In Martinez v. Celtic Bank, the Southern District of New York recently denied a motion for summary judgment finding that a jury could consider an investigation reckless when a furnisher fails to review any records other than a payment history in response to a dispute that an account was erroneously reported as delinquent.

The case arose out of the plaintiff opening a credit card account with Celtic Bank (Celtic). Genesis FS Card Services, Inc. (Genesis) serviced the account on behalf of Celtic. In May 2020, Genesis enrolled eligible cardholders such as the plaintiff in a “Disaster Relief Program” (DRP). The plaintiff was told by Genesis that her account would not be reported as late once she was enrolled in the DRP. According to Genesis, the plaintiff allowed the account to become 30 days past due in August 2020 and Genesis reported this to the consumer reporting agencies (CRAs).

In December 2021, the plaintiff began contacting Genesis directly regarding its reporting of her account as delinquent. After reviewing the content of the May 2020 phone call, Genesis determined that the terms of the DRP as explained to the plaintiff were incorrect and agreed to request that the August 2020 delinquency be removed from her credit report. However, prior to Celtic’s determination, the plaintiff had submitted six separate disputes to the CRAs between January and June 2022. The plaintiff did not reference the DRP in her disputes, but instead only claimed that she had never made a late payment on the account. In its investigation into three of the disputes, Genesis used an automated program that only reviewed the payment history. As for the remaining three, live agents investigated the plaintiff’s disputes but likewise only reviewed the payment history.

The plaintiff brought suit against Celtic alleging that it (through its servicer Genesis) had failed to conduct a reasonable investigation in violation of FCRA § 1681s-2(b). Celtic moved for summary judgment on the claim that Celtic had committed a willful violation. The Southern District of New York found that Celtic was not consciously aware that a violation would result from its approach to investigating disputes and therefore Celtic did not knowingly violate the statute. However, the court found that Genesis’ “inquiry into payment history, alone, risked overlooking actions taken to remove the debt or other evidence that the debt was inaccurate.” According to the court, this approach could be considered by a jury as knowingly accepting a substantial risk of violation and therefore summary judgment was not appropriate.

Although this case does not create bright-line precedent that account level documents must be reviewed in connection with every credit reporting dispute, it indicates reliance solely on a payment history is perilous. It also serves as important guidance for furnishers developing their dispute procedures to avoid limitations on what documents can be reviewed and further demonstrates the potential for credit card issuers to be held liable for actions taken by their servicers.