The CFPB recently filed two amicus briefs, one in a First Circuit case involving the Fair Debt Collection Practices Act (FDCPA) and the other, which was filed jointly with the Federal Trade Commission, in a Fourth Circuit case involving the Fair Credit Reporting Act (FCRA).

FDCPA.  The FDCPA case is Carrasquillo v. CICA Collection Agency.  The plaintiff, after having filed a bankruptcy, received a collection letter from the defendant seeking to collect a debt he owed for telephone and communication services.  In the letter, the defendant stated that the debt was “due and payable” and that the creditor was “fully entitled to initiate a legal action” to collect it.  In his lawsuit, the plaintiff alleged that the letter violated numerous FDCPA provisions, in particular the FDCPA provision that prohibits a debt collector from “us[ing] any false, deceptive, or misleading representation or means in connection with the collection of any debt.”  The plaintiff claimed that the representations in the collection letter were false because, at the time it was sent, he was protected by the Bankruptcy Code automatic stay.  Thus, according to the plaintiff, the debt was not due and the creditor could not commence a debt collection lawsuit against him.

The defendant moved to dismiss, arguing that the Bankruptcy Code precludes FDCPA claims based on the defendant’s attempt to collect a debt notwithstanding the bankruptcy.  Alternatively, the defendant argued that the FDCPA prohibits only intentional violations and that because the defendant did not know of the bankruptcy and the accompanying automatic stay, it did not intentionally make any false representations about the debt.  The district court granted the motion to dismiss.  It declined to address whether the Bankruptcy Code precluded the plaintiff’s FDCPA claims because it found that the claims failed on the merits.  The district court held that the defendant’s statements in its letter did not violate the FDCPA because the prohibition in question was intended to prohibit only knowing or intentional misstatements and the defendant was unaware of the bankruptcy proceeding despite the plaintiff’s allegation to the contrary.  The plaintiff appealed the dismissal to the U.S. Court of Appeals for the First Circuit.

In its amicus brief in support of the plaintiff, the CFPB argues that the FDCPA prohibition does not implicitly make misrepresentations unlawful only if the debt collector makes them knowingly or intentionally and the district court erred in reading such a scienter requirement into the prohibition.  According to the CFPB, this is confirmed by the FDCPA’s plain language and other FDCPA provisions that show Congress knew how to add a scienter requirement when it intended such a requirement to apply.  The CFPB also contended that the bona fide error provision in the FDCPA’s civil liability section shows that a debt collector will be liable for unintentional violations if it cannot show that the violations resulted from a bona fide error and it maintained procedures reasonably adapted to avoid such errors.  The CFPB asserts that there would have been no reason for Congress to include the language regarding “procedures reasonably adapted to avoid any such error” if a showing that a violation was unintentional was sufficient to avoid liability. 

The CFPB also argues that if the First Circuit addresses the issue, it should hold that the Bankruptcy Code does not bar the plaintiff’s FDCPA claims.  According to the CFPB, nothing in the text of the Bankruptcy Code or the FDCPA suggests that Congress intended the Bankruptcy code to preclude FDCPA claims where the statutes overlap nor is there any other basis to infer such intent from the statutes.  

FCRA. The FCRA case is Roberts v. Carter-Young, Inc.  The defendant, a debt collector, had been hired by the apartment complex in which the plaintiff formerly resided to collect an invoice she owed for alleged damage to the stove in her unit.  The plaintiff refused to pay the debt, claiming that according to her lease and governing state law, this was an ordinary maintenance issue that the complex could have easily fixed rather than replacing the stove.  The defendant reported the debt to the three major consumer reporting agencies (CRAs). When the CRAs forwarded the plaintiff’s dispute to the defendant, the defendant investigated the disputed information, allegedly by asking the apartment complex to recertify the validity of its claim.  Based on the complex’s confirmation of the debt’s validity, the defendant confirmed its validity to the CRAs which continued to report the debt. 

In her lawsuit, the plaintiff alleged that the defendant violated the FCRA requirement for a furnisher, upon receipt of an indirect dispute from a CRA, to “conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate.”  The defendant moved to dismiss for failure to state a FCRA claim, arguing that the FCRA reasonable investigation requirement applies only to asserted factual inaccuracies, not disputes involving legal questions like those at issue in the plaintiff’s dispute with the apartment complex.  The plaintiff argued that furnishers have an obligation to investigate both legal and factual disputes.  She also argued that her dispute raised factual rather than legal issues.

The magistrate judge found that the FCRA does not impose a duty on furnishers to resolve legal questions and recommended granting the motion to dismiss.  The magistrate judge also rejected the plaintiff’s contention that her dispute was factual rather than legal because, in the magistrate’s view, the validity of the debt would have required the defendant to interpret the lease and state landlord-tenant law.  The district court adopted the magistrate’s recommendation and dismissed the case.  The plaintiff appealed the dismissal to the U.S. Court of Appeals for the Fourth Circuit.

In their amicus brief in support of the plaintiff, the CFPB and FTC argue that, in requiring furnishers to reasonably investigate consumers’ disputes, the FCRA does not distinguish between legal and factual disputes.  According to the agencies, any burden imposed on furnishers is mitigated by the fact that the investigation need only be “reasonable.”  They also argue that because debts generally arise from contracts, and thus any dispute about a debt might require a review of contract terms, an exclusion for legal disputes “could create a loophole that would gut the requirement to investigate disputes.”

The CFPB and FTC also ask the Fourth Circuit to clarify that the district court erred “to the extent the district court held that the reasonableness of an investigation turns on the information within the furnisher’s possession.”

The CFPB and FTC have filed joint amicus briefs (here and here) in Eleventh Circuit cases that involve the issue of  a furnisher’s obligation to perform a reasonable investigation when a consumer disputes the accuracy of information furnished to the CRA, even if the dispute could be characterized as a legal, rather than factual, dispute. 

In July 2023, the Second Circuit ruled in Sessa v. Trans Union, LLC that because “there is no bright-line rule that only purely factual or transcription errors are actionable under the [Fair Credit Reporting Act (FCRA)],” the FCRA does not contemplate a threshold inquiry by the court as to whether an alleged inaccuracy is “legal” for purposes of determining whether the plaintiff has stated a cognizable claim under the FCRA.  Rather, as the Second Circuit also ruled, a claimed inaccuracy is potentially actionable under the FCRA so long as the challenged information is objectively and readily verifiable.  The CFPB and FTC also filed a joint amicus brief in Sessa.