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Eleventh Circuit’s “Narrow” Holding May Open Wide Disputes About Duties Under The FCRA

The Eleventh Circuit recently weighed in on a common practice—reporting debts subject to bankruptcy. In the process of so doing, the opinion in Losch v. Nationtar Mortgage LLC provided litigants some key insights in Fair Credit Reporting Act (“FCRA”) compliance and litigation strategies, as well as adding another wrinkle in the growing complexity of standing for procedural  statutory violations, particularly here in the Eleventh Circuit.

Turning to the facts, in 2012, Henry Losch took out a mortgage on his house in Florida. Five years later, Losch filed for Chapter 7 bankruptcy. Wanting to keep his house, Losch initially reaffirmed his mortgage, but later rescinded his reaffirmation with the approval of the bankruptcy court. Shortly thereafter, Losch discovered that his Experian credit report still showed that he had a debt of nearly $140,000 with Nationstar—the servicer of his former mortgage. In response, Losch disputed the credit report with Experian, informing it that the mortgage had been discharged in his 2017 bankruptcy action. When Experian received Losch’s dispute letter, it sent an automated consumer data verification (“ACDV”) to Nationstar in an attempt to verify the alleged debt. Nationstar confirmed the debt. Experian relayed this information to Losch, but took no further action to verify the debt.

As is often the case, then, in 2018, Losch sued Experian, alleging that it violated the Fair Credit Reporting Act (“FCRA”) by failing to follow reasonable procedures in preparing his credit report and failing to conduct a reasonable investigation after receiving his dispute letter. The federal district court granted summary judgment in Experian’s favor, holding that the FCRA “does not impose any duties on the credit-reporting agency other than notifying the furnisher [here, Nationstar] of the dispute and examining any information the consumer submits.” Losch appealed.

On appeal, the Eleventh Circuit first addressed a threshold question—whether Losch had Article III standing. Specifically, the court addressed whether Losch had sufficiently demonstrated that he had suffered a concrete “injury-in-fact,” despite alleging an “intangible injury”—namely, the reporting of inaccurate information about his credit. Relying on its decision in Pedro v. Equifax, Inc., 868 F.3d 1275, 1279–80 (11th Cit. 2017), the court held that false credit reporting itself is a concrete injury, reasoning that the harm bears a close relationship to that of the tort of defamation. Hence, the court held that Losch did not need to show that the false reporting caused an independent harm (e.g., a decrease in his credit score) in order to establish an injury-in-fact. Furthermore, the court held that Losch had also shown a concrete injury due to the time he wasted contesting the inaccurate information (no matter how minimal) and because he testified that he had suffered from stress, anxiety, and lack of sleep as a result of his inaccurate credit report.

Moving to the merits, the Eleventh Circuit addressed the parties’ “primary dispute”—whether Experian reasonably discharged its report-preparation and reinvestigation duties simply by sending an ACDV regarding the disputed information to Nationstar. The court began by noting that the question of whether a credit reporting agency acted reasonably under the FCRA “will be a jury question in the overwhelming majority of cases.” Next, the court formally adopted “two corollary principles” stated by the Third and Seventh Circuits on the issue of “reasonableness” under the FCRA: (1) that a credit reporting agency’s procedures “will not be deemed unreasonable unless the agency has a reason to believe that the information supplied to it by a data furnisher is unreliable”; and (2) that when a credit reporting agency has been notified of potentially inaccurate information, its position (and by implication, duty) changes because it need only investigate that single, alleged error. Applying these principles, the Eleventh Circuit held that the district court erred in granting summary judgment in favor of Experian. The court found that a jury question existed regarding the reasonableness of Experian’s investigation, given the fact that Experian did not conduct any independent investigation, but instead relied entirely on the data furnisher to verify the debt, when it could have done something with the information that Losch provided. For example, it could have “check[ed] the bankruptcy docket.”


Importantly, the court expressly limited its holding to the facts of the case, qualifying its holding as “a narrow one.” The court acknowledged that “there may be circumstances—say, when the consumer supplies insufficient detail—in which there is no jury question about the reasonableness of the [credit reporting] agency’s investigation or reinvestigation.” Nevertheless, summary judgment on such FCRA claims may be increasingly difficult to obtain in the wake of this new, binding precedent. For one, the idea that independent investigation requires checking information outside of a business’s own records, is far from comforting, as this opens the door for post-hoc arguments that will be difficult to see coming—after all, if a plaintiff could find something via public sources, it will be hard to stop them from arguing that the furnisher or CRA couldn’t have, as well.

For another, it’s likely that plaintiffs may try to muddy the waters here on reporting debts subject to bankruptcy. It’s important to note that Losch dealt with an already discharged debt. That fact has significant implications to Losch’s personal liability on that debt, primarily that the debt is no longer enforceable against Losch. However, discharge doesn’t mean that the debt or liens associated with it necessarily dissolve. Also, the mere filing of bankruptcy petition—which does trigger the automatic stay and forestalls any further collection efforts absent bankruptcy court approval—doesn’t affect the enforceability of the debt itself. The point being that there’s a fairly wide field of play between a bankruptcy petition and discharge, particularly in the ever present Chapter 13 for individual bankruptcy. Plaintiffs may attempt to take the decision in Losch and turn that field of play into a game of inches, because it is easy to muddy the waters when bankruptcy is involved.

While the Eleventh Circuit tried to keep their decision “a narrow one”, the reach of Losch is likely to be anything but.