United States: Cursory Investigations And Misleading Reporting Leads To Partial Summary Judgment Win For Consumer

Last Updated: November 9 2017
Article by Meagan Mihalko, Alan D. Wingfield and Ethan G. Ostroff

A recent federal court decision granting summary judgment to a plaintiff on a claim that a lender violated the Fair Credit Reporting Act (the "FCRA"), 15 U.S.C. § 1681 et seq., by failing to conduct a "reasonable" investigation of a credit reporting dispute – an issue normally reserved for a jury – illustrates the difficulty creditors have in managing the legal risks in furnishing information to consumer reporting agencies. It also illustrates the particularly high risks creditors face in handling claims of identity theft, and the risks they run when they fail to take advantage of multiple disputes to address a problem.

On September 21, 2017, the District Court for the Eastern District of Virginia resolved cross-motions for summary judgment in favor of Plaintiff David W. Wood ("Wood" or "Plaintiff") in a case against Defendant Credit One Bank ("Credit One" or "Defendant") for violations of the FCRA. See Wood v. Credit One Bank, No. 3:15-cv-594 (E.D. Va. Sept. 21, 2017). Wood alleges that he was the victim of identity theft after a Credit One credit card account was opened in his name, and that Credit One failed to investigate and remedy inaccurate credit reporting after he submitted multiple disputes with consumer reporting agencies ("CRAs"). The Court agreed, holding that Credit One had failed to conduct a reasonable investigation into Wood's disputes, failed to accurately report the results of its investigations, and inaccurately reported that Wood opened and was responsible for the account in question.

Here are the facts. On June 11, 2013, Credit One received a credit application and opened a credit card account (the "Account") in Wood's name. The application included identifying information for Wood, but a primary e-mail address belonging to another individual. The Account was activated three days later. On the same day, a request to add an authorized user to the account was submitted, but the request was denied because the voice "was not recognized to be one that would match the Account details." Testimony by Credit One's representative suggests that the request was denied because the gender of the caller did not match that of the account holder. The credit limit was exceeded shortly after the Account was opened, no payments were ever made, and Credit One eventually sold the account.

Wood became aware of the Account five weeks after it was activated when he received a bill in the mail. He testified that he immediately reported it to Credit One as fraudulent and began monitoring his credit with Equifax. Wood suspected that his mother, Dyan Lollis, and aunt, Frieda Wood, were tampering with his mail. And in fact, Wood's mother later submitted an affidavit certifying that the account was opened "against [Wood's] will" and that she wished to have it transferred back into her name. But before obtaining that affidavit, Wood reported the fraudulent activity to local police, accusing his mother of opening the account. Although a police report was prepared, the investigation did not progress, and the Sergeant assigned to the case would eventually opine in an affidavit that she believed Wood was simply trying to have his bill written off.

In total, Wood testified that he contacted Credit One at least thirty times by letter or phone, although Credit One claimed it only had records of four communications. Credit One also alleged that they sent two requests for an affidavit of fraud that went unanswered. What is certain is that Wood began disputing the Account with the CRAs in July 2014. When Credit One received the Automated Consumer Dispute Verification ("ACDV") form, it verified the name, social security number, and birthday provided by Wood with its internal records. Although the address Wood provided did not match Credit One's records, the company responded to the ACDV by indicating the Account was verified, should be modified as indicated (i.e., with the address Credit One had on file), and reported a Compliance Condition Code ("CCC") of "XH;" meaning that the account was previously in dispute, but that the dispute was now resolved. After the first ACDV response, Wood did not dispute the reporting again until the following year. However, starting in April 2015 and ending in June 2015, Wood sent a total of five ACDVs alleging that the Account was fraudulent. In each instance, Credit One "verified" the information and reported a CCC of XH – account previously disputed, now resolved. While Credit One maintained that it performed an investigation after each dispute, at least two of the responses included a notation that Wood was "previously found responsible" and "no further action was taken."

Beyond the events that transpired, Credit One's reporting policies were central to the Court's decision. Of the ten CCCs a furnisher – an entity that provides data to CRAs – could use to describe the status of an account in dispute, three were relevant in this case: XB (consumer disputes account information under the FCRA), XC (investigation of dispute complete, consumer disagrees with result), and XH (account previously in dispute, now resolved). But Credit One's policies and testimony from their corporate representatives revealed that "[i]n almost all situations" Credit One agents should respond to an ACDV with XH. And in cases where an account had been purged or sold, such as Wood's, the policy was to either delete the account (if the consumer was found not responsible) or report XH. Moreover, testimony revealed that Credit One never responded to an ACDV with XC – that the investigation was complete, but the results were disputed by the consumer – and would apparently forego investigations where an account had been "verified" in the past thirty days.

The Court's decision. The Court first addressed Credit One's Motion for Summary Judgment, which argued that Wood could not prove actual damages or a willful violation of the FCRA. With respect to damages, Credit One argued that Wood's allegations were insufficient because they were only supported by his own testimony – that Wood had offered nothing beyond his own statements to prove emotional distress, lost income, lost credit opportunities, etc. But the Court rejected this argument and held that Wood's testimony alone, which it found more than conclusory, was sufficient to create a genuine dispute of material fact and survive summary judgment. The Court also disagreed that there was insufficient evidence of a willful FCRA violation. Indeed, the Court held that a reasonable juror could find that Credit One's actions were willful because, in light of its practice of never reporting when a consumer disagrees with the results of an investigation and relying on findings from prior investigations, it intended to not report the ongoing dispute involving Wood's Account.

The Court next addressed Wood's Motion for Partial Summary Judgment. First, the Court held there was no genuine dispute over whether Wood opened and was responsible for the Account. The Court relied on Wood's uncontroverted testimony that he had never done so and the affidavit by Wood's mother stating that the account was opened against her son's will and that she was the rightful owner. Credit One sought to dispute this evidence by using its responses to Wood's interrogatories and other testimony, but the Court refused to consider the interrogatory responses after a procedural error by Credit One and otherwise rejected the proffered testimony as conclusory. The Court then considered if there was a genuine dispute over whether Credit One conducted a reasonable investigation. The Court determined there was not.

In concluding there was no dispute over whether Credit One conducted reasonable investigations, the Court focused largely on the cursory and repetitive nature of Credit One's inquiries. Specifically, in three of the six disputes, Credit One merely verified that the personal information provided on the ACDVs matched its internal records. But the Court also found that Credit One's evidence failed to create a genuine dispute of fact because it focused on what Wood apparently did not do instead of contradicting what he claimed he had done. For example, Wood claimed he had contacted Credit One thirty times, and the company's only rebuttal to that claim was that it was "not corroborated by Credit One's account history notes." The Court found this to be conclusory, and insufficient to rebut Wood's testimony of numerous and frequent contact. And in light of such contact, the Court found Credit One's practice of simply matching personal identifiers to be an unreasonable response to the disputes.

Finally, the Court considered whether Credit One correctly reported the results of its investigations into Wood's disputes. The Court again concluded that Credit One's actions ran afoul of the FCRA. Here the Court focused on Credit One's use of the CCC of XH, holding that "[b]y reporting a CCC of XH when Wood was continuing to dispute the accuracy of Credit One's reporting, Credit One 'create[d] a materially misleading impression,' that the Account was not in dispute." The Court rejected Credit One's argument that 'now resolved' means an investigation has been completed in compliance with the FCRA. Instead, the Court reasoned that the plain language of the XH CCC implies that any dispute the consumer previously had about the account is settled, or a solution has been found. In this case, given Wood's repeated disputes, "Credit One's investigations clearly did not solve or end the dispute."

The important takeaways. Although this decision does not create binding precedent, the case should put data furnishers on notice that finishing an investigation and responding to an ACDV does not necessarily signal the end of a dispute, and furnishers should report accordingly. As a threshold matter, a Court granting summary judgment to a plaintiff on the basis that a defendant acted unreasonably – an issue almost always reserved for the jury – shows that this Court took a dim view indeed of the defendant's conduct. Factors playing into that negative view included that there are multiple disputes in close proximity to each other, or the consumer otherwise indicates that they disagree with the conclusion of an investigation. Individual FCRA cases in the past that have resulted in large verdicts often involve multiple complaints and disputes that are handled in a perfunctory manner by a creditor. The case also highlights the importance of establishing policies that allow for more probing inquiries when there are frequent or recurring disputes. Although time and efficiency are always of concern, relying on previous investigations to dismiss new disputes can have costly repercussions. And this case signals that Courts may focus more on the impression a particular type of reporting creates over whether the reporting complied with industry standards. Finally, identity theft disputes have generated a well-deserved reputation as being particularly dangerous for creditors, and this case validates that reputation with yet another bad litigation outcome.

As always, working closely with counsel to maintain effective policies and procedures can help reduce these risks. To that end, Troutman Sanders stands ready and able to help your business navigate the ever-changing landscape of FCRA law.

The Troutman Sanders' Consumer Financial Services Law Monitor blog offers timely updates regarding the financial services industry to inform you of recent changes in the law, upcoming regulatory deadlines and significant judicial opinions that may impact your business. To view the blog, click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Meagan Mihalko
Alan D. Wingfield
Ethan G. Ostroff
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions