A U.S. district court in the Eastern District of New York recently denied a motion for summary judgment filed by a credit card issuer because the plaintiff alleged identity theft and a reasonable factfinder could determine the issuer’s investigation was willfully unreasonable under the Fair Credit Reporting Act (FCRA).

In 2019, a credit card was shipped to the plaintiff’s address. The plaintiff claims he never received the card and reported the theft to the New York Police Department and the United States Postal Service. However, a caller using the plaintiff’s telephone number activated the account by providing the credit card number, the 3-digit CVC number, and the last four digits of the plaintiff’s social security number. Notably, the issuer did not have anti-spoofing measures in place at that time. The same day the card was activated, a large purchase was made at a store the plaintiff claims he does not have a membership with and was over a hundred miles away from his location. Shortly thereafter, an additional purchase was made, but that one was flagged as fraudulent and the card was blocked. The plaintiff contested the charge, but the issuer’s policy was to deny disputes if the card appeared to be activated from the consumer’s telephone number unless the consumer knew who stole and activated the card. When the plaintiff refused to pay the charge, the issuer reported the account as delinquent to the consumer reporting agencies (CRAs). The plaintiff then disputed the reporting with the CRAs, but the issuer denied the dispute and verified the charges. At that point, the plaintiff sued the card issuer under the FCRA for failing to conduct a proper investigation of his dispute.

Section 1681s-2(b) requires a furnisher to undertake a reasonable investigation of consumers’ disputes. The court noted that the focus is often on whether the reporting of an account is inaccurate and, if so, whether that inaccuracy is factual or legal. Two recent Second Circuit cases clarified the question is whether the information in dispute is “objectively and readily verifiable.” The question in this case was purely factual — whether the plaintiff or someone else activated the card and made the purchase. The court found that the credit card issuer was in the best position to undertake this inquiry.

The court found that the plaintiff provided specific evidence contesting the allegedly fraudulent charge and, further, the plaintiff could point to the defendant’s policy and procedure of denying fraud claims where cards were activated with proper verification. As a result, the district court concluded that a reasonable factfinder could determine the bank failed to reasonably investigate the dispute. Further, because the defendant’s policy was to not consider any additional evidence, a reasonable jury could find that policy “recklessly violated the [defendant’s] statutory investigatory duties under the FCRA.” The court thus denied the credit card issuer’s motion for summary judgment.