A recent opinion issued by the district court for the Middle District of Florida rejected a credit union’s attempt to dismiss claims under the Fair Credit Reporting Act (FCRA) and Electronic Funds Transfer Act (EFTA) arising out of the alleged mishandling of a disputed charge and subsequent reporting to credit reporting agencies (CRAs), finding the claims too fact-specific to dispose of at such an early stage.

In Monroe v. Grow Financial Federal Credit Union (Grow Financial), the plaintiff alleged she agreed to pay a moving company $700 for a move. The moving company sent a request to Grow Financial to process a debit from the plaintiff’s checking account for $3,371. The debit resulted in an overdraft of the plaintiff’s checking account, which Grow Financial covered by initially transferring funds from the plaintiff’s money market account. When the plaintiff disputed the charge, Grow Financial issued a provisional credit for $3,371 to the plaintiff’s checking account pending investigation of the claim. Grow Financial ultimately denied the plaintiff’s claim and reversed the provisional credit resulting in a negative balance in the plaintiff’s checking account.

More than a year later, Grow Financial informed the plaintiff that her negative checking account balance resulting from the disputed moving company charge was being reported to the CRAs as a charge off. The plaintiff disputed the reported charge off with the CRAs and sued Grow Financial alleging it willfully failed to perform a reasonable investigation, failed to remove and/or correct the inaccurate information, and continued to report derogatory and inaccurate information to the CRAs resulting in actual damages in the form of lost credit opportunities, harm to credit reputation and credit score, and emotional distress.

Grow Financial moved to dismiss the plaintiff’s FCRA and EFTA claims arguing that reporting a negative balance in the plaintiff’s checking account to the CRAs was accurate and that it had received authorization to pay the charge requested by the moving company. The court rejected both arguments.

The court first addressed the FCRA claim finding the plaintiff sufficiently alleged each element of a violation. Specifically, the court held the plaintiff made supportable allegations that: (a) the reported charge off was inaccurate or incomplete, (b) she notified the CRAs of the dispute concerning the accuracy of Grow Financial’s credit reporting, (c) the CRAs notified Grow Financial of the dispute, and (d) Grow Financial failed to perform a reasonable investigation of the plaintiff’s dispute.

The court similarly found the plaintiff alleged sufficient facts to support an EFTA claim for failing to perform a reasonable or good faith investigation pursuant to §1693f, failing to adhere to the consumer liability cap pursuant to §1693g, and effectuating an unauthorized electronic fund transfer of an incorrect amount of money from the plaintiff’s checking account to the moving company pursuant to §1693e(a). The court rejected Grow Financial’s contention that the plaintiff’s account agreement authorized defendant to make a charge without liability because §1693l provides that “[n]o writing or other agreement between a consumer and any other person may contain any provision which constitutes a waiver of any right conferred or cause of action created by this subchapter.” The court also concluded that Grow Financial has the burden of proof to show that the electronic fund transfer of an incorrect amount of money to the moving company was authorized and, at the motion to dismiss stage, all facts are accepted as true and viewed in the light most favorable to the plaintiff.

Ultimately, the court concluded the plaintiff’s claims were simply too fact-specific to dispose of at such an early stage and whether they survive a motion for summary judgment or ultimately prevail is for another day.

Troutman Pepper will continue to monitor developments in FCRA and EFTA litigation and post updates.