[author: Erik Johnson]
Earlier this year, the CFPB and the FTC filed an amicus brief in an appeal to the Second Circuit, arguing that the Court should reject the District Court’s “unduly narrow” interpretation of the FCRA requirement that consumer reporting agencies (CRAs) follow reasonable procedures to assure accuracy of information included in consumer reports. The CFPB and FTC argue that the FCRA does not distinguish between “legal” and “factual” inaccuracies, and thus CRAs may be held liable for failing to maintain reasonable procedures to prevent even inaccuracies that turn on legal questions regarding the underlying debt or credit information.
Recently, the Chamber of Commerce of the United States of America, America Bankers Association (ABA), National Association of Federally-Insured Credit Unions (NAFCU), Independent Community Bankers of America (ICBA), American Financial Services Association (AFSA), Credit Union National Association (CUNA), and Consumer Bankers Association (CBA) together submitted its own amicus brief in Sessa v. TransUnion asking the Second Circuit to reject the CFPB’s theory, which would require credit reporting agencies and furnishers to adjudicate legal disputes that courts should resolve.
In Sessa v. Trans Union, LLC, Plaintiff-Appellant brought a putative class action alleging that TransUnion reported she owed a “balloon payment” on a vehicle lease, but then inaccurately reported the amount owed as the vehicle’s residual value, which was an optional amount to purchase the vehicle at the end of the lease and greater than the actual amount owed.
The District Court for the Southern District of New York granted summary judgment to TransUnion holding that Plaintiff failed to make the “threshold showing” of inaccuracy on the consumer report. First, the court drew a distinction between factual and legal inaccuracies and held that a CRA cannot be held liable when the issue requires a legal determination as to the validity of the debt the agency reported. In the court’s view, whether Plaintiff in fact owed a balloon payment at the end of the lease was a “legal dispute” that requires “a legal interpretation of the loan’s term.” Second, the court concluded that the information in the credit report was factually accurate because TransUnion reported the exact information it received from the data furnisher.
AFSA and the organizations agree with this decision, noting that it accords with the FCRA’s text, purpose, structure and history. The amicus brief argues that the FCRA requires credit reporting agencies to guard against factual inaccuracies, not to resolve legal disputes. The approach under CFPB’s expanded interpretation would have damaging economic consequences for consumers, furnishers, and credit reporting agencies. ASFA urges that, such a holding is consistent with findings in other circuits recognizing that the FCRA focuses on factual inaccuracies.
In arguing in support of the District Court’s decision, the brief notes that distinguishing between fact and law is a routine task for courts of appeals. Even in cases involving mixed questions of law and fact, the principles of distinguishing legal and factual matters are well established in the courts. ASFA states that the point is not that the analysis is easy per se as there will be hard questions, but rather the point is that the distinction is firmly embedded in the American legal tradition and is familiar to every federal court in the country. The elimination of the accepted fact-law distinction would prove unworkable, expensive, and inefficient in practice.