Tenth Circuit Adopts Higher Bar for Consumer FCRA Claims
The Tenth Circuit recently narrowed the kinds of credit-reporting disputes that can succeed in litigation going forward. On July 20, the court addressed when a furnisher can be held liable for failing to investigate a consumer’s dispute in Ward v. National Credit Systems, Inc.
The ruling could give furnishers another basis to seek early dismissal of FCRA claims when consumers cannot show that the reported information contains a clear, verifiable error.
Robbin Ward’s daughter allegedly used his personal information, without his knowledge, to rent an apartment in his name. When she stopped paying rent, the debt went to collections, and National Credit Systems (NCS) reported it to the credit bureaus under Ward’s name. Ward disputed the debt as identity theft. NCS investigated but couldn’t confirm his story, and it kept reporting the debt as accurate. Ward sued, the trial court let the case go to a jury, and the jury awarded him $500,000 for emotional distress. NCS asked the court to throw out the verdict, the trial court refused, and NCS appealed.
The “Objectively Verifiable” Standard the Court Adopted for FCRA Claims
The Tenth Circuit reversed, answering a question it had never resolved before: does a consumer have to prove the disputed information was actually inaccurate before he can sue a furnisher for an allegedly insufficient investigation? The court said yes, for two main reasons.
- The federal Fair Credit Reporting Act (FCRA) only lets consumers recover damages caused “as a result of” a furnisher’s negligence. The court read that language as requiring but-for causation. If the reported information was actually accurate, then no matter the quality of the investigation, it couldn’t have caused any harm, because the furnisher never had to change accurate information in the first place. The court also noted that a consumer’s dispute must be bona fide, meaning that the disputed information could materially alter how the reported debt was understood.
- The court adopted the same rule that the Second, Fourth, Fifth and Eleventh Circuits have already applied: to win an FCRA claim, a consumer must make a threshold showing that the disputed information was, in fact, inaccurate or incomplete. As the court put it, “we join the circuits that have extended this logic to FCRA claims against furnishers and conclude that a consumer must make a prima facie showing that the disputed information was in fact inaccurate or incomplete.”
Importantly, when the underlying facts aren’t in real dispute, it’s the judge, not the jury, who decides whether the consumer made this threshold showing. The court explained that “assessments of credibility and demeanor are not crucial to the proper resolution of the ultimate issue,” so this isn’t a question that should go to trial.
The court also rejected Ward’s argument that a furnisher’s duty is triggered by mere notice of a dispute, and that it must fix a report whenever accuracy simply “cannot be verified.” The court clarified that this “cannot be verified” language only applies once a furnisher has already decided that further digging would be pointless. It doesn’t lower the bar for consumers who haven’t proven an actual inaccuracy.
The court likewise held that the FCRA’s identity-theft provision doesn’t excuse a consumer from this burden; simply filing an identity-theft report backed only by the consumer’s own account isn’t enough to prove the reported information was wrong.
Finally, the court explained what “inaccurate” actually means: the disputed information must be “objectively and readily verifiable” as containing a mistake. Put simply, “purely factual or transcription errors or a straightforward application of law to facts” qualify, but “a dispute without a straightforward answer does not.”
Applying that test, the court found Ward’s identity-theft claim didn’t qualify because deciding whether he was an innocent victim or was complicit in his daughter’s scheme required a credibility call and resolution of an unsettled question — something NCS wasn’t equipped to verify on its own.
What Does This Change for Credit Furnishers and Consumers?
This ruling makes unreasonable-investigation claims much harder to bring in the Tenth Circuit. Because proving actual inaccuracy is a threshold, judge-decided element, claims resting on a consumer’s uncorroborated account of fraud or identity theft may be more likely to be resolved before trial, and possibly before the parties ever get to discovery.
Contact Harrison Golden, Tim Byrd, Patrick Judd or any member of Phelps’ litigation, appellate or banking and financial services teams with questions.