The Federal Trade Commission (“FTC”) and the Consumer Financial Protection Bureau (“CFPB”) have filed a joint amicus brief in which they urge the U.S. Court of Appeals for the Second Circuit to reverse the decision of a New York federal court in Suluki v. Credit One Bank, NA. The agencies argue that the district court disregarded the Fair Credit Reporting Act’s (“FCRA”) requirement that a furnisher delete disputed information that it cannot verify. 

In the underlying case, plaintiff Khalilah Suluki notified Equifax, TransUnion, and Experian that she was disputing a Credit One credit card account shown as her account on her credit report.  According to the plaintiff, her mother had opened the account in her name without her permission.  After receiving the dispute from the credit reporting agencies, Credit One investigated the dispute and concluded that the account belonged to the plaintiff.  The plaintiff then filed a lawsuit against Credit One in which she alleged that Credit One had not conducted a reasonable investigation of her dispute as required by the FCRA.

In granting Credit One’s motion for summary judgment, the district court stated at the outset that the plaintiff “has not presented any facts showing that, had Credit One taken any of the additional steps [the plaintiff] urges, it would have come to a different conclusion.”  The court observed that “[n]o reasonable jury could find on these facts that Credit One had information available to it that, had Credit One taken additional steps to obtain that information, would have led it to conclude that Suluki did not authorize her mother to open the account on her behalf.” 

The district court also observed that the plaintiff “had pointed to no one who can corroborate her testimony that her mother did not give her permission to open the account, nor has she proffered any piece of evidence that would show she did not give that permission, if Credit One had only retained it or sought it out.”  The court then concluded that because a furnisher is not required under the FCRA to “‘rely solely on a consumer’s allegations in the absence of other information that would cause a reasonable person to have substantial doubts about the accuracy of the consumer’s credit report…. [a]nd [a]s [plaintiff] cannot demonstrate that a reasonable investigation could have uncovered any such evidence,’” the plaintiff had failed to raise a material issue of fact as to whether the investigation was not reasonable.

In their amicus brief, the FTC and CFPB argue that the Second Circuit should reverse the district court’s grant of summary judgment in favor of Credit One because even if Credit One had no evidence of fraud other than the plaintiff’s allegations, the court could have found that Credit One had not established that the account did not result from fraud.  Section 1681s-2(b)(1)(E) of the FCRA provides that when a furnisher’s investigation finds that disputed information is “inaccurate, incomplete, or cannot be verified,” the furnisher must, “as appropriate, based on the results of the reinvestigation” modify, delete, or permanently block reporting of the information.  According to the FTC and CFPB, the district court “failed to consider the possibility that Credit One had not verified Suluki’s debt and thus should have removed if from her credit report.  If Suluki had made that showing at trial, she well could have been entitled to damages.  But the district court’ summary judgment ruling wrongly denied her that opportunity.” 

We find the FTC’s and CFPB’s position troubling.  The agencies appear to be urging the Second Circuit to find that when a consumer disputes an account as the result of fraud, a furnisher must conclude that the disputed information “cannot be verified” and delete the account unless the furnisher has evidence that definitively establishes the absence of fraud.  In other words, according to the FTC and CFPB, a furnisher cannot properly consider disputed information to be accurate or verified even when there is no evidence available to the furnisher (other than the consumer’s allegation) that the account was the result of fraud.  If the furnisher is unable to “confirm” that the account was not the result of fraud, the furnisher must consider the information to be unverified.

Absent an admission by the consumer that no fraud had occurred, or an admission of wrongdoing by a third party, a furnisher is unlikely to ever have definitive evidence that a disputed account was not the result of fraud.  Thus, if the Second Circuit were to adopt the FTC’s and CFPB’s position on what a furnisher must do to conclude that an account is not the result of fraud and find the disputed information to be accurate, furnishers would routinely be required to delete any account alleged to be the result of fraud even if there is no evidence available to the furnisher to support that allegation other than the mere allegation itself.

Moreover, the FTC and CFPB seem to be attempting to do an end run around Section 605B of the FCRA and around Section 623(a)(6)(B) of the FCRA.  The former section directs a consumer reporting agency, that receives an allegation of identity theft from a consumer, to block the reporting of the information, but only after it receives (1) appropriate proof of the identity of the consumer, (2) a copy of an identity theft report; (3) the identification of the information that resulted from the alleged identity theft, and (4) a statement by the consumer that the information is not information related to any transaction by the consumer.  The latter section directs a furnisher receiving an identity theft report, at the address it specified for receiving such reports, to block the furnishing of the information unless it “subsequently knows or is informed by the consumer that the information is correct.”  As the FTC and CFPB have recognized, the identify theft report, an “official valid report” filed with a law enforcement agency, which subjects the filer to criminal penalties for falsifying information, is a key component of these provisions.  But here Suluki failed to submit any identity theft report.