Last week the United States Court of Appeals for the Third Circuit clarified the requirements for bringing a Fair Credit Reporting Act case for faulty credit reporting. Michelle SimmsParris is a New Jersey lawyer who allegedly made a couple of late payments on her mortgage loan from Countrywide Home Loans. In February 2008, SimmsParris learned that Countrywide had reported her as twice late. At her behest, her law firm fired off a letter to Countrywide, stating that it furnished false information. When Countrywide did not change the report, SimmsParris sued. The district court threw the case out on summary judgment, and the Third Circuit affirmed. SimmsParris’s claim failed for three reasons:

  1. The Fair Credit Reporting Act does not permit a private right of action against a furnisher of credit information [Countrywide] except under very limited circumstances.
  2. A private citizen cannot sue a furnisher of information unless that furnisher has been notified of the consumer’s dispute by a consumer reporting agency and this fails to conduct a reasonable investigation.
  3. The credit agency notifying the furnisher must be the same consumer reporting agency that is allegedly report the false information.

The third prong above is the new twist. SimmsParris argued that when her law firm sent the notice to the furnisher, the statutory requirement was met. According to SimmsParris her law firm occasionally acts as a consumer reporting agency. The Court rejected this notion, finding that the FCRA required that the agency to which the furnisher provided the allegedly false information had to be the one that provided the notice to trigger any statutory duty. The Court ruled:

“To allow a consumer to bypass this structural framework by hiring a law firm that occasionally acts as a consumer reporting agency would interfere with this congressionally chosen path for creating liability. In doing so, it would cause furnishers of information to have to respond directly to consumers rather than to reporting agencies, and that would upset the balance enacted by the statute.”

Because SimmsParris did not comply with the statutory framework her claim could not survive.