This article will review recent important rulings in Fair Credit Reporting ("FCRA") Act cases. Specifically, the cases relate to (1) the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") amendments to the FCRA, (2) permissible purposes for obtaining a consumer credit report, and (3) investigations related to the accuracy of tradelines.
I. THE FCRA AND THE CARES ACT
Perhaps the most important and notable development in FCRA standards in recent years is the passing of the CARES Act, on March 27, 2020. The CARES Act was Congress' attempt to right the economic ship during the initial stages of the COVID-19 pandemic, and it amended the FCRA to assist consumers struggling to make monthly payments or obtain credit. At the same time, employment in many "non-essential" positions was prohibited due to health and safety concerns. Since the CARES Act passed, Courts have begun interpreting these amendments to provide clarity for consumers, furnishers, and credit reporting agencies.
A. Horvath v. JPMorgan Chase & Co.
in the United States District Court for the Southern District of California1
The Plaintiff filed a petition in San Diego County Small Claims Court, alleging Chase violated the FCRA and the CARES Act. Chase removed the case to the Southern District of California and filed a Motion to Dismiss. The Plaintiff claimed Chase's reports of delinquent payments to the credit reporting agencies were inaccurate or misleading because the account was subject to COVID deferral.
The Court held that Plaintiff does not have a cause of action under the CARES act because there is no private cause of action to enforce its provisions. Additionally, the Plaintiff failed to plead that she notified the credit reporting agencies that she disputed the reporting as inaccurate. The Court held that an allegation of tradeline inaccuracy stemming from a CARES Act deferral does not absolve a plaintiff from first having to dispute the tradeline with the credit reporting agency. Because the complaint failed to allege that a dispute letter was provided to the credit reporting agencies, the Motion to Dismiss was granted,with leave to amend.
B. Hafez v. Equifax Information Services, LLC
in the United States District Court for the District of New Jersey2
The Plaintiff brought this putative class action alleging Defendants failed to adopt reasonable procedures to insure the accuracy of consumer credit reports in light of the CARES Act amendments to the FCRA. The Plaintiff's student loan payments were suspended by the the CARES Act, and her loan servicer reported her loans as in "forbearance" rather than "current." Her credit score fell by 97 points during this time. Plaintiff notified her servicer, and the servicer removed the "forbearance" remark and notified the credit reporting agencies. Plaintiff alleges that, despite the Secretary of Education's requirement to ensure that suspended payments were treated as if the borrower made a regularly scheduled payment for credit reporting purposes, VantageScore Solutions provided a score that did not account for the CARES Act amendments and treated the suspension of student loan payments as an adverse credit event. Importantly, the Plaintiff did not state whether her federal student loans were current prior to the CARES Act or whether she received an accommodation under the CARES Act.
The defendants filed a motion to dismiss. The Court held that it is not patently inaccurate to report federal student loans as anything other than current. Said another way, the credit reporting agencies do not need to report an account as "current" if the account was delinquent before an accommodation under the FCRA (as amended by the CARES Act).
C. Mitchell v. Specialized Loan Servicing, LLC
in the United States District Court for the Central District of California3
In this case, the Plaintiff took out a second mortgage on his home in 2019. He sought three months of loan forbearance under the CARES Act. Interacting with a voice response system, the Plaintiff indicated he sought forbearance because of the economic impacts of COVID-19 and selected an option that indicated he lost income or work hours. The defendant approved the forbearance, and the Plaintiff was...
