QUESTION
I am the General Counsel for a servicer. You have written many times about RESPA’s requirement that mortgage loan servicers conduct reasonable investigations of QWRs. I don’t think there is a reliable definition of a reasonable investigation in RESPA, and I question whether there is one in the FCRA.
To me, it seems to come down to an arbitrary and somewhat subjective understanding rather than a concrete, time-tested definition. I would like to be able to rely on something more legally applicable.
My current concern involves credit repair agencies, about which you have written extensively. In particular, I want to know how a reasonable investigation is described procedurally in the Fair Credit Reporting Act with respect to credit repair agencies involved in potential violations. I am being specific because I am currently handling litigation relating to the FCRA and a credit reporting agency.
I want to know if there is a reasonable investigative standard or set of requirements to follow that comply with the FCRA.
What is the reasonable investigative standard that complies with the FCRA?
ANSWER
You might be interested in Radford v. LoanCare, LLC,[i] litigation alleging a violation of the Real Estate Settlement Procedures Act (RESPA). The case also examined whether LoanCare had complied with the Fair Credit Reporting Act (FCRA) with respect to the reasonable investigation requirement.
First, let me set forth the requirements, so you have this information up front.
The FCRA requires furnishers of information to provide accurate information to Credit Reporting Agencies (CRAs). It also requires them to investigate the accuracy of the information they provided if they receive notice of a dispute from a CRA.
They must
(1) conduct an investigation;
(2) review all relevant information provided by the CRA;
(3) report the results of the investigation to the CRA;
(4) if the investigation finds that information is incomplete or inaccurate, report those results to all CRAs to which they provided information; and
(5) if an item disputed by the consumer is found to be inaccurate or incomplete or cannot be verified after investigation, promptly modify that item, delete that item, or permanently block the reporting of that item.
If the furnisher fails to comply with these requirements, a consumer may sue for actual damages caused by the failure, and seek punitive damages if the furnisher willfully fails to comply.
Marcialene Radford claimed that LoanCare negligently and willfully violated the FCRA by failing to conduct a reasonable investigation into her credit disputes and verifying inaccurate information to the CRAs. LoanCare defended by arguing that it had investigated Radford’s payment history and determined the CRAs’ reports were accurate, and Radford did not show damages due to the alleged violation.
Like RESPA, the FCRA does not define the level of investigation required. It simply requires the investigation to be reasonable. I realize you seem to believe the reasonable investigation standard is “arbitrary” and not “time-tested.” Here, the court concluded that the reasonableness of LoanCare’s investigation was genuinely disputed.
At the time LoanCare received automated credit dispute verification (ACDV) requests from the CRAs, the loan notes on Radford’s account already reflected repeated disputes in the preceding months regarding her June and July payments, but LoanCare did not even claim that it had reviewed those complaints during its investigation.
Here’s a takeaway:
While a furnisher of information need investigate only what is contained in the CRA’s dispute notice as to the nature of the dispute, it must actually investigate. That is, it must conduct some degree of careful inquiry.
In light of the information provided by Radford’s letter, a reasonable jury could conclude that the failure to examine Radford’s repeated disputes and communications fell short of this standard.
As for damages, the court pointed out that because Radford had alleged both a negligent and a willful violation, she could recover statutory and punitive damages if she could prove a willful violation even if she did not suffer any actual damages.
In any event, Radford provided evidence of actual damages by presenting some evidence of emotional distress and evidence that LoanCare’s failure to correct inaccurate information had caused her denial of credit. Specifically, her affidavit asserted that her attempts to co-sign her son’s applications for car loans in July and October 2022 were rejected after the car dealerships made credit inquiries with Equifax and Experian. This evidence was sufficient to present a genuine dispute of material fact regarding Radford’s actual damages. As a result, the court denied LoanCare’s motion for summary judgment.
Jonathan Foxx, Ph.D., MBAChairman & Managing Director
Lenders Compliance Group
[i] Radford v. LoanCare, LLC, 4:21 CV 1368 CDP (E.D. Mo. May. 2, 2023)
