In Frazier v. Dovenmuehle Mortgage, Inc., the Seventh Circuit recently issued an opinion affirming summary judgement in favor of the defendant data furnisher in a suit brought by a consumer under § 1681s-2(b) of the Fair Credit Reporting Act (FCRA) requiring data furnishers upon notice of a dispute to “investigate the disputed data” and “correct or verify the information by returning the ACDV form to the credit reporting agency [CRA] with any amended or verified data inserted next to the old data.” The appellate court rejected the consumer’s argument that the information provided by the furnisher on an ACDV response to a CRA was materially misleading, even though the CRA’s inaccurate interpretation of the ACDV response led the CRA to report that the consumer was currently delinquent on a settled debt.

In 2019, the plaintiff allegedly submitted a dispute to a CRA regarding its reporting of her mortgage loan as currently delinquent when the loan had in fact been paid off through a short sale of the property in 2016. After an investigation, the defendant furnished the following ACDV responses to the CRA:

The CRA interpreted and reported the modified data to reflect that the plaintiff was currently delinquent on her mortgage with missed payments in months following the short sale in 2016. The plaintiff brought a claim against the defendant furnisher (and, separately, against the CRA) claiming that the amended data was inaccurate, pointing in part to the way the CRA interpreted and reported it as evidence that the amended data was materially misleading. The district court granted the defendant furnisher’s motion for summary judgement finding that the Pay Rate of “3” was not materially misleading. The court found that, in context, the “3” was directly beside an Account Status of “13,” which means closed. Also, the Date Closed was correctly furnished as “01-14-2016.” The plaintiff appealed.

In its decision, the Seventh Circuit joined several other circuits in holding: (a) as a threshold element of a § 1681s-2(b) claim, the plaintiff must make a prima facie showing that a data furnisher provided incomplete or inaccurate information; and (b) incompleteness or inaccuracy requires showing that the information was (1) patently incorrect, or (2) materially misleading, including by omission, which means “misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.” Most notably, the appellate court further held that completeness or accuracy of the ACDV responses is determined based on objective review of the information provided by the data furnisher to the CRA, rather than the CRA’s subjective interpretation of that data or the consumer report generated by the CRA in response to receiving the data furnisher’s information in an ACDV. In other words, the furnisher’s liability under § 1681s-2(b) is not affected by the CRA’s inaccurate interpretation of the furnisher’s ACDV response.

Under those legal standards, the Seventh Circuit affirmed the district court’s holding that the information reported by the furnisher to the CRA was not inaccurate or incomplete (including because it was not materially misleading to a reasonable observer), regardless of how that information was interpreted by the CRA or how it was reported on the resulting consumer report.