Third Circuit Hears Oral Argument on FCRA “Pay Status” Cases

Troutman Pepper
Contact

Troutman Pepper

On January 20, the Third Circuit Court of Appeals held oral argument in Bibbs v. Trans Union, LLC. This case is a consolidated appeal of multiple decisions from the Eastern District of Pennsylvania, granting dispositive motions in favor of defendants on “Pay Status” claims under the Fair Credit Reporting Act (FCRA).

Background

Over the past 18 months, courts have seen an influx of cases under the FCRA, alleging that a tradeline reported as closed or transferred and, simultaneously, past due is erroneous. The Eastern District of Pennsylvania has seen more than 50 such cases filed since 2020. Various plaintiffs’ lawyers have argued that furnishers and consumer reporting agencies (CRAs) are incorrectly reporting their financial accounts with a “Past Due Pay Status,” which they claim hurts their credit. Furnishers and CRAs argue, however, that their reporting is accurate, not misleading, and consistent with industry guidance.

Oral Argument

Counsel for the appellant, Marissa Bibbs, met a hot bench, skeptical of the argument that courts should read individual fields on a credit report in isolation. The court expressed concern that accepting Bibbs’ position would require the court to find that interpreting a credit report, including determining whether information is technically accurate but still potentially misleading, is subjective rather than objective. Bibbs’ counsel argued, however, that the accuracy of “Pay Status” reporting turns on the date that a credit report is pulled. While a “Past Due Pay Status,” might have been accurate at one time in the historical past, Bibbs’ counsel contended that it was inaccurate as of the date the Bibbs’ credit report was created. Because “Pay Status” is not defined on a credit report, Bibbs’ counsel argued that readers are left to create their own understanding of what the field means, and the district court improperly speculated as to its meaning when granting motions to dismiss.

Trans Union’s counsel argued in favor of accepting an objective standard, using the standard of a reasonable reader. The court was quick to distinguish the standard under the FCRA as opposed to the Fair Debt Collection Practices Act, noting that the court need not approach this question under the FCRA from the lens of the least sophisticated consumer. The court further pressed counsel for Trans Union on whether there is a material impact as to how to decide these cases based on the way that an account reaches a zero balance, either by transfer or payment. Trans Union’s counsel, however, argued that the distinguishing factors in payment or transfer did not make a difference, as neither would convert a consumer’s account to a “non-late status.” Trans Union further emphasized the import of the “Pay Status” field to potential creditors — where a consumer paid his or her account late, that information is both important and relevant to users of consumer reports. Finally, Trans Union’s counsel rejected Bibbs’ argument that the dates a consumer report or dispute investigation results were created had any relevance to the question before the court. Instead, the “Pay Status” for a closed account should be read in conjunction with all other information on an account’s tradeline, reflecting historical information about the status of the account at the time of closure.

While the court seemed more sympathetic to Trans Union’s arguments and doubtful of Bibbs’ contentions that “Pay Status” should be read in isolation, only time will tell whether the Third Circuit closes the door on the “Pay Status” claim.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Troutman Pepper | Attorney Advertising

Written by:

Troutman Pepper
Contact
more
less

Troutman Pepper on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.