Last month, consumer reporting agency Experian Information Solutions, Inc. beat a Fair Credit Reporting Act 15 U.S.C. §§ 1681 et seq. (“FCRA”) class action on summary judgment – no small feat in the Ninth Circuit. In Reyes v. Experian Information Solutions, Inc., Judge Guilford from the Central District of California found that plaintiff failed to show a derogatory account appearing on her credit report was either patently inaccurate or unduly misleading, a prerequisite for any FCRA accuracy claim. 2017 WL 4712075 (C.D. Cal. Oct. 13, 2017). Given the Ninth Circuit’s oft-regarded consumer friendly leanings, the decision in Reyes may seem counter-intuitive. However, the result actually conforms to the Ninth Circuit’s seminal case on the FCRA’s accuracy requirement – Carvalho v. Equifax Information Services LLC., 629 F.3d 876 (9th Cir. 2010) – which applied an uncharacteristically conservative standard to the FCRA’s accuracy requirement.
In Reyes, plaintiff sued Experian, alleging that inaccurate or misleading information related to accounts from Western Sky Financial LLC (“Western Sky”) appeared on her credit report. Plaintiff claimed, in particular, that the underlying loans from Western Sky were usurious and void ab initio under state law, and that Experian, in turn, should not have reported them. Experian moved for summary judgment, arguing that Reyes’s claims failed as a matter of law because the disputed inaccuracy at the heart of her FCRA claim was nothing more than a collateral attack on the legal validity of the debt at issue. Relying principally on Carvalho, the Central District of California granted summary judgment in favor of Experian.
Carvalho lays out the Ninth Circuit’s initial hurdle to the Circuit’s otherwise “plaintiff-friendly approach” in making out a disputed inaccuracy claim under the California Consumer Credit Reporting Agencies Act (the California analogue to the FCRA). As the Ninth Circuit has recognized, consumer information is inaccurate where it is “patently inaccurate” or so misleading that it may negatively affect a consumer’s ability to obtain credit. Carvalho, 629 F.3d at 890. In Carvalho, the court was confronted with a claim that the three national consumer reporting agencies (“CRAs”) each failed to conduct reasonable reinvestigations into, and subsequently delete, a disputed medical collection debt owed by the plaintiff. Plaintiff alleged the medical debt should not appear on her credit report because her medical insurance company was responsible for the payment of the debt. The district court granted the CRAs’ motions for summary judgment. The Ninth Circuit affirmed, holding that plaintiff had not established an inaccuracy by claiming she was not legally responsible for the debt and the duty of reinvestigation does not require CRAs to resolve legal disputes between parties. Stated differently, CRAs have no duty to determine whether consumer information is accurate on legal grounds. Carvalho, 629 F.3d at 891–92. This standard originated in the First Circuit in DeAndrade v. Trans Union LLC, 523 F.3d 61 (1st Cir. 2008).
Case law from California following Carvalho has expanded the application of this accuracy standard – that legal disputes do not constitute an inaccuracy – to non-reinvestigation claims. Specifically, courts have followed this line of cases to dismiss FCRA claims based upon a CRA’s duty to follow reasonable procedures to assure maximum possible accuracy in the first instance prior to any consumer initiated dispute. Grigoryan v. Experian Information Solutions, Inc., 84 F. Supp. 3d 1044, 1060-61 (C.D. Ca. 2014); Prianto v. Experian Information Solutions, Inc., No. 13-CV-03461-TEH, 2014 WL 3381578, at *4 (N.D. Ca. July 10, 2014); Smith v. Experian Information Solutions, Inc., 2017 WL 1489689, at *5-6 (N.D. Ca. April 26, 2017). This more stringent accuracy requirement – at least in disputed inaccuracy matters – is not applied in the Third, Fifth and Seventh Circuits. See Perez v. Experian Information Solutions, Inc., 2015 WL 12683795, at *3 (C.D. Cal. Jan. 13, 2015) (surveying the Circuits’ FCRA accuracy requirements).
Thus, it should come as no surprise that in Reyes, Judge Guilford quickly dispensed with plaintiff’s argument that her credit report contained patent inaccuracies and focused on her allegations that Experian reported “misleading” information. The court reasoned that Plaintiff was asking Experian to adjudicate whether she was legally responsible for the debt at issue – a task which Carvalho makes clear is not a CRA’s responsibility.
Presumably, the Supreme Court will eventually hear and decide which accuracy standard applies, the more stringent standard from the First and Ninth Circuits, or the more plaintiff-friendly standard from the Third, Fifth and Seventh. Until then, the Reyes case serves as a valuable reminder that accuracy is a CRA’s best defense in California consumer and credit reporting act cases.