Earlier this month, a district court for the Eastern District of Michigan dismissed on its own initiative a Fair Credit Reporting Act (FCRA) claim brought by a consumer alleging inaccurate reporting of her charged-off vehicle loan. The court’s opinion in Shelton v. Americredit Financial Services, Inc. provides a nuts-and-bolts analysis of what does not constitute inaccurate credit reporting for purposes of the FCRA.
The pro se plaintiff in Shelton alleged that her lender violated the FCRA by erroneously reporting her auto loan as charged-off, i.e., written off as a loss and closed. In conjunction with the filing of her complaint, the plaintiff successfully moved the court to allow her to proceed without prepayment of fees or costs under the federal in forma pauperis statute, 28 U.S.C. § 1915. In granting the motion, however, the court undertook its additional responsibility required under the statute — screening the complaint to ensure that it stated a claim upon which relief may be granted. Despite the liberal construction typically afforded to pleadings filed by pro se litigants, the court dismissed the plaintiff’s complaint sua sponte for failure to state a claim.
As summarized by the court, § 1681s-2(b) imposes a duty on furnishers to ensure that their reporting of consumer credit information to credit reporting agencies is accurate. Additionally, upon notice of a consumer’s dispute concerning the accuracy of information reported, a furnisher must investigate the dispute and, if appropriate, correct the inaccuracy. Thus, a threshold showing of inaccuracy is an essential element in pleading a § 1681s-2(b) claim. According to the court, this is where the plaintiff’s complaint came up short.
In its analysis, the court noted initially the complaint’s admission that the plaintiff had failed to make payments on her loan since 2021, which resulted in the vehicle being repossessed and sold at auction. Despite this, the plaintiff lodged several objections to the defendant’s investigation, which found that the auto loan was at all times reported accurately.
First, the plaintiff disputed the defendant’s reporting of the account’s payment history — alleging that it failed to reflect a “payment” of $5,000 defendant received at auction of the vehicle. Assuming Article 9 of Michigan’s Uniform Commercial Code (UCC) governing secured transactions applied to the plaintiff’s auto loan, the court reasoned that the defendant, as a secured creditor, was legally entitled to the auction proceeds following the plaintiff’s default. Application of the auction proceeds in partial satisfaction of the loan was, therefore, no payment at all and the defendant was not required to report it as such. Hence, no inaccuracy.
Second, the plaintiff took issue with the defendant’s reporting of the loan as charged off over a seven to eight month period, which she alleged “ma[de] it confusing as to when the account was charged off.” However, because the FCRA allows a charged off account to be reported for seven years, the court found the month-to-month reporting of the charge off permissible. Though the plaintiff may have been confused, the defendant’s reporting of the loan from origination to charge-off provided a clear picture to would-be creditors. Again, no inaccuracy.
Finally, the plaintiff alleged that the defendant’s reporting of the loan payment history was inaccurate, as it reported the loan as “OK” in October 2021 despite her not remitting any payment that month. “True,” noted the court, but a “30” was entered for the loan’s payment status the following month, indicating payment on the loan was 30 days late. Thus, no inaccuracy.
In sum, because the plaintiff failed to plausibly plead any inaccuracies in connection with the defendant’s reporting, her FCRA claim failed. The court dismissed the complaint but gave the plaintiff leave to amend to the extent she believed her loan was not governed by Article 9 of Michigan’s UCC.
The Shelton court’s opinion provides a good example of how state law — in this case, the UCC — may inform an accuracy determination for purposes of the FCRA. The opinion also offers helpful reminders on the mechanics of credit reporting, the ignorance of which can result in unfounded FCRA claims.