In Holden v. Holiday Inn Club Vacations Inc., the U.S. Court of Appeals for the Eleventh Circuit recently upheld a consolidated district court ruling granting summary judgment for the defendant furnisher in two Fair Credit Reporting Act (FCRA) actions centering on whether the consumers’ disputes with the furnisher were actionable. While the Eleventh Circuit declined to impose a bright-line rule that only FCRA claims based on factual disputes are actionable, it affirmed the district courts’ summary judgment ruling, finding that for consumer disputes to be actionable against furnishers, the alleged inaccuracy must be “objectively and readily verifiable.”

The consolidated case arose out of two plaintiffs who separately purchased timeshares from the defendant. The plaintiffs later stopped making payments and considered the agreements to be cancelled. The defendant disagreed and reported the debts to a consumer reporting agency (CRA). The plaintiffs then each sent disputes to the CRA challenging the accuracy of their consumer reporting. When their reporting was not changed, the plaintiffs alleged that the defendant failed to reasonably investigate their disputes in violation of § 1681s-2(b) of the FCRA. After hearing argument, the district court granted summary judgment for the furnisher in each case ruling that the alleged inaccuracies were “legal disputes” rather than “factual inaccuracies” and therefore not actionable under § 1681s-2(b). The plaintiffs appealed.

On appeal, the Eleventh Circuit analyzed what constitutes an “actionable inaccuracy” under the FCRA and whether a legal dispute could ever be actionable. In its analysis, the Eleventh Circuit considered the parties’ arguments as well as an amicus brief filed by the Consumer Financial Protection Bureau and the Federal Trade Commission (collectively, the agencies).

In their amicus brief, the agencies asserted that furnishers should be required to conduct reasonable investigations of both legal and factual questions posed in consumer disputes because many alleged inaccuracies, especially those stemming from contracts, could be characterized as legal and thus, under the district court’s rationale, not actionable. The agencies argued the court should follow Ninth Circuit precedent holding that the FCRA does not categorically exempt disputes raising “legal” issues from the investigation requirements of §1681s-2(b).

In considering this argument, the Eleventh Circuit focused on the meaning of “accuracy” in the FCRA and explained that to have maximum possible accuracy meant “greatest in quantity or highest in degree attainable” and “falling or lying within the powers’ of an agent or activity.” The Eleventh Circuit also said that when examining a consumer report for accuracy, it looked at the “objectively reasonable interpretations of the report” and that “a report must be factually incorrect, objectively likely to mislead its intended user, or both to violate the maximal accuracy standard of the [FCRA].”

Applying this statutory interpretation, the Eleventh Circuit found the plaintiffs’ alleged inaccurate information was not objectively and readily verifiable because it stemmed from a contractual dispute without a straightforward answer. The court noted that the resolution of this contractual dispute was not a straightforward application of law to fact, in part, because Florida case law is conflicting on whether the default provisions excused a consumer’s obligation to keep paying under the timeshare agreement. The Eleventh Circuit agreed that “furnishers are qualified and obligated to assess issues such as where debts are actually due and/or are collectible,” as argued in the agencies’ amicus brief, but found that in this case while the defendant did assess the validity of the alleged inaccuracy the plaintiffs disagreed with the defendant’s conclusion.

The Eleventh Circuit explained that where the resolution of a contract dispute is not straightforward or “objectively and readily verifiable,” it is also not actionable under the FCRA against a furnisher. However, that does not mean that plaintiffs are without any future recourse. The court advised that such plaintiffs could sue for declaratory judgment that the challenged debt was void and, if a favorable result was received, use the declaration to later challenge the accuracy or request changes to their consumer reporting.

The Eleventh Circuit expressly declined to impose a rule “that only purely factual or transcription errors are actionable under the FCRA” instead holding that to determine whether a claim is actionable, a court must determine whether the disputed information is “objectively and readily verifiable.” In finding that the plaintiffs’ alleged disputes failed to meet that standard, the Eleventh Circuit held that the plaintiffs did not have actionable FCRA claims.

Our Take

In reaching this decision, the Eleventh Circuit adopted a similar approach to the Second Circuit, which recently stopped short of finding a bright-line rule that no legal questions are actionable under the FCRA and instead focused the inquiry on whether the alleged inaccuracy involves “objective and readily verifiable information.”

Whether furnishers may be held liable under the FCRA for reporting inaccuracies based on legal questions continues to be a heavily litigated issue without resolution. Indeed, courts across the country continue to grapple with this issue, which has resulted in inconsistent case law between states. The CFPB has also come down firmly on this issue and takes the position that furnishers are obligated to investigate legal disputes under the FCRA.

However, the Eleventh Circuit sidesteps this controversy and adopts a new standard — whether the alleged inaccuracy is “objectively and readily verifiable.” While the Eleventh Circuit declines to impose a bright-line rule “that only purely factual or transcription errors are actionable under the FCRA,” the “objectively and readily verifiable” standard may be broader in application than the current factual/legal dispute standard being advanced in other circuits. As seen in Holden, the “objectively and readily verifiable” standard could cover legal disputes as well as other disputes, including certain factual disputes where the alleged inaccuracy is not objectively verifiable. Thus, the Eleventh Circuit’s new standard may be viewed as a more favorable standard for furnishers.