FTC and CFPB Files Amicus Brief Over Furnisher’s Responsibility Under FCRA

October 21, 2023

The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) have recently filed a joint amicus brief. In it, they urged the U.S. Court of Appeals for the Second Circuit to overturn a New York federal district court decision. 

The FCRA Case

The two federal agencies claimed the lower court’s recent decision overlooked a Fair Credit Reporting Act (FCRA) requirement. According to the agencies, the FCRA requires information furnishers to delete information in cases that cannot verify the data’s accuracy. The case’s underlying issues began when the plaintiff filed a dispute with the three largest consumer reporting agencies (CRAs).

The plaintiff expressed concerns regarding credit accounts made under her name. According to the plaintiff, her mother had opened multiple credit accounts in her name without permission. She discovered these accounts after an apartment complex denied her application for a lease. She filed disputes concerning these accounts with the three CRAs, who forwarded the cases to the issuing banks.

The Defendant’s Investigations

In response to the dispute, one bank proceeded to investigate its files. It sought to confirm whether the information on file matched those provided by the plaintiff. In addition, the bank referenced a public database to verify whether the address and telephone number linked to the account matched the plaintiff’s name. The bank found everything matched.

Due to this, the bank reported the plaintiff as the account holder responsible for the credit card debt. In response, the plaintiff filed a lawsuit against the bank alleging violations of the FCRA, specifically Section 1681s-2(b)(1), which requires data furnishers to conduct a reasonable investigation of the dispute and take appropriate action.

The plaintiff argued that the bank took no additional steps to prove fraudulent accounts. However, the district court found that the plaintiff’s argument held no facts to prove the bank would come to another conclusion. Furthermore, the court found that the FCRA does not require a furnisher to rely on a consumer’s allegations without other evidence. Due to the lack of evidence that a reasonable investigation could uncover such evidence, the court granted summary judgment to the defendant.

The FTC’s and CFPB’s Rebuttal

However, the FTC and CFPB’s amicus brief argue that the Second Circuit should reverse this ruling. The federal agencies’ argument centers upon its interpretation of Section 1681s-2(b)(1)(E). This section requires that “when disputed information ‘is found to be inaccurate or incomplete or cannot be verified,’ the furnisher must, ‘as appropriate,’ delete, modify, or permanently cease reporting the disputed information.”

According to the deferral agencies, the district court failed to consider that the defendant had not suitably verified the information. They found this was the case even though the bank could not determine any definitive evidence of fraud. As a result, the agencies claim that it may have been appropriate to cease reporting the information in the absence of a definitive verification.

The Second Circuit has yet to rule on the merits of this argument. Regardless, this case illustrates the importance of accurate consumer reporting. This reminder is particularly true for consumer reports used in employment screening. The best way to ensure the accuracy of these reports is to partner with a trusted background check provider.

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