Welcome to Balch's Consumer Finance Compass, where we'll navigate the complex regulatory sphere that is consumer finance. I'm Jason Tompkins, chair of the firm's Issues and Appeals Practice and member of the Consumer Finance Compliance & Defense Practice.
Today we'll explore Ingram v. Experian Information Solutions, a recent decision from the U.S. Court of Appeals for the Third Circuit. The main takeaway from this case is that the manner in which a company receives a dispute about a credit report will dictate what steps it must take in response. Companies should be sure that they have developed robust policies to process the different types of disputes.
Under the Fair Credit Reporting Act, a consumer may make two types of disputes. First, the consumer can make a dispute directly to the creditor or the debt collector that is furnishing the information that appears on their credit report. Second, a consumer may make a dispute to one of the credit bureaus, here, Experian, which that credit bureau must then forward to the furnisher and both must investigate the dispute.
Here, the plaintiff did both. After discovering that a Comcast account had been opened without his knowledge, he first filed a dispute with Comcast. In response, Comcast asked him to provide some substantiation of identity theft such as an FTC affidavit or a police report. He never did so.
Mr. Ingram then filed a dispute with Experian concerning the trade line that was on his credit report from a new company, Waypoint that had acquired the account from Comcast. Experian forwarded that dispute to Waypoint, who did a very brief investigation, but determined that the dispute was frivolous or irrelevant because Mr. Ingram had not provided the documentation that Comcast had originally requested.
The trial court in the matter granted summary judgment in favor of Waypoint holding that they had no duty to investigate since he had not provided that information. The Third Circuit reversed, and in doing so, drew a distinction between the direct disputes and what they called indirect disputes, the ones that go through the credit bureaus.
For direct disputes, companies do have the ability and the right under the Fair Credit Reporting Act to deem those as irrelevant or frivolous and not investigate them or to request additional information from the consumer in order to investigate them. For indirect disputes that first go to a credit bureau, the court held that the credit bureau may make those same determinations of frivolity or that additional information is necessary, but that the creditor furnishing the information does not have that discretion. Instead, the creditor must investigate that dispute even if they believe it's frivolous and even if they need additional information in order to do so thoroughly.
Many companies have policies like Comcast that require a consumer to submit substantiated documentation when they're claiming a fraudulently opened account or identity theft. One of the takeaways from this decision is that companies cannot use those policies to impose on the consumer an obligation to provide more information prior to their investigation under the Fair Credit Reporting Act. Instead, companies should work with their compliance counsel to develop robust investigation policies with an eye toward the eventual litigation that may come.
The Third Circuit actually stated in this decision that the lack of information from the consumer does not absolve a company of completing its investigation under the Fair Care Reporting Act, but can be a factor in any investigation about the reasonableness of that company's investigation.
After this decision, companies need to take a hard look at their policies and ensure that they differentiate between direct disputes received from the consumer and indirect disputes received from a credit bureau and ensure that the investigation techniques differ depending on which of those avenues the dispute comes in.
