The Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., was designed to ensure that consumer reporting agencies (CRAs) – like Experian, TransUnion and Equifax – fairly and accurately report information relevant to consumer credit worthiness. The FCRA requires CRAs – which are, essentially, warehouses of consumer credit information – to provide consumers with reports of the credit information they have received, and to take steps to verify any information disputed by a consumer. CRAs receive consumer information from “furnishers,” including banks and credit card companies. When a consumer notifies a CRA of possibly incorrect credit information, Section 1681i (a)(2) of the FCRA requires the CRA to notify the furnisher that the information it provided to the CRA is being disputed. Once notified, Section 1681s-2(b) requires the furnisher to investigate the dispute and correct any inaccurate information. If the furnisher fails to investigate the disputed information, or correct information found to be inaccurate, it is liable to the consumer for, inter alia, actual damages, punitive damages and attorneys’ fees. See 15 U.S.C. § 1681n.
In Barrepski v. Capital One Bank, --- F. 3d ---, 2011 WL 4424825 (1st Cir. Sept. 23, 2011), the 1st Circuit overturned a magistrate judge’s conclusion that the complaint filed by Frank Barrepski and his wife against Capital One Bank – a furnisher – for violations of Section 1681s-2(b), failed to state a claim. The Barrepskis’ complaint alleged that Capital One had failed to correct inaccurate information it had provided to Experian, specifically, that the Barrepski’s owed Captial One for a $540 charge, and that this failure resulted in the Barrepski’s being denied a mortgage. In response, Capital One argued that the complaint should be dismissed because the Barrepski’s had failed to dispute, originally, the $540 charge, and thus had failed to exhaust the grievance procedures prior to filing their complaint.
In reversing the magistrate judge and reinstating the Barrepskis’ complaint, the 1st Circuit stood firm on the Federal Rules’ standard of notice pleading, and explained that the fact that the Barrepskis had not originally disputed the $540 charge was not fatal to their complaint. Indeed, the complaint did not need to address the validity of the underlying information furnished by Capital One. Under the Rule 8(a)(2) Federal Rules of Civil Procedure, all the complaint needed to do was to allege:
- that the Barrepskis gave notice to Experian that Capital One had furnished incorrect information;
- that Capital One, after learning of the error, refused to correct it; and
- that the Barrepskis were denied a mortgage because of Capital One’s failure to correct the error.
Interestingly, the substance of the Barrepskis’ claim was that they had entered into a settlement with Capital One regarding the $540 charge, and so Capital One should not have continued to furnish negative information on the charge to Experian. In dicta, the 1st Circuit alluded that claimed violations of the FCRA based upon settlements, like the Barrepskis’, were at least cognizable under section 1681s-2(b), and that Capital One’s arguments about the effect of the settlement were appropriate for summary judgment, but not for a motion to dismiss.