FCRA Willfulness Standard Favors Consumers

Under the Fair Credit Reporting Act (FCRA), credit reporting agencies have a duty to conduct a reasonable reinvestigation of information disputed by consumers.  Likewise, data furnishers have a duty to perform a reasonable investigation upon receipt of a dispute notification from a consumer reporting agency.  In order to prove a consumer reporting agency or data furnisher willfully violated the FCRA, the consumer must prove that the consumer reporting agency or data furnisher recklessly violated the consumer’s FCRA rights.

In Daugherty v. Ocwen Loan Servicing, LLC, the mortgage servicer (data furnisher defendant) unsuccessfully argued on appeal that the plaintiff failed to show that it had willfully violated the FCRA because “it reasonably interpreted the FCRA as requiring furnishers of credit information to investigate only the information identified by the credit reporting agency as ‘disputed,’ and to consult only records within its own possession.” [1]

The Fourth Circuit Court of appeals disagreed and held the following evidence supported a finding of willfulness:

  • 24 disputes made to Ocwen;
  • 8 disputes provided to Ocwen by a consumer reporting agency, included information sufficient to demonstrate that the disputed information was in fact inaccurate (no less than 4 times);
  • Ocwen possessed information in its own records which substantiated the information reported was inaccurate;
  • Ocwen systemically ignored the dispute reason code(s);
  • “Ocwen lacked any procedure for correcting erroneous reports that an account is currentlypast due or in foreclosure, when that account previously had been past due or in foreclosure but had been fully reinstated”;
  • Ocwen processed each dispute verification request independently, without consulting the context of prior correspondence from Daugherty, the CFPB, or Equifax regarding the same account;” and
  • Ocwen’s “repeated noncompliance with its FCRA obligations over [17 months].”

The court ruled that based on this evidence the jury could have reasonably concluded that Ocwen recklessly disregarded Daugherty’s FCRA rights.

More recently, in Myrick v. Equifax Information Services, LLC, the defendant consumer reporting agency, Equifax, disposed of the plaintiff’s willfulness claim on summary judgment.  The plaintiff moved for certification of appealability of the district court’s order granting summary judgment on the FCRA willful violation claim.  Citing Daugherty v. Ocwen Loan Servicing, LLC, No. 16-2243, 2017 WL 3172422 (4th Cir. July 26, 2017), the plaintiff successfully argued “because Equifax possessed information in its own records that could have been used to correct a notation on his credit report showing a balance due and owing on his FFB account after he notified Equifax that the FFB account had been discharged in bankruptcy,” supported a finding of a willful violation.

Equifax argued that it did not have the complete bankruptcy file in its records, thus, did not possess the information which substantiated the information reported was inaccurate.  Further, Equifax notified the furnisher of the dispute and that satisfied its duties under the FCRA.

The district court held the trier of fact could view Equifax’s conduct as willful because Equifax was on notice of the bankruptcy and had sufficient information in its possession that could have been used to correct the inaccurate information. Moreover, because Equifax could have contacted a third party to obtain information to reinvestigate the disputed information, contacting the furnisher was not sufficient in this case.  Accordingly, the court reversed summary judgment in favor of the consumer and denied the motion for appeal as moot.

[1] The jury awarded the plaintiff $6,128.39 in non-economic compensatory damages and $2.5 million in punitive damages.  On appeal, Fourth Circuit “remand[ed] the case to the district court to provide Daugherty the option of accepting a punitive damages award in the reduced amount of $600,000 or proceeding to a new trial on punitive damages the punitive damages award was remitted to $600,000.”

The Adkins Firm represents consumers with errors on credit or background reports in federal court under the Fair Credit Reporting Act.  We also work with referring attorneys around the country on a referral and co-counsel basis to assist their clients who have credit or background report errors.  Contact us for a free case review.