In a recent decision from the Eastern District of Virginia, the court dismissed Fair Credit Reporting Act (FCRA) claims brought by a consumer who never received the vehicle he attempted to purchase with an auto loan. Despite acknowledging the underlying fraud in the transaction, the court held that the dispute over whether the consumer still owed on the loan was a legal question, not the kind of “objectively and readily verifiable” factual inaccuracy that can support an FCRA furnisher claim.

Background

The plaintiff sought to buy a vehicle from a purported dealership in North Dakota and worked with a bank to finance the purchase. The car was supposed to be delivered to the plaintiff in Virginia, but it never arrived. The bank nonetheless treated the loan as due and payable, and when the plaintiff stopped making payments, the bank reported the account as delinquent to the nationwide consumer reporting agencies (CRAs).

The plaintiff then disputed the account multiple times through the CRAs. The CRAs forwarded his disputes to the bank, which verified the account each time. The plaintiff alleged that the negative tradeline caused credit denials, a denied home loan, reduced credit scores, reputational harm, and emotional distress. In his complaint, he asserted two FCRA furnisher claims under 15 U.S.C. § 1681s-2(b), a Virginia Consumer Protection Act claim, and an intentional misrepresentation claim. The bank moved to dismiss only the FCRA counts.

Court’s Analysis

The court began by reciting the elements of a furnisher claim under § 1681s-2(b): the consumer must dispute information with a CRA, the CRA must notify the furnisher, and the furnisher must fail to conduct a reasonable investigation. But, as the Fourth Circuit has emphasized, a plaintiff must first identify “inaccurate or incomplete information” furnished to the CRA. Information is “inaccurate” if it is patently incorrect or if it is so materially misleading that it can be expected to adversely affect a credit decision. Not every dispute about whether a debt is owed qualifies. The alleged inaccuracy must be “objectively and readily verifiable.”

The court framed the key question as whether the plaintiff’s dispute involved information that was objectively and readily verifiable, as opposed to requiring “complex fact-gathering and in-depth legal analysis.” The plaintiff argued that the bank’s reporting was inaccurate or at least misleading because he never received the vehicle and because the underlying transaction was fraudulent, such that his repayment obligation was never triggered or was unenforceable. The court characterized this as a challenge to the very existence or validity of the debt, a category of dispute that can, in some cases, be objectively verifiable. But in this case, the court concluded that resolving the plaintiff’s theory would require legal analysis of the loan agreement and contract doctrines.

Because the plaintiff’s challenge went to the legal enforceability of the debt under the loan agreement, and not to any objectively ascertainable factual error in how the bank reported the account, the court held that he failed to plausibly allege an “inaccuracy” under the FCRA. Without an actionable inaccuracy, the § 1681s-2(b) claims necessarily failed, regardless of whether the bank’s investigation was reasonable. The court therefore granted the bank’s partial motion to dismiss and dismissed both FCRA counts.

Our Take

This decision reinforces that FCRA claims are not a vehicle for litigating contract defenses or fraud theories about whether a debt is legally enforceable. Where the consumer’s core dispute is, “I don’t legally owe this debt,” and resolving that dispute requires interpreting a contract, courts in this circuit are increasingly likely to treat it as a non-FCRA issue.