In a recent decision, the U.S. Court of Appeals for the Eighth Circuit affirmed summary judgment in favor of Freedom Mortgage Corporation, rejecting Fair Credit Reporting Act (FCRA) claims brought by borrowers who insisted they had made their mortgage payments on time. The court held that the servicer accurately reported a 30‑day late payment and conducted a reasonable investigation in response to the borrowers’ disputes forwarded to it by the consumer reporting agencies (CRAs). The opinion reinforces two important principles: first, a payment can be accurately reported as late when it is not properly identifiable or conforming to the servicer’s payment instructions, and second, a furnisher’s investigative obligations are defined and limited by the information it receives from the CRAs.
Background
The borrowers had a mortgage loan serviced by Freedom Mortgage starting in late 2019. Before filing for bankruptcy in March 2020, the borrowers made their payments online. After they filed and then reaffirmed the mortgage debt, Freedom Mortgage required them to make payments by mail. The servicer’s welcome letter directed them to make checks payable to Freedom Mortgage and to “include your mortgage loan number” on the check. Monthly statements repeated those instructions and included a payment coupon listing the loan number.
On April 28, 2020, the borrowers mailed a cashier’s check in an amount slightly higher than their May 1 payment due. According to the borrowers, they included a piece of paper with the loan number in the envelope, but they did not write the loan number on the face of the check. The check also bore only one of the borrower’s names. Freedom Mortgage received the check but did not deposit it because it could not tell which account to credit: the company had 34 customers with the same name as the borrower, and the amount did not match the scheduled payment.
When the borrowers’ next statement arrived showing a late payment, they contacted Freedom Mortgage and told a representative that they had sent a money order and that it had already been cashed — neither of which was true. The representative was unable to locate the payment based on that incorrect information. Ultimately, the cashier’s check was returned by the issuing bank. The borrowers then sent a new check, this time with the loan number written on its face, and the payment was applied on June 9, 2020 — more than 30 days after the May 1 due date.
Freedom Mortgage then reported the May payment as more than 30 days late to the CRAs. The borrowers disputed the tradeline with the agencies, submitting short letters stating: “My Freedom Mortgage account is reporting late payments on my credit report. I’ve made all of my payments on time so please remove this information immediately.” They did not mention the cashier’s check, the missing loan number, the servicer’s instructions that were not followed, or their earlier conversation with the customer service representative.
The CRAs forwarded the disputes to Freedom Mortgage. The servicer investigated by reviewing the account history, payment history, and account notes, confirmed that the May payment had been credited on June 9, and verified the late status to the agencies. The borrowers then sued under the FCRA, alleging that the late payment reporting was inaccurate and that Freedom Mortgage failed to conduct a reasonable investigation under 15 U.S.C. § 1681s‑2(b). The district court granted summary judgment for Freedom Mortgage, finding no inaccuracy and no triable issue on the reasonableness of the investigation. The Eighth Circuit affirmed.
Legal Reasoning
Section 1681s‑2(b) requires furnishers, upon receiving a dispute from a CRA, to conduct an investigation, review relevant information, report results, and correct any information that is inaccurate, incomplete, or unverifiable. It also provides that consumers may enforce violations of this subsection in court.
On the threshold question of accuracy, the court accepted the district court’s view that the May payment was late. Although the borrowers mailed a cashier’s check before the due date, the check failed to conform to the servicer’s payment instructions. Freedom Mortgage could not reasonably identify the correct account, did not apply the payment, and the loan became more than 30 days past due. Under those circumstances, reporting a 30‑day delinquency was accurate.
Turning to the investigation, the court emphasized that a furnisher’s duty under § 1681s‑2(b) is triggered and defined by the information it receives from the CRA. Citing its own precedent and other case law, the court explained that a furnisher “need investigate only what it learned about the nature of the dispute from the description in the [agency’s] notice of dispute,” and that a more limited investigation can be reasonable when the dispute description is vague or conclusory.
Here, the borrowers’ dispute letters were brief and generic, stating only that they had made all payments on time. They did not identify a specific payment, explain the timing or method of remittance, mention the cashier’s check, or describe their communications with Freedom Mortgage. In response, Freedom Mortgage reviewed the account history, payment records, and account notes, including notes from the May 23 call in which the Johnsons inaccurately claimed that a money order had been sent and cashed. Those records confirmed that the payment due May 1 was not credited until June 9. Based on that review, Freedom Mortgage verified the reporting.
The court contrasted this record with cases where investigations were found deficient, noting that Freedom Mortgage went beyond simply checking a balance and in fact consulted account‑level documentation. On the undisputed facts, the court held that “[i]ts duties as a furnisher of information under the FCRA required no more,” and that no reasonable jury could find the investigation unreasonable. As a result, summary judgment was appropriate.
The borrowers also urged the Eighth Circuit to adopt the “heightened” or “materially misleading” accuracy standard embraced in some other circuits, under which a technically accurate report can still be “inaccurate” if it creates a misleading impression. The court declined to reach that broader question. It held that Freedom Mortgage’s investigation did not reveal any inaccuracy or incompleteness under either a technical‑accuracy or materially‑misleading standard and therefore found it unnecessary to decide whether to adopt a heightened test.
Finally, the borrowers argued that the payment instructions in the welcome letter were ambiguous, suggesting a factual dispute over whether their first check complied with the servicer’s requirements. The Eighth Circuit refused to consider that argument because the Johnsons had not raised it in the district court.
Our Take
For mortgage companies and other furnishers, this decision offers several practical and reassuring takeaways about FCRA exposure in the context of payment‑application disputes and late‑payment reporting. First, it confirms that furnishers are not obligated to treat every attempted payment as timely simply because a consumer mailed funds before the due date. When a borrower fails to follow clear, written payment instructions and the servicer cannot reasonably identify and credit the payment, a resulting 30‑day delinquency may still be accurately reported.
Second, the opinion reinforces that the scope of a furnisher’s duty to investigate is tied closely to the information contained in the dispute transmitted by the CRA. When a dispute is short, conclusory, and lacking in specifics, courts will not require furnishers to embark on open‑ended investigations or reconstruct hypothetical scenarios. It was enough here that Freedom Mortgage pulled account‑level documentation, reviewed payment and account notes, and confirmed the timing of the credit.
Third, the decision illustrates the value of robust servicing records and clear borrower communications. Freedom Mortgage benefitted from having maintained detailed account notes, including the May 23 call where the borrowers gave an inaccurate explanation of events, and from having consistently instructed borrowers to include loan numbers on payments. Those records allowed the servicer to demonstrate that the payment was not properly identifiable and that its investigation addressed the actual dispute.