A North Carolina federal magistrate judge recently denied a furnisher’s motion for judgment on the pleadings in a case that involved reporting of historical credit information on a consumer’s closed account. In Newman v. American Honda Finance Corp., No. 1:21CV3, 2022 U.S. Dist. LEXIS 38993 (M.D.N.C. March 4, 2022), the plaintiff, Tracy Newman, filed a lawsuit, alleging that a furnisher, American Honda Finance Corporation (Honda), violated Section 1681s-2(b) of the Fair Credit Reporting Act (FCRA), when it continued to report the pay status of her closed account as “60 days late,” which she contended was materially misleading and led to a subsequent denial of credit. Newman settled with, and dismissed, the defendant credit reporting agency (CRA), leaving Honda as the sole defendant in the lawsuit. Honda filed a motion for judgment on the pleadings (Rule 12(c) motion) and attached two substantially redacted reports obtained from the plaintiff in discovery. One report contained status and payment history information about Newman’s Honda account, and the other credit report information listing the Honda account as “closed” with a zero balance. Honda also attached a copy of the written dispute Newman sent to the CRA.
In considering the motion, the court first looked at the procedural posture and the documents attached to the Rule 12(c) motion. Honda argued that the reports attached to its motion were integral to claims made in the complaint, as they established the accuracy of the information reported by the CRA about Newman’s account. Additionally, Honda argued that courts in other jurisdictions have routinely found that reporting historical information on a closed account does not, as a matter of law, constitute an inaccuracy. Conversely, Newman argued that the attached reports, which she characterized as consumer disclosures, represented information provided to the consumer, not potential lenders, which made the reports nonintegral. Moreover, because the issues of accuracy of information and reasonableness of an investigation are fact-driven inquiries, Newman argued they could not be properly resolved in the context of a Rule 12(c) motion.
The court found that the appended documents were not integral to the complaint. First, the court predicated its conclusion on the fact that the complaint alleged that Honda inaccurately reported payment status information without specifically referencing any documents. This allegation alone, the court explained, did not support converting any document into a pleading for purposes of Honda’s motion. Second, the court underscored the fact that the documents failed to mention how Honda conducted its investigation of the disputed information, what information Honda reviewed in connection with its investigation, and how Honda reported the results, or the obligations imposed upon a furnisher by Section 1681s-2(b).
Furthermore, the court noted that the parties’ focus on the accuracy of information reported by the CRA was misplaced. As the court explained, the crux of Newman’s claim under Section 1681s-2(b) was whether Honda furnished accurate information to the CRA, noting that Honda could have furnished inaccurate information to the CRA even if the information ultimately reported by the CRA was technically correct. In essence, the court found the record before it was devoid of facts sufficient to establish, as a matter of law, the accuracy of the information Honda reported to the CRA, or reasonableness of Honda’s investigation into the dispute.
This case serves as a reminder for practitioners defending Section 1681s-2(b) claims to carefully consider dispositive motion strategy and the propriety of certain procedural shortcuts. Defense counsel must also showcase documents evidencing the reasonableness of a furnisher’s investigation as well as the accuracy of the information reported to the CRA by the furnisher. Focusing strictly on the accuracy of the information reported by CRAs to potential lenders may not result in favorable disposition.