A recent federal court decision granting summary judgment to a plaintiff on a claim that a lender violated the Fair Credit Reporting Act (the “FCRA”), 15 U.S.C. § 1681 et seq., by failing to conduct a “reasonable” investigation of a credit reporting dispute – an issue normally reserved for a jury – illustrates the difficulty creditors have in managing the legal risks in furnishing information to consumer reporting agencies.  It also illustrates the particularly high risks creditors face in handling claims of identity theft, and the risks they run when they fail to take advantage of multiple disputes to address a problem. 

On September 21, 2017, the District Court for the Eastern District of Virginia resolved cross-motions for summary judgment in favor of Plaintiff David W. Wood (“Wood” or “Plaintiff”) in a case against Defendant Credit One Bank (“Credit One” or “Defendant”) for violations of the FCRA.  See Wood v. Credit One Bank, No. 3:15-cv-594 (E.D. Va. Sept. 21, 2017).  Wood alleges that he was the victim of identity theft after a Credit One credit card account was opened in his name, and that Credit One failed to investigate and remedy inaccurate credit reporting after he submitted multiple disputes with consumer reporting agencies (“CRAs”).  The Court agreed, holding that Credit One had failed to conduct a reasonable investigation into Wood’s disputes, failed to accurately report the results of its investigations, and inaccurately reported that Wood opened and was responsible for the account in question.      

Here are the facts.  On June 11, 2013, Credit One received a credit application and opened a credit card account (the “Account”) in Wood’s name.  The application included identifying information for Wood, but a primary e-mail address belonging to another individual. The Account was activated three days later.  On the same day, a request to add an authorized user to the account was submitted, but the request was denied because the voice “was not recognized to be one that would match the Account details.”  Testimony by Credit One’s representative suggests that the request was denied because the gender of the caller did not match that of the account holder.  The credit limit was exceeded shortly after the Account was opened, no payments were ever made, and Credit One eventually sold the account. 

Wood became aware of the Account five weeks after it was activated when he received a bill in the mail.  He testified that he immediately reported it to Credit One as fraudulent and began monitoring his credit with Equifax.  Wood suspected that his mother, Dyan Lollis, and aunt, Frieda Wood, were tampering with his mail.  And in fact, Wood’s mother later submitted an affidavit certifying that the account was opened “against [Wood’s] will” and that she wished to have it transferred back into her name.  But before obtaining that affidavit, Wood reported the fraudulent activity to local police, accusing his mother of opening the account.  Although a police report was prepared, the investigation did not progress, and the Sergeant assigned to the case would eventually opine in an affidavit that she believed Wood was simply trying to have his bill written off.  

In total, Wood testified that he contacted Credit One at least thirty times by letter or phone, although Credit One claimed it only had records of four communications.  Credit One also alleged that they sent two requests for an affidavit of fraud that went unanswered.  What is certain is that Wood began disputing the Account with the CRAs in July 2014.  When Credit One received the Automated Consumer Dispute Verification (“ACDV”) form, it verified the name, social security number, and birthday provided by Wood with its internal records.  Although the address Wood provided did not match Credit One’s records, the company responded to the ACDV by indicating the Account was verified, should be modified as indicated (i.e., with the address Credit One had on file), and reported a Compliance Condition Code (“CCC”) of “XH;” meaning that the account was previously in dispute, but that the dispute was now resolved.  After the first ACDV response, Wood did not dispute the reporting again until the following year.  However, starting in April 2015 and ending in June 2015, Wood sent a total of five ACDVs alleging that the Account was fraudulent.  In each instance, Credit One “verified” the information and reported a CCC of XH – account previously disputed, now resolved.  While Credit One maintained that it performed an investigation after each dispute, at least two of the responses included a notation that Wood was “previously found responsible” and “no further action was taken.”   

Beyond the events that transpired, Credit One’s reporting policies were central to the Court’s decision.  Of the ten CCCs a furnisher – an entity that provides data to CRAs – could use to describe the status of an account in dispute, three were relevant in this case: XB (consumer disputes account information under the FCRA), XC (investigation of dispute complete, consumer disagrees with result), and XH (account previously in dispute, now resolved).  But Credit One’s policies and testimony from their corporate representatives revealed that “[i]n almost all situations” Credit One agents should respond to an ACDV with XH.  And in cases where an account had been purged or sold, such as Wood’s, the policy was to either delete the account (if the consumer was found not responsible) or report XH.  Moreover, testimony revealed that Credit One never responded to an ACDV with XC – that the investigation was complete, but the results were disputed by the consumer – and would apparently forego investigations where an account had been “verified” in the past thirty days.    

The Court’s decision.  The Court first addressed Credit One’s Motion for Summary Judgment, which argued that Wood could not prove actual damages or a willful violation of the FCRA.  With respect to damages, Credit One argued that Wood’s allegations were insufficient because they were only supported by his own testimony – that Wood had offered nothing beyond his own statements to prove emotional distress, lost income, lost credit opportunities, etc.  But the Court rejected this argument and held that Wood’s testimony alone, which it found more than conclusory, was sufficient to create a genuine dispute of material fact and survive summary judgment.  The Court also disagreed that there was insufficient evidence of a willful FCRA violation.  Indeed, the Court held that a reasonable juror could find that Credit One’s actions were willful because, in light of its practice of never reporting when a consumer disagrees with the results of an investigation and relying on findings from prior investigations, it intended to not report the ongoing dispute involving Wood’s Account.  

The Court next addressed Wood’s Motion for Partial Summary Judgment.  First, the Court held there was no genuine dispute over whether Wood opened and was responsible for the Account.  The Court relied on Wood’s uncontroverted testimony that he had never done so and the affidavit by Wood’s mother stating that the account was opened against her son’s will and that she was the rightful owner.  Credit One sought to dispute this evidence by using its responses to Wood’s interrogatories and other testimony, but the Court refused to consider the interrogatory responses after a procedural error by Credit One and otherwise rejected the proffered testimony as conclusory.  The Court then considered if there was a genuine dispute over whether Credit One conducted a reasonable investigation.  The Court determined there was not.  

In concluding there was no dispute over whether Credit One conducted reasonable investigations, the Court focused largely on the cursory and repetitive nature of Credit One’s inquiries.  Specifically, in three of the six disputes, Credit One merely verified that the personal information provided on the ACDVs matched its internal records.  But the Court also found that Credit One’s evidence failed to create a genuine dispute of fact because it focused on what Wood apparently did not do instead of contradicting what he claimed he had done.  For example, Wood claimed he had contacted Credit One thirty times, and the company’s only rebuttal to that claim was that it was “not corroborated by Credit One’s account history notes.”  The Court found this to be conclusory, and insufficient to rebut Wood’s testimony of numerous and frequent contact.  And in light of such contact, the Court found Credit One’s practice of simply matching personal identifiers to be an unreasonable response to the disputes.       

Finally, the Court considered whether Credit One correctly reported the results of its investigations into Wood’s disputes.  The Court again concluded that Credit One’s actions ran afoul of the FCRA.  Here the Court focused on Credit One’s use of the CCC of XH, holding that “[b]y reporting a CCC of XH when Wood was continuing to dispute the accuracy of Credit One’s reporting, Credit One ‘create[d] a materially misleading impression,’ that the Account was not in dispute.”  The Court rejected Credit One’s argument that ‘now resolved’ means an investigation has been completed in compliance with the FCRA.  Instead, the Court reasoned that the plain language of the XH CCC implies that any dispute the consumer previously had about the account is settled, or a solution has been found.  In this case, given Wood’s repeated disputes, “Credit One’s investigations clearly did not solve or end the dispute.” 

The important takeaways.  Although this decision does not create binding precedent, the case should put data furnishers on notice that finishing an investigation and responding to an ACDV does not necessarily signal the end of a dispute, and furnishers should report accordingly.  As a threshold matter, a Court granting summary judgment to a plaintiff on the basis that a defendant acted unreasonably – an issue almost always reserved for the jury – shows that this Court took a dim view indeed of the defendant’s conduct.  Factors playing into that negative view included that there are multiple disputes in close proximity to each other, or the consumer otherwise indicates that they disagree with the conclusion of an investigation.  Individual FCRA cases in the past that have resulted in large verdicts often involve multiple complaints and disputes that are handled in a perfunctory manner by a creditor. The case also highlights the importance of establishing policies that allow for more probing inquiries when there are frequent or recurring disputes.  Although time and efficiency are always of concern, relying on previous investigations to dismiss new disputes can have costly repercussions.  And this case signals that Courts may focus more on the impression a particular type of reporting creates over whether the reporting complied with industry standards.  Finally, identity theft disputes have generated a well-deserved reputation as being particularly dangerous for creditors, and this case validates that reputation with yet another bad litigation outcome. 

As always, working closely with counsel to maintain effective policies and procedures can help reduce these risks.  To that end, Troutman Sanders stands ready and able to help your business navigate the ever-changing landscape of FCRA law.