QUESTION
We are a consumer reporting agency. Recently, our regulator said that we showed a few instances of not conducting a “reasonable investigation” of indirect disputes brought by consumers, in violation of FACTA. This really shocked us because we go out of our way to investigate these indirect disputes involving credit reporting.
Even our counsel thinks we are doing everything to conduct the investigation. Maybe you can help!
We want to know more about investigations and indirect dispute resolution.
What is a “reasonable investigation” of an indirect dispute involving consumer credit reporting?
ANSWER
Let's begin with some background. Before the Fair and Accurate Credit Transactions Act (FACT Act or FACTA), the Fair Credit Reporting Act (FCRA) required consumers to raise disputes about the information in their credit reports with one or more consumer reporting agencies (CRAs), not with the furnishers of that information. The CRA was required to investigate the disputed information and, if necessary, contact the furnisher (i.e., provide the furnisher with an “indirect” dispute). After hearing back from the furnisher, the CRA was required to report to the consumer.
The FACT Act supplemented this process by amending the FCRA to allow consumers to directly dispute credit report information with furnishers of information, under certain circumstances. Consumers now can submit a dispute directly to the furnisher (viz., a “direct” dispute) when the issue relates to information for which the furnisher is responsible.
Regulation V, which implements the FCRA, requires a furnisher to conduct a “reasonable investigation” of a direct dispute if it relates to any of the following circumstances:
(1) the consumer’s liability for a loan with the furnisher, such as direct disputes relating to identity theft or fraud against the consumer, individual or joint liability on an account, or the question of who is an authorized user of a credit account;
(2) the terms of a loan with the furnisher, such as direct disputes relating to the type of account, principal balance, scheduled payment amount, or the amount of the reported credit limit on an open-end account;
(3) the consumer’s performance or other conduct concerning a loan with the furnisher, such as direct disputes relating to the current payment status, high balance, the date a payment was made, the amount of a payment, or the date an account was opened or closed; or
(4) any other information contained in a consumer report regarding an account or other relationship with the furnisher that bears on the consumer’s creditworthiness, credit standing, character, general reputation, personal characteristics, or mode of living attributed to the furnisher on the consumer report.
Regulation V also lists exceptions that furnishers are not required to handle as direct disputes:
(1) disputes regarding the consumer’s identifying information, such as name, date of birth, Social Security number, telephone number, or address;
(2) disputes regarding the identity of past or present employers;
(3) disputes regarding information derived from public records, such as judgments, bankruptcies, liens, and other legal matters (unless provided by a furnisher having a relationship with the consumer;
(4) disputes regarding information related to fraud alerts or active duty alerts;
(5) disputes regarding information provided by another furnisher; or
(6) disputes reasonably believed to have been submitted by, prepared on behalf of the consumer by, or submitted on a form supplied to the consumer by, a credit repair organization.
You don’t provide an outline of the efforts you make in defense of your position of conducting a reasonable investigation. However, I think a particular case, decided recently, would help elucidate one aspect of many parameters relating to such processes. I have in mind White v Equifax Information Services.[i] In this case, the U.S. Court of Appeals for the 11th Circuit considered a complaint that a furnisher had failed to reasonably investigate a dispute a consumer raised with a CRA, not directly with the furnisher.
When White checked her Equifax and Trans Union credit reports, they noted that she disputed her Wells Fargo tradeline. She sent a letter to the credit reporting agencies (CRAs) to say she no longer disputed the tradeline.
The CRAs forwarded the letter to Wells Fargo, asking Wells Fargo to verify the dispute. Wells Fargo responded that the tradeline remained in dispute because its records indicated Wells Fargo had not received any word from White saying she no longer disputed the tradeline. The CRAs then left the dispute notation on their credit reports.
White sued Wells Fargo, alleging it had violated the FCRA by failing to investigate her dispute. Her complaint did not allege that she ever told Wells Fargo directly that she no longer disputed the tradeline. Her complaint only said that she had sent the CRAs a letter stating that they were wrong in reporting that the Wells Fargo tradeline was in dispute.
The district court dismissed the claim. And the 11th Circuit affirmed.
White had previously disputed the Wells Fargo tradeline, but she had not resolved the dispute with Wells Fargo by the time she sent the letter to the CRAs.
This decision is important because precedent from the 11th Circuit held that “reasonableness” is the touchstone for evaluating investigations under the indirect dispute provision of the FCRA.[ii] Whether a furnisher’s investigation is reasonable depends in part on the documentation available to the furnisher.
The 11th Circuit found that White had not plausibly alleged that Wells Fargo failed to conduct a reasonable investigation in response to the materials she had sent the CRAs. She had previously disputed the Wells Fargo tradeline but had not resolved the dispute with Wells Fargo by the time she sent the letter to the CRAs. The tenor of her letter indicated the CRAs’ reports were inaccurate, not that White was resolving or attempting to resolve a dispute with her bank, whom she had not copied on her letter.I realize that the tenor of her letter seems to be a distinction without a difference. But the distinction is dispositive in this case because Wells Fargo reasonably interpreted the correspondence from the CRAs as a request to verify that their reporting about the status of White’s account matched the status of her account in Wells Fargo’s official records. The reasonable thing for Wells Fargo to do was to check its official records, which is what Wells Fargo did. Thus, the FCRA required nothing more!
The court noted that
“[p]erhaps Wells Fargo could have contacted Ms. White to ask whether she was, as an initial matter, attempting to resolve the underlying dispute with Wells Fargo through the CRAs as an intermediary, but that better practice is not what the FCRA requires. …
What Ms. White want[ed] Wells Fargo to do – either (1) to intuit that she no longer disputed the tradeline from her report to the CRAs or (2) to reach out to her directly to clarify and confirm that she no longer wished to dispute the tradeline – goes beyond what FCRA reasonableness requires.”
Furthermore, the letter White sent to the CRAs was far from clear. The form letter was addressed “[d]ear [w]hoever” and signed by “Veda White with permission.” Indeed, the letter was internally contradictory. The first part of the letter seemed to dispute that certain “things…belong on [her] credit report” at all and then listed the Wells Fargo tradeline, while the second part said she “no longer dispute[s] the above accounts” and asked the CRAs to “remove all of the disputed comments from the above accounts.”
Obviously, White could have written a better letter, but, according to the court, that was not the letter on which she based her lawsuit.
I’ll end with this observation: like the 11th Circuit, courts typically apply the “reasonable investigation” standard to either type of dispute – direct to furnisher or indirect through a CRA – even though the FCRA statute[iii] is not clear about the standard for indirect disputes.
The statute simply provides:
“After receiving notice pursuant to [the FCRA] of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall…conduct an investigation with respect to the disputed information….”
Regulation V[iv] imposes the “reasonable investigation” standard on direct disputes, but no comparable regulation implements the requirements[v] for indirect disputes.
Jonathan Foxx, Ph.D., MBA[i] White v. Equifax Information Services, LLC, 2021 U.S. App. (11th Cir. December 23, 2021)
[ii] See 15 USC § 1681s-2(b)
[iii] Idem
[iv] 12 CFR § 1022.43(e)(1)
[v] Such as 15 USC § 1681s-2(b)
