FTC and CFPB’s position on adverse items of information and the seven-year reporting period

In a recent amicus brief before the U.S. Court of Appeals for the Ninth Circuit, the Federal Trade Commission (“FTC”) and Consumer Financial Protection Bureau (“CFPB”) – double the pleasure – teamed up to provide their interpretation of section 605(a) of the Fair Credit Reporting Act (“FCRA”), the reporting of “other adverse items of information” and the seven year reporting period.

The matter, Moran v. The Screening Pros LLC (Case No. 12-57246), involves a consumer report used for tenant screening purposes.  The report, made in 2010, listed a 2000 misdemeanor drug charge that was dismissed in 2004.  This is the key fact and this is where the FTC and CFPB claim that the Plaintiff is correct in saying that the consumer report provided to the propery manager shouldnot have included the misdemeanor drug charge as the information was outside the seven year window.

For brevity sake, the issue at hand is the FCRA restriction on a consumer reporting agency (“CRA”) from including obsolete information in a report.  Enter section 605(a) of the FCRA.  Long and short of it, the FTC and CFPB take the position that the FCRA restricts the reporting of “any other adverse item of information…which antedates the report by more than seven years.”  Page 11 of the amicus brief states:

 “An adverse item, when it occurs, starts the seven-year period.  Later related events that are not in themselves adverse do not reopen the period.  Thus, in the case of a criminal charge that is eventually dismissed, the dismissal is not an adverse item that starts its own seven-year reporting period.  It is simply the disposition of a truly adverse item, the underlying criminal charge.”

The FTC and CFPB made an analogy in their position to obsolete debts and the fact that later, non-adverse events relating to the debt, do not extend the period in which a CRA may report the fact that the debt was referred to collection.

Word to the Wise – CRAs should review their practice with respect to the reporting of dismissals pursuant to section 605(a).  While this is just an amicus brief that does not carry the weight of law, it may nonetheless portend to future events given that the CFPB has rulemaking authority under the FCRA.