Edward Seamans v. Temple University , 744 F.3d 853 ( 2014 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 12-4298
_____________
EDWARD M. SEAMANS,
Appellant
v.
TEMPLE UNIVERSITY
_____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 2:11-cv-06774)
District Judge: Honorable Stewart Dalzell
_____________
Argued September 24, 2013
Before: CHAGARES, VANASKIE and SHWARTZ,
Circuit Judges
(Filed: February 21, 2014)
Gregory J. Gorski, Esq. [ARGUED]
Mark D. Mailman, Esq.
John Soumilas, Esq.
Francis & Mailman
100 South Broad Street
Land Title Building, 19th Floor
Philadelphia, PA 19110
Counsel for Appellant
Richard J. Perr, Esq. [ARGUED]
Fineman, Krekstein & Harris
1735 Market Street
Mellon Bank Center, Suite 600
Philadelphia, PA 19103
Counsel for Appellee
_____________
OPINION OF THE COURT
_____________
VANASKIE, Circuit Judge.
In this case we consider for the first time the interplay
between the Fair Credit Reporting Act (“FCRA”), 15 U.S.C.
§§ 1681–1681x, and the Higher Education Act of 1965
(“HEA”), 20 U.S.C. §§ 1001–1155, with respect to the
responsibilities of an institution of higher education that
furnishes information on student loan indebtedness to a
consumer reporting agency (“CRA”). Edward M. Seamans
appeals an order of the United States District Court for the
Eastern District of Pennsylvania, which granted summary
judgment to defendant Temple University (“Temple”) on
Seamans’s claims for negligent and willful violations of
2
FCRA in connection with Temple’s reporting of certain
information to CRAs concerning Seamans’s student loan. For
the following reasons, we will vacate and remand.
I.
On January 16, 1989, Seamans received a need-based
Federal Perkins Loan (the “Loan”) of $1,180.00 from
Temple. The first payment on the Loan was due on January
20, 1992. Upon Seamans’s failure to make payment within
the fifteen-day grace period, the loan was declared delinquent
on February 4, 1992. On August 3, 1992, with the full
balance of the Loan still unpaid, Temple notified Seamans
that the account had been placed for collection.
In January 2010, Seamans enrolled as a full-time
student at Drexel University. In the spring of 2011, Seamans
sought financial aid in the form of a Pell Grant, but Drexel
refused to provide Seamans with financial assistance until he
repaid the balance of the still-outstanding Loan. On April 28,
2011, Seamans repaid the Loan in full.
In May 2011, allegedly for the first time in many
years, Seamans noticed a “trade line” on his credit report
summarizing data pertaining to the Loan. For reasons
unknown, that trade line may or may not have actually
appeared on Seamans’s credit report at the times it
indisputably should have—namely, between February 1992
and April 2011, when the account was in default. Because
Seamans’s claim is predicated only on Temple’s conduct after
he disputed the trade line, whether and how Temple reported
information about the Loan before Seamans lodged his
dispute is irrelevant.
3
What is not in dispute is that in the aftermath of
Seamans’s repayment of the Loan, Temple reported certain
Loan-related data to TransUnion, a CRA. We observe at the
outset that much reporting of consumer credit data, including
the bulk of the reporting by Temple in this case, takes the
form of “codes” rather than text. For the sake of clarity, we
refer primarily to the underlying interpretations of the codes,
which are undisputed, rather than to the codes themselves.
Relevant categories of coded information include (1) the
“date of first delinquency,” which refers to the initial date
upon which the loan had been marked as defaulted; (2) the
“payment history,” which documents the debtor’s month-by-
month payment record; (3) the “account status,” which
documents a particular status for a given debt, including
whether an account is open, closed, paid, or unpaid; and (4)
the “compliance condition,” which indicates whether the
reported information is disputed by the consumer.
In the aftermath of Seamans’s payment, Temple had
provided the following information to TransUnion:
(a) [Seamans] had been over 180
days late for at least twenty-four
(24) months prior to the time the
Perkins [L]oan was paid in full;
(b) the Account Status was
report[ed] as ‘Current; Paid or
Paying as Agreed;’
(c) the Balance was report[ed] as
‘$0;’
4
(d) the High Balance was
report[ed] as ‘$1180;’
(e) the Terms was report[ed] as
‘120 Monthly $30;’
(f) the Date Open was report[ed]
as ‘10/1991;’ and
(g) the Date Closed was
report[ed] as ‘04/2011.’
App. 64–65. Temple did not report the date of first
delinquency for the Loan (i.e., February 4, 1992), and also did
not report that the account had ever been placed for
collection.
On May 17 and May 20, 2011, Seamans formally
disputed portions of that information by contacting
TransUnion. Seamans’s May 17 dispute, which he submitted
online, stated:
Loan defaulted 1992. Temple
didn’t report in a decade+, and
charged off long ago. I paid
Temple on 4/30, they
retroactively reported years of
120d late payments, but it had
been co’d. Nothing from Temple
was on my report until I fully paid
to close account. Why does
report show two years of late
payments?
5
App. 207. Seamans’s May 20 dispute was made by
telephone. TransUnion in turn notified Temple of the May 17
and May 20 disputes and asked it to verify, among other
things, the “payment history profile” and “account status” of
the Loan.
In response, Temple, through its loan servicer, ACS
Education Services, Inc. (“ACS”), conducted an
investigation. ACS had contracted with Temple to respond to
consumer disputes on Temple’s behalf in exchange for $2 per
dispute “received and processed” by ACS. The procedure
followed by ACS in these investigations was essentially to
verify that the reported data was in fact consistent with
Temple’s internal documentation pertaining to the Loan.1
On May 23, 2011, Temple resubmitted the information
to TransUnion virtually unchanged. Again, Temple did not
indicate when the Loan first became delinquent or that it had
ever been placed for collection. Nor did Temple report by
way of a “compliance condition” code that Seamans now
disputed the trade line.
On August 1, 2011, Seamans contacted Temple,
TransUnion, and another CRA, Equifax, again to dispute the
1
ACS is not a defendant in this case. Both parties
appear to impute the actions, procedures, and policies of ACS
to Temple throughout their briefing, and so far as we can tell,
Temple does not legally attempt to distance itself from ACS
in any respect. Consequently, we at times refer to “Temple’s
reporting” even in places where ACS acted as Temple’s agent
with regard to the relevant filings and communications.
6
continued appearance of Temple’s trade line on his credit
report. Seamans’s letter to TransUnion stated:
In 1989 I received a Perkins Loan
while attending Temple
University. I defaulted on the
loan and the loan went to
collection. No activity occurred
on the account for some time, and
the account eventually came off
my credit reports for all three of
the reporting agencies. I recently
began attending school again at
Drexel University, and in order to
qualify for financial aid, I had to
settle the Perkins loan default. I
walked into Temple’s billing
department and paid $2009
dollars [sic] on the spot, receiving
a letter on Temple University
letterhead that the debt was
settled. Temple went on to
retroactively report two years
worth of 120-day late payments to
the credit reporting agencies. It is
important to note that there was
no reporting on this account to the
credit bureaus for many years, and
then suddenly after the debt was
paid, Temple reported two years
worth of late payments all at once.
7
I previously disputed this online,
and received a letter stating that
the creditor has reviewed the
account and wishes to make no
further adjustment to my credit
record.
To put it plainly, I want the
Temple University account
removed from my credit report.
The account is closed, and well
beyond the time limit imposed for
the reporting of derogatory credit
information. Therefore, it should
not appear on my credit reports
now. I have been a good
consumer for years now, and the
Temple reporting instantly
negatively impacted my Trans
Union score by approximately 80
points.
App. 258. Temple was notified of the August 1 dispute and
received copies of the letters written by Seamans to
TransUnion and Equifax. After a second investigation,
Temple modified certain elements of its report on the Loan
but still did not report the Loan’s history in collections, a date
of first delinquency, or the fact that Seamans was disputing
the accuracy of the reported information.
Seamans points to evidence that Temple’s non-
reporting with respect to certain information about the Loan
was not unique. For example, an ACS employee testified at
8
deposition that at least until late 2011, ACS’s policy was that
its employees would never flag an account as disputed,
regardless of the nature of the consumer’s challenge:
Q Let's go to the document ACS-2
again. Within ACS-2 can you
point me to any particular portion
of it which relates to reporting an
account as disputed by the
consumer in the compliance
condition code portion of the
Metro 2 code?
A No, there is not.
Q And is the reason for that
because up until . . . November of
2011, ACS did not report
accounts as disputed to credit
reporting agencies whether
affirmatively or after a dispute
had been received?
A Correct.
App. 485–86. The same employee explained that ACS never
included dates of first delinquency in its reports even after
disputes were lodged. App. 482–83. A different customer
service representative from ACS testified at deposition that
she spent an average of 15 minutes on any given dispute and
that ACS provided no written guidelines or formal training
from managers for her. App. 350–53.
9
On October 28, 2011, Seamans filed a complaint
against Temple in the United States District Court for the
Eastern District of Pennsylvania, alleging that Temple
negligently or willfully violated FCRA with respect to its
reporting of the Loan. On May 21, 2012, Temple moved for
summary judgment, arguing in essence that HEA exempted it
from compliance with FCRA because the credit instrument at
issue was a Perkins Loan. On October 25, 2012, the District
Court granted the motion in full and entered judgment on the
following day in favor of Temple. Seamans appeals from that
judgment.
II.
A.
The District Court had jurisdiction pursuant to 28
U.S.C. § 1331 and 15 U.S.C. § 1681p. We have jurisdiction
under 28 U.S.C. § 1291.
Our review of a District Court's grant of summary
judgment is plenary. Official Comm. of Unsecured Creditors
of Allegheny Health, Educ. & Research Found. v.
PricewaterhouseCoopers, LLP, 607 F.3d 346, 351 (3d Cir.
2010). A moving party is entitled to summary judgment only
if “there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). A material fact is “[a] fact[ ] that might affect
the outcome of the suit under the governing law.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). For an issue
to be genuine, “all that is required is that sufficient evidence
supporting the claimed factual dispute be shown to require a
jury or judge to resolve the parties' differing versions of the
truth at trial.” Id. at 249 (quotation marks omitted). All facts
10
are viewed in the light most favorable to the nonmoving
party, who is “entitled to every reasonable inference that can
be drawn from the record.” Merkle v. Upper Dublin Sch.
Dist., 211 F.3d 782, 788 (3d Cir. 2000). Questions of
statutory interpretation are also subject to de novo review.
Fraser v. Nationwide Mut. Ins. Co., 352 F.3d 107, 113 (3d
Cir. 2003).
B.
Seamans brings this action under 15 U.S.C. §§ 1681n
and 1681o, which permit private suits for damages against
parties who willfully or negligently fail to comply with
certain duties to consumers under FCRA. Specifically,
Seamans contends that Temple’s investigation of his claims
was unreasonable, and that even after he had lodged a
detailed written dispute with TransUnion, Temple continued
to omit the Loan’s history in collections, its date of first
delinquency, and even the fact of his dispute itself. He claims
that these violations caused him to suffer actual damages in
the form of “lost credit opportunities, harm to credit
reputation and credit score, and emotional distress.” He also
seeks punitive damages under 15 U.S.C. § 1681n for the
violations that he contends were willful.
Resolution of this appeal requires us to consider
several discrete issues. In Part III of this Opinion we address
the extent of Temple’s duties under FCRA as a furnisher of
credit information, and whether HEA materially impacts
those duties. In Part IV-A, we decide whether Seamans has
raised a genuine issue of material fact as to the completeness
and accuracy of Temple’s post-dispute filings and the
reasonableness of Temple’s post-dispute investigative and
corrective procedures. Next, in Part IV-B, we consider
11
Temple’s claim that FCRA does not permit private citizens
such as Seamans to sue for damages caused by a furnisher’s
failure to mark an account as disputed. Finally, in Part IV-C,
we address whether Seamans has stated a claim under §
1681n for willful FCRA violations that, if proved, would
allow him to recover punitive damages.
III.
A.
FCRA, enacted in 1970, created a regulatory
framework governing consumer credit reporting. That
framework “was crafted to protect consumers from the
transmission of inaccurate information about them, and to
establish credit reporting practices that utilize accurate,
relevant, and current information in a confidential and
responsible manner.” Cortez v. Trans Union, LLC, 617 F.3d
688, 706 (3d Cir. 2010) (quotation marks omitted). Under
FCRA, CRAs collect consumer credit data from “furnishers,”
such as banks and other lenders, and organize that material
into individualized credit reports, which are used by
commercial entities to assess a particular consumer’s
creditworthiness.
FCRA imposes a variety of obligations on both
furnishers and CRAs. For instance, to protect consumers
from having their credit forever impaired by aging debts,
CRAs are precluded from reporting accounts which have
been “placed for collection” or “charged to profit and loss”
more than seven years prior to the report. 15 U.S.C. §
1681c(a)(4). Other “adverse item[s] of information,” aside
from criminal convictions, also may be reported only for
seven years after the adverse event. Id. § 1681c(a)(5). When
12
the seven-year threshold for these items is reached, CRAs
may no longer lawfully report that data: in industry parlance,
it has “aged off” the consumer’s credit report.
When a furnisher provides information to a CRA
regarding an account placed for collection or charged to profit
or loss, the furnisher then has 90 days in which to notify the
CRA of the account’s “date of delinquency,” which is defined
as “the month and year of the commencement of the
delinquency on the account that immediately preceded the
action.” Id. § 1681s-2(a)(5)(A). The date of delinquency
enables the CRA to calculate the seven-year window for
“aging-off” purposes—without it, the CRA would be unable
to determine when the account had been placed for collection,
rendering the “aging-off” date impossible to calculate.2
Temple concedes that under these provisions, if a non-
education loan had been first marked delinquent in early 1992
and placed for collection later that year, a furnisher would be
obligated to report those facts under 15 U.S.C. § 1681s-
2(a)(5)(A). Consistent with the terms of 15 U.S.C. §
1681c(a)(4), the trade line would have “aged off” the
consumer’s credit report at some point in 1999.
B.
HEA, enacted in 1965 and amended repeatedly
thereafter, contains a provision that instructs CRAs to
2
We use the term “seven-year window” somewhat
loosely. For purposes of accounts placed for collection or
charged to profit and loss, the seven-year period technically
begins 180 days after the date of first delinquency. 15 U.S.C.
§ 1681c(c)(1).
13
disregard FCRA’s “aging-off” provisions when reporting data
on certain federally backed education loans. See 20 U.S.C. §
1087cc(c)(3). This section provides as follows:
Notwithstanding paragraphs (4)
and (5) of subsection (a) of
section 1681c of Title 15, a
consumer reporting agency may
make a report containing
information received from . . . an
institution regarding the status of
a borrower’s account on a loan
made under this part until the loan
is paid in full.
Id. The upshot of this provision is that a defaulted Perkins
Loan, if left unpaid, can remain on a person’s credit report
indefinitely—it does not “age off” a person’s credit report
after seven years by operation of law.3 The bill’s legislative
history explains the underlying rationale of that provision:
These changes represent a
simplification effort and provide
consistency between the statute of
limitations for collecting loans
and the period for reporting
negative credit information. The
3
The text of the provision is permissive, providing that
CRAs “may make a report . . . until the loan is paid in full.”
20 U.S.C. § 1087cc(c)(3) (emphasis added). We express no
opinion as to whether HEA affirmatively obligates CRAs to
make such reports until qualifying loans are fully repaid.
14
committee believes that reporting
of defaulted loans to credit
bureaus is an effective tool and
should be available to institutions
and the Secretary of Education for
the entire period that loan
collection is allowed.
S. Rep. No. 105-181, at 58 (1998).4
C.
We now consider whether the reporting obligations of
Temple, a furnisher of consumer credit data under FCRA, are
affected by 20 U.S.C. § 1087cc(c)(3). When, as here, the
question is one of statutory construction, the appropriate
starting place is with the statutory text. “When the words of a
statute are unambiguous, then, this first canon [of statutory
construction] is also the last: judicial inquiry is complete.”
4
The HEA provision at issue sits within a much
lengthier section of the statute that establishes detailed
furnishing and reporting requirements when an institutional
furnisher enters into a formal “cooperative agreement” with a
CRA. See generally 20 U.S.C. § 1087cc(c). The record
before us contains no evidence of such an agreement.
Because 20 U.S.C. § 1087cc(c)(3) appears to be freestanding
in the sense that its applicability does not depend on the
presence of a formal “cooperative agreement,” we address the
ramifications of that subsection only and express no opinion
on the effect of other portions of 20 U.S.C. § 1087cc(c) on a
furnisher’s reporting duties under FCRA.
15
Conn. Nat'l Bank v. Germain, 503 U.S. 249, 254 (1992)
(quotation marks omitted).
The text of HEA is unambiguous in a crucial respect—
namely, it refers only to CRAs:
Notwithstanding paragraphs (4)
and (5) of subsection (a) of
section 1681c of Title 15, a
consumer reporting agency may
make a report containing
information received from . . . an
institution [of higher education]
regarding the status of a
borrower’s account on a loan
made under this part until the loan
is paid in full.
20 U.S.C. § 1087cc(c)(3) (emphasis added). The text does
not mention furnishers of consumer credit data.
Temple’s primary argument is that despite the absence
of a specific reference to furnishers, HEA nonetheless
functionally compels educational institutions to omit the date
of first delinquency and collection history when reporting
Perkins Loans to CRAs. This is based on Temple’s worry
that if it had continuously reported the Loan’s full history,
including the items at issue such as collection history and date
of delinquency, the CRAs may have failed to notice that the
Loan was an HEA-qualifying education loan and instead may
have treated the Loan as a standard-order defaulted debt.
Under that scenario, according to Temple, the CRAs may
have mistakenly allowed the Loan to “age off” Seamans’s
credit report in 1999. Temple rationalizes that by simply
16
omitting from its report all facts that could trigger the “aging
off” provisions, Temple was helping the CRAs comply with
20 U.S.C. § 1087cc(c)(3) and, in practice, furthering the
congressional intent to prevent unpaid student loans from
“aging off” credit reports.
As an initial matter, we find it difficult to credit the
implicit suggestion that Temple had no avenue, whether
through the intricate coding system described above or in
some other way, by which to signal affirmatively to the CRAs
that a given loan is an HEA-qualifying education loan. In
other words, surely Temple could have allayed its own
concerns about the CRAs’ possible mischaracterization of the
Loan by providing them with more information rather than
less.
Nevertheless, whether this is the case or not, the
question of whether a particular loan should or should not
“age off” a credit report must be answered by the CRAs, and
not by furnishers such as Temple. If CRA procedures had
allowed the Loan’s trade line to expire in 1999, in possible
contravention of 20 U.S.C. § 1087cc(c)(3), that would be the
CRAs’ statutory concern, not an excuse for Temple to report
loan information in an incomplete or inaccurate manner. As
stated recently by the Supreme Court, “even the most
formidable argument concerning the statute's purposes could
not overcome the clarity we find in the statute's text.”
Kloeckner v. Solis, 133 S. Ct. 596, 607 n.4 (2012). The
strange compliance-by-omission described by Temple is not
present in the statutory text at issue and we decline to read
such a procedure into it.
Temple also notes its belief that any loan fully repaid
according to its original schedule will remain on a person’s
17
credit report for 10 years after final payment.5 Thus a “good
borrower” could take out an education loan and fully pay the
loan on schedule in 4 years, but would then carry the trade
line on her credit report for 10 years afterward. Temple
claims that under Seamans’s reading of FCRA and HEA, a
“bad borrower” who took out a federal education loan and
immediately defaulted could then pay the loan 8 years later
and see the trade line expunged immediately, because it
would be more than 7 years past the date when the loan was
sent for collection. The “good borrower” thereby “carries”
the trade line on her credit report for more time (14 years)
than the “bad borrower” (8 years). Temple suggests that this
inequity is a good reason to interpret the relevant statutes in
its favor.
Temple has provided no evidence, however, that the
appearance of a non-adverse payment history, i.e., the one
appearing on the “good borrower’s” credit report, would
impair the “good borrower’s” credit score. There is nothing
to show, in other words, that these disparate outcomes are
inequitable to the “good borrower” at all. Indeed, FRCA
itself reflects a policy choice to allow dated adverse credit
data to “age off” a credit report because such information
might otherwise indefinitely hamper the borrowing
capabilities of now-reformed individuals. Non-adverse credit
information, by contrast, can be reported indefinitely—at
5
The record is unclear on this point. There is evidence
that Equifax has a policy under which it ceases reporting non-
adverse credit information after 10 years—that is to say, a
borrower’s good credit history will only show up on an
Equifax credit report for 10 years. That window does not
appear to be fixed by law.
18
least in part because it demonstrates that a person has been a
reliable borrower in the past and will presumably continue to
be such in the future.
We thus disagree with the District Court’s conclusion
that 20 U.S.C. § 1087cc(c)(3) effectively exempts the Loan
from FCRA’s “aging off” provision indefinitely. Instead, the
statutory text of 20 U.S.C. § 1087cc(c)(3) makes clear that
the seven-year window described in 15 U.S.C. § 1681c(a)(4)
is extended only “until the loan is paid in full.” Accordingly,
once Seamans’s loan had been repaid, the trade line
pertaining to the Loan should have “aged off” his credit
report pursuant to 15 U.S.C. § 1681c(a)(4), because the Loan
by that time had been placed for collection more than seven
years prior. In reality, however, the trade line did not “age
off,” and it did not “age off” because Temple never provided
the CRAs with the collection history and date of delinquency.
Instead, Temple’s incomplete and misleading reporting made
it appear as if Seamans had simply made a late repayment on
a non-defaulted loan in 2011, which, under 15 U.S.C. §
1681c(a)(5), could be recorded on his credit report until 2018.
Under the reading of HEA advanced by Temple, a
borrower such as Seamans, who initially defaults on an
education loan and then later repays it, is penalized twice:
once because the loan, if unpaid, will not be removed from
his credit report, and twice, because even after payment, the
loan’s trade line will persist for another seven years. We find
this consequence to be inconsistent with Congress’s
expressed intent that “reporting of defaulted [education] loans
to credit bureaus is an effective tool and should be available
to institutions . . . for the entire period that loan collection is
allowed.” S. Rep. No. 105-181, at 58 (1998). The first
19
penalty, to be sure, is an “effective tool” indeed, providing
great motivation for a borrower to repay even very old
education loans. The second penalty, however, reaches
beyond the “period that loan collection is allowed,” and
serves little purpose. Once the debt is paid, the threat that the
negative payment history will persist for another seven years
as “adverse information” gives the borrower no further
motivation—he has already done everything in his power to
satisfy the debt.
In sum, both a straightforward reading of the statutory
text and an assessment of the legislative intent compel the
conclusion that HEA did not exempt Temple, as a furnisher,
from its typical reporting obligations under FRCA. We
conclude that furnishers of consumer credit data remain
obligated to report fully and accurately under FCRA
regarding the collection history and date of delinquency for
even an HEA-qualifying education loan.
IV.
A.
We now address whether Seamans has raised a
genuine issue of material fact regarding his claim that Temple
negligently failed to conduct a reasonable post-dispute
investigation and thereafter failed to correct inaccurate and
incomplete reporting as to the Loan. Section 1681o 6
6
The relevant portion of § 1681o(a) states:
Any person who is negligent in
failing to comply with any
requirement imposed under this
20
authorizes consumers to bring suit for damages caused by a
furnisher’s negligent breach of its duties to consumers under
15 U.S.C. § 1681s-2(b). 7 See SimmsParris v. Countrywide
subchapter with respect to any
consumer is liable to that
consumer in an amount equal to
the sum of-
(1) any actual damages
sustained by the consumer as a
result of the failure; and
(2) in the case of any
successful action to enforce any
liability under this section, the
costs of the action together with
reasonable attorney's fees as
determined by the court.
7
The relevant portion of § 1681s-2(b)(1) states:
After receiving notice pursuant to
section 1681i(a)(2) of this title of
a dispute with regard to the
completeness or accuracy of any
information provided by a person
to a [CRA], the person shall-
(A) conduct an
investigation with respect to the
disputed information;
(B) review all relevant
information provided by the
[CRA] pursuant to section
1681i(a)(2) of this title;
21
Fin. Corp., 652 F.3d 355, 358 (3d Cir. 2011). Although
furnishers such as Temple are obligated to provide complete
and accurate information to CRAs even in the first instance,
(C) report the results of the
investigation to the [CRA];
(D) if the investigation
finds that the information is
incomplete or inaccurate, report
those results to all other [CRAs]
to which the person furnished the
information and that compile and
maintain files on consumers on a
nationwide basis; and
(E) if an item of
information disputed by a
consumer is found to be
inaccurate or incomplete or
cannot be verified after any
reinvestigation under paragraph
(1), for purposes of reporting to a
consumer reporting agency only,
as appropriate, based on the
results of the reinvestigation
promptly-
(i) modify that item of
information;
(ii) delete that item of
information; or
(iii) permanently block the
reporting of that item of
information.
22
i.e., before a dispute, under 15 U.S.C. § 1681s-2(a), FCRA
explicitly precludes private suits for failure to comply with
that statutory duty, 15 U.S.C. § 1681s-2(c), and instead
provides for enforcement of that provision by federal and
state officials, 15 U.S.C. § 1681s-2(d). The claims here are
thus predicated solely on Temple’s conduct after it was
informed of Seamans’s dispute by TransUnion.
We have previously held that a furnisher’s post-dispute
investigation into a consumer’s complaint must be
“reasonable,” SimmsParris, 652 F.3d at 359, but did not
expound upon what that standard requires. We have
recognized, though, that CRAs also are required to follow
“reasonable procedures” with respect to the accuracy of
consumer data under FRCA, see 15 U.S.C. § 1681e(b),8 and
in that similar context we have explained that a reasonable
procedure is one “‘that a reasonably prudent person would
undertake under the circumstances.’” Cortez, 617 F.3d at 709
(quoting Philbin v. Trans Union Corp., 101 F.3d 957, 963 (3d
Cir. 1996)). That issue “is normally a question for trial unless
the reasonableness or unreasonableness of the procedures is
beyond question.” Id. (quotation marks omitted).
We also stated in Cortez that when assessing
reasonableness, the factfinder must balance “the potential
harm from inaccuracy against the burden of safeguarding
against such inaccuracy.” Id. The Court of Appeals for the
8
The relevant portion of 15 U.S.C. § 1681e(b) states:
“Whenever a consumer reporting agency prepares a consumer
report it shall follow reasonable procedures to assure
maximum possible accuracy of the information concerning
the individual about whom the report relates.”
23
Fourth Circuit has explicitly defined a furnisher’s duty in
similar terms. See Johnson v. MBNA Am. Bank, NA, 357 F.3d
426, 432–33 (4th Cir. 2004) (holding that the reasonableness
of a furnisher’s investigation involves weighing “the cost of
verifying the accuracy of the information versus the possible
harm of reporting inaccurate information” (quotation marks
omitted)); see also Van Veen v. Equifax Info., 844 F. Supp. 2d
599, 605 (E.D. Pa. 2012) (applying Johnson). We join our
sister Circuit in holding that the same balancing test we
applied in Cortez with respect to the reasonableness of a
CRA’s procedures applies to investigations conducted by
furnishers as well.
Other Courts of Appeals have evaluated the
reasonableness of a furnisher’s investigative procedure as it
relates to the content of the notice of dispute sent by the CRA
to the furnisher.9 For instance, where a given notice contains
only scant or vague allegations of inaccuracy, a more limited
investigation may be warranted. See Boggio v. USAA Fed.
Sav. Bank, 696 F.3d 611, 616–17 (6th Cir. 2012); Chiang v.
Verizon New England Inc., 595 F.3d 26, 38–41 (1st Cir.
2010); Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147,
1157–61 (9th Cir. 2009); Westra v. Credit Control of
Pinellas, 409 F.3d 825, 827 (7th Cir. 2005). Likewise, “[i]f a
CRA fails to provide ‘all relevant information’ to a furnisher,
9
As we explained in SimmsParris, “a consumer must
first alert the [CRA] that reported the allegedly erroneous
information of a dispute. It is then up to the [CRA] to inform
the furnisher of information that there has been a dispute,
thereby triggering the furnisher's duty to investigate. . . .”
652 F.3d at 359. Such notice “cannot come directly [to the
furnisher] from the consumer.” Id. at 358.
24
then the consumer has a private cause of action against the
CRA, 15 U.S.C. §§ 1681i(a)(2)(A), 1681n-o, but not against
the furnisher.” Chiang, 595 F.3d at 38. We agree that this
too is an important factor in assessing the reasonableness of a
furnisher’s investigation.
The meaning of “completeness” and “accuracy” in the
specific context of a furnisher’s duties under FCRA is also a
matter of first impression in this Court. It is not seriously
debated, however, that factually incorrect information is
“inaccurate” for purposes of FCRA. See, e.g., Boggio, 696
F.3d at 617. And we agree with the three Courts of Appeals
to have considered the question that even if the information is
technically correct, it may nonetheless be inaccurate if,
through omission, it “create[s] a materially misleading
impression.” Saunders v. Branch Banking & Trust Co. of
Va., 526 F.3d 142, 148 (4th Cir. 2008); see also Boggio, 696
F.3d at 617; Gorman, 584 F.3d at 1163. Whether technically
accurate information was “‘misleading in such a way and to
such an extent that [it] can be expected to have an adverse
effect’” is generally a question to be submitted to the jury.
Gorman, 584 F.3d at 1163 (quoting Saunders, 526 F.3d at
150).
Here, the District Court granted Temple’s motion for
summary judgment principally because Temple’s reporting
had not caused the undesired trade line to appear on
Seamans’s credit report. App. 22–23. In the alternative, the
District Court found that Temple’s employment of an outside
vendor, ACS, to conduct consumer credit investigations on
Temple’s behalf was reasonable as a matter of law, App. 30–
31, and that the information actually provided by Temple in
25
response to Seamans’s dispute was complete and accurate in
light of its obligations under FCRA and HEA. App. 31–34.
We disagree with the District Court’s conclusion that
Seamans is unable to establish causation for the alleged harm
to his credit and the associated negative consequences. Under
our interpretation of FCRA and HEA, the trade line’s
appearance on Seamans’s credit report is directly traceable to
Temple’s failure to report the Loan’s collection history and
date of delinquency. Whether the harms alleged by Seamans,
i.e., a drop in credit rating and associated loss of credit
opportunities, can be linked to the appearance of the trade line
on his credit report remains a disputed question of fact.
Similarly, the record contains genuine issues of
material fact regarding the extent to which the above-
described omissions were attributable to unreasonable
investigative and corrective procedures. The parties agree
that Temple was fully notified of the nature of Seamans’s
dispute and in fact received, through proper channels, a copy
of the August 1, 2011 letter in which Seamans provided a
detailed basis for his complaint. Evidence also exists that
Temple’s loan servicer routinely allotted a minimal amount of
time to the investigation of each claim, and that its
investigative procedures and corrective protocols regarding
accounts sent for collection and dates of first delinquency
were justified by a plainly erroneous interpretation of
Temple’s legal obligations as a furnisher. Under the
standards we announced in Cortez, we find on the record
before us a genuine issue of material fact as to whether
Temple’s conduct was reasonable.
Finally, we conclude that the District Court erred with
respect to its characterization of Temple’s reporting as
26
indisputably accurate and complete. As described above, the
information Temple provided may have been incomplete and
inaccurate insofar as it did not disclose the account’s date of
first delinquency or the fact that the account had been placed
for collection in 1992.
In sum, we conclude that genuine issues of material
fact exist as to whether Temple negligently failed to comply
with its obligations under FCRA. Accordingly, we will
vacate the District Court’s order granting summary judgment
in favor of Temple and remand for further proceedings.
B.
Along with Seamans’s claim that Temple was
obligated to correct its reporting of his account’s collections
history and date of first delinquency, he contends that Temple
violated FCRA by failing to flag his account as disputed in its
later reporting to TransUnion and other CRAs. FCRA
imposes an explicit duty on furnishers of credit information to
report a dispute to all CRAs to whom it provides the
information as part of a reasonable investigation. 15 U.S.C. §
1681s-2(a)(3). 10 Private enforcement of that obligation,
10
15 U.S.C. § 1681s-2(a)(3) states:
If the completeness or accuracy of
any information furnished by any
person to any [CRA] is disputed
to such person by a consumer, the
person may not furnish the
information to any [CRA] without
notice that such information is
disputed by the consumer.
27
however, as with other duties arising under § 1681s-2(a), is
not permitted. Id. § 1681s-2(c)(1). The question presented is
whether a furnisher’s continuing failure to flag an account as
disputed also constitutes a violation of 15 U.S.C. § 1681s-
2(b), which as discussed above, requires complete and
accurate post-dispute reporting of debts, and is privately
enforceable by virtue of § 1681o.
The two Courts of Appeals to have considered this
question have both answered it in the affirmative. In
Saunders v. Branch Banking, discussed supra, the Fourth
Circuit considered the interaction of § 1681s-2(a), which
requires complete and accurate pre-dispute reporting of loan
data, and is not privately enforceable, with § 1681s-2(b),
which imposes investigative and corrective duties on
furnishers, and is privately enforceable. 526 F.3d at 148–50.
The panel noted that “[n]o court has ever suggested that a
furnisher can excuse its failure to identify an inaccuracy when
reporting pursuant to § 1681s-2(b) by arguing that it should
have already reported the information accurately under §
1681s-2(a).” Id. at 149–50. In other words, the fact that a
furnisher is affirmatively obligated to flag an account as
disputed under § 1681s-2(a) does not undermine the
conclusion that a failure to flag the account as disputed also
constitutes a material inaccuracy under § 1681s-2(b). See
also Gorman, 584 F.3d at 1163 (explaining that where a
dispute is bona fide, “the omission of the disputed nature of a
debt could render the information sufficiently misleading so
as to be ‘incomplete or inaccurate’ within the meaning of [§
1681s-2(b)]”); Van Veen, 844 F. Supp. 2d at 606 (applying
Saunders and Gorman).
28
We agree with this assessment, and conclude that a
private cause of action arises under 15 U.S.C. § 1681s-2(b)
when, having received notice of a consumer’s potentially
meritorious dispute, a furnisher subsequently fails to report
that the claim is disputed.11 We further find that a genuine
issue of material fact exists as to whether Temple violated
that duty here. The District Court held that Temple was
under no obligation to report Seamans’s dispute because that
dispute “was not bona fide given the status of [the Loan]
11
Temple argues that our holding in SimmsParris
supports the opposite conclusion. We disagree. That
decision simply clarifies that before a consumer can bring a
private claim against a furnisher for failure to provide
accurate information to CRAs, he must first notify the CRA,
who then notifies the furnisher and thereby triggers the
furnisher’s duty to undertake a reasonable investigation and
corrective measures if warranted. SimmsParris, 652 F.3d at
359.
It may seem peculiar that FCRA compels a furnisher,
who can only be formally notified of a dispute by a CRA, to
then re-designate the account as disputed in its submission
back to the same CRA, which of course already knows about
the dispute, having been the initial recipient of notice from
the consumer. But this requirement serves two purposes:
first, the furnisher, not the CRA, is in the best position to
determine whether the dispute is bona fide, and thus the
furnisher’s validation of the dispute signifies that the dispute
is genuine; and second, the furnisher must provide notice of
the dispute to all CRAs to whom it originally submitted the
information—not just to the CRA which initially notified the
furnisher of the dispute.
29
under the HEA.” For the reasons already stated, however, we
find that Seamans’s dispute appears to have merit, and the
failure to report that dispute may constitute a material
inaccuracy on Seamans’s credit report.
Accordingly, we will vacate the District Court’s order
granting summary judgment for Temple on Seamans’s claims
under § 1681o insofar as they are predicated upon an alleged
violation of § 1681s-2(b) for failure to report the disputed
nature of the Loan.
C.
Along with permitting actual damages, costs, and
attorney’s fees for negligent violations of duties imposed
under § 1681s-2(b), FCRA also provides for an award of
punitive damages for willful violations of those same duties
under 15 U.S.C. § 1681n. 12 Liability for willful violations
12
The relevant portion of § 1681n(a) states:
Any person who willfully
fails to comply with any
requirement imposed under this
subchapter with respect to any
consumer is liable to that
consumer in an amount equal to
the sum of-
(1)(A) any actual damages
sustained by the consumer as a
result of the failure or damages of
not less than $100 and not more
than $1,000; or
...
30
will lie not only in the case of knowing violations of the
statute but also if a defendant acts with “reckless disregard”
of the statute’s terms. Safeco Ins. Co. of Am. v. Burr, 551
U.S. 47, 69 (2007). “[A] company subject to FCRA does not
act in reckless disregard of it unless the action is not only a
violation under a reasonable reading of the statute’s terms,
but shows that the company ran a risk of violating the law
substantially greater than the risk associated with a reading
that was merely careless.” Id. An actor’s “subjective bad
faith” is irrelevant—the test is whether the actor’s conduct
was “objectively unreasonable.” Fuges v. Sw. Fin. Servs.,
Ltd., 707 F.3d 241, 248–49 (3d Cir. 2012).
In determining whether an actor’s conduct was
reckless, a court should examine the text of the statute, case
law that existed at the time of the alleged violation, and any
agency interpretations. Safeco, 551 U.S. at 69–70. “[A]
dearth of authoritative guidance” makes it less likely that a
party’s conduct was objectively unreasonable, but the absence
of such authority does not “immunize” an actor from potential
liability where the statute is “far too clear” to support the
(2) such amount of
punitive damages as the court
may allow; and
(3) in the case of any
successful action to enforce any
liability under this section, the
costs of the action together with
reasonable attorney's fees as
determined by the court.
31
actor’s interpretation. Cortez, 617 F.3d at 721–22. We have
noted as to FCRA in particular that:
[T]he breadth and scope . . . is
both evident and extraordinary. . .
. Moreover, it is undeniably a
remedial statute that must be read
in a liberal manner in order to
effectuate the congressional intent
underlying it. . . . [I]t is
imperative that we do not allow a
company that traffics in the
reputations of ordinary people a
free pass to ignore the
requirements of the FCRA each
time it creatively incorporates a
new piece of personal consumer
information in its reports.
Id. at 721–23 (citations and quotation marks omitted).
A furnisher’s objectively unreasonable actions with
respect to a particular consumer’s account can support a jury
finding of willfulness. Blanket policies, too, can underpin
such a finding. See, e.g., Boggio, 696 F.3d at 620 (remanding
for a jury trial as to whether a furnisher’s policy
“prohibit[ing] its employees from performing anything more
than a cursory confirmation of [the consumer’s] status before
reporting back to a CRA” constituted willful violation of the
FCRA); Van Veen, 844 F. Supp. 2d at 610 (denying
defendant’s motion for summary judgment as to willfulness
where furnisher’s policies “never result in marking an
32
account as disputed” and where the furnisher’s analysts were
allotted only “5 to 10 minutes” for investigations).
Here, the District Court endorsed the reasonableness of
Temple’s conduct and concluded that a jury could not find
Temple had acted willfully under Safeco. App. 24–25. But
as noted earlier, we conclude that Temple’s construction of
the HEA is in fact foreclosed by the straightforward statutory
text. HEA simply does not affect reporting obligations under
FCRA for furnishers such as Temple. Beyond that, Seamans
points to evidence that undertrained ACS representatives
spent, on average, only 15 minutes investigating each dispute,
and that the policy of ACS was to never flag accounts as
disputed or to report dates of first delinquency. If true, these
policies would appear to be in outright conflict with a
furnisher’s duties under FCRA.
We will therefore vacate the District Court’s order
with respect to its dismissal of Seamans’s claim for punitive
damages under § 1681n and remand for further proceedings.
V.
For the foregoing reasons, we will vacate the District
Court’s order of October 25, 2012, and remand for further
proceedings consistent with this Opinion.
33