the credit reporting agency did not determine it was frivolous or otherwise irrelevant;
(3) The credit reporting agency notified the furnisher of the dispute; and
(4) The furnisher failed to conduct a reasonable investigation into the consumer’s claims after the furnisher received notice of the dispute from the credit reporting agency.
See Miller v. Best Buy Co., Inc., Civil Action 12-cv-02535-RBJ-KMT (D. Colo. Aug. 23, 2013).
Importantly, the notification requirements must meet the criteria of 15 U.S.C. § 1681i(a)(2). That is, in order for a furnisher to have an obligation to investigate an alleged debt, the consumer must have disputed the debt with the consumer reporting agency and the consumer reporting agency must have provided notice of the dispute to the furnisher. Where the consumer disputes the debt directly with the furnisher it will not satisfy the notice requirements of 15 U.S.C. § 1681i(a)(2) and, thus, a furnisher’s obligations under 15 U.S.C. § 1681s-2(b) will not kick in. See Llewellyn v. Shearson Financial Network Inc., 622 F.Supp.2d 1062 (D. Colo. Mar. 31, 2009).
However, if the consumer has also directly disputed the debt with the furnisher, and the furnisher’s obligations under 15 U.S.C. § 1681s-2(b) do kick in, then the furnisher may have an obligation to report that the debt is disputed. See 15 U.S.C. § 1681s-2(a)(3); Sartrori v. Susan C. Little & Associates, P.A., 571 Fed.Appx. 677, 682 (10th Cir. 2014); Collins v. BAC Home Loans Servicing LP, 912 F.Supp.2d 997, 1010 (D. Colo. Dec. 12, 2012).
Lastly, where the consumer has disputed the information in a manner sufficient to trigger the furnisher’s obligations to investigate under 15 U.S.C. § 1681s-2(b), the dispute provided by the consumer must have covered the alleged inaccuracies. In other words, the consumer must have sufficiently described the alleged inaccuracies to reasonably put the furnisher on notice of the disputed information. Where a consumer fairs to sufficiently describe the disputed information, the furnisher cannot be held liable for failing to investigate inaccuracies that it was not put on notice of. See Stich v. BAC Home Loans Servicing, LP, Civil Action 10-cv-01106-CMA-MEH (D. Colo. Feb. 27, 2012).
Damages under the FCRA
Where a consumer reporting agency, user of a consumer report, or a furnisher has violated the FCRA, there are two categories of damages under which relief can be sought. Those two categories are:
– Negligent violations of the FCRA under 15 U.S.C. § 1681o; and
– Willful violations of the FCRA under 15 U.S.C. § 1681n.
Damages for negligent violations of the FCRA under 15 U.S.C. § 1681o occur where the consumer reporting agency, consumer report user, or furnisher failed to take proper care in fulfilling its obligations under the FCRA but did not act willfully or recklessly in ignoring those obligations. In essence, negligent violations occur where the entity is trying to abide by the FCRA regulations but isn’t taking sufficient steps to ensure it actually does.
Where a negligent violation of the FCRA has occurred, the person or entity who has violated the FCRA shall be liable to the consumer in an amount equal to the sum of:
(1) any actual damages sustained by the consumer as a result of the failure; and
(2) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney’s fees as determined by the court.
See 15 U.S.C. § 1681o.
In contrast where a person or entity has willfully violated the FCRA, meaning that it was either an intentional violation or a violation committed by an agency in reckless disregard of it FCRA duties, that person or entity will be liable to the consumer in an amount equal to the sum of:
(1)(A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000; or
(B) in the case of liability of a natural person for obtaining a consumer report under false pretenses or knowingly without a permissible purpose, actual damages sustained by the consumer as a result of the failure or $1,000, whichever is greater;
(2) such amount of punitive damages as the court may allow; and
(3) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney’s fees as determined by the court.
See 15 U.S.C. § 1681n. Birmingham v. Experian Information Solutions, Inc., 633 F.3d 1006, 1009 (10th Cir. 2011) (discussing the willfulness standard under the FCRA).
Overall, where a negligent violation of the FCRA has occurred the consumer will only be entitled to actual damages incurred as well as attorneys’ fees and costs in litigating the FCRA action. In contrast if a willful or reckless violation has occurred, the consumer will be entitled to either actual damages or statutory damages up to $1,000, whichever is greater; punitive damages as determined by the court; and attorneys’ fees and costs in litigating the action.
Importantly, actual damages include both economic harm and non-economic harm derived from the FCRA violation. Examples of economic harm include expenses arising from the denial of loans or other credit related applications, loss of income if employment has been denied as the result of the violation, and out-of-pocket expenses arising from the violation. In contrast, non-economic damages include compensation for harm to quality-of-life, such as emotional distress.
Lastly, while actual damages are obtainable for both willful and negligent violations of the FCRA, these types of damages can be hard to prove or can result in minimal damages where the effect of the violation was insubstantial. Accordingly, statutory and punitive damages for willful violations can be an important remedy for willful violations and provide an additional deterrent where the FCRA violation results in insignificant actual damages.
Relation to State Law Claims
While the FCRA statutorily prescribes certain damages, damages for state law claims may also be pursued; however, they may only be pursued in certain circumstances. More specifically, the FCRA generally prohibits consumers from bringing state common law claims for actions arising from FCRA violations.
In particular, 15 U.S.C. § 1681h(e) provides:
. . . no consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence with respect to the reporting of information against any consumer reporting agency, any user of information, or any person who furnishes information to a consumer reporting agency . . . except as to false information furnished with malice or willful intent to injure such consumer.
Accordingly, only where there is evidence of malice or willful intent to injure the consumer will state common law claims be allowed to proceed. Importantly, “malice or willful intent to injure” has been defined to include not only intentional conduct that was designed to injure the plaintiff, but also reckless conduct where the person or entity should have known that the reported information was false. See Maiteki v. Marten Transport Ltd., Civil Action 12-cv-2021-WJM-CBS (D. Colo. Oct. 15, 2015).
Examples of state common law claims in Colorado that may be applicable to FCRA actions include:
– Defamation
– Negligence
– Invasion of privacy
– Intentional infliction of emotional distress
Additionally, while state common law claims may be plead in some circumstances, the FCRA has been interpreted to preempt state statutory claims entirely. In particular, 15 U.S.C. § 1681t provides:
No requirement or prohibition may be imposed under the laws of any State
(1) with respect to any subject matter regulated under
. . .
(B) [15 U.S.C. § 1681i] of this title, relating to the time by which a consumer agency must take any action, including the provision of notification to a consumer or other person, in any procedure related to the disputed accuracy of information in a consumer’s file . . .
. . .
(F) [15 U.S.C. § 1681s-2] of this title relating to the responsibilities of persons who furnish information to consumer reporting agencies . . .
While courts are currently split as to whether 15 U.S.C. § 1681t preempts all state claims or just statutory claims, Colorado federal courts have currently found 15 U.S.C. § 1681t only applicable to Colorado statutory claims. See Consumer Data Industry Ass’n v. King, 678 F.3d 898, 901 (10th Cir. 2012); Llewellyn v. Shearson Financial Network, Inc., 622 F.Supp.2d 1062, 1070 (D. Colo. 2009) (discussing 15 U.S.C. § 1681t as only preempting state statutory law claims); Greene v. Capital One Bank, 2 07-CV-687 (D. Utah Apr. 23, 2008) (discussing the interrelation of 15 U.S.C. § 1681h and 15 U.S.C. § 1681t and finding that 15 U.S.C. § 1681t preempts state statutory claims).
Accordingly, state common law claims for FCRA violations may only be plead where there was willful intent to injure or reckless disregard for the falsity of the information. In contrast, state statutory claims cannot be plead at all.
© 2017 J.D. Porter, LLC. Author: Jordan Porter. Denver, Colorado.