New Consumer Friendly Fair Credit Decision

On August 7, 2012, the Ninth Circuit issued a decision interpreting the Fair Credit Reporting Act that favors consumers (Drew v. Equifax Information Services, LLC). One aspect of the opinion concerns the FCRA’s statute of limitations–how long consumers have to file suit. The other aspect concerns what notice triggers a furnisher’s obligations to investigate a disputed report. On appeal, the defendants in the case were Chase Bank and and FIA Card Services, a unit of Bank of America.

The FCRA has a statute of limitations of two years after the date of discovery by the consumer of the violation that is the basis of liability. The Court said that the statute starts to run when the consumer first learns that the credit reporting agency or the furnisher of information (such as a bank) had failed to comply with its duties under the FCRA.

In a typical case, this means the date the statute starts to run is when the consumer learns the credit reporting agency or furnisher had completed an insufficient investigation of an account that the consumer was disputing as inaccurate. (Previously, some courts have said the statute starts to run when the consumer learns there were inaccuracies in his or her credit reports, which in many cases would be months or years earlier).

In the trial court, the judge had granted Chase Bank’s motion for summary judgment on the theory it had not been properly notified of the dispute by the consumer and that its proper reinvestigation insulated it from liability. Not so, said the Ninth Circuit: “What Chase disparagingly refers to as Trans Union’s “fraud block notification” was just that—a “notification” within the meaning of the FCRA § 1681i(a)(2). This notice triggered Chase’s duties under the FCRA to rectify past misreporting and prevent future misreporting of information that is “incomplete” and “inaccurate.” Chase had reported Drew’s credit card “lost or stolen” belonging to Drew when in fact, Drew was the victim of identity theft.

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