News accounts of instances of stolen identity in which identity thieves incur debts in the names of innocent consumers are common. Given the structure of the consumer credit industry, it is difficult for consumers to know where to turn to try to fix the problem. The ostensible creditor often has referred the debt to a collection agency to collect. The existence of the debt is probably reported by yet another entity, a consumer credit reporting agency, maybe even multiple credit reporting agencies.
To give consumers tools to address the problem, Congress enacted the Fair Consumer Reporting Act (“FCRA”). A consumer may file an “indirect dispute” with the credit reporting agency, a “direct dispute” with the party that reported the account to the credit reporting agency, referred to in FCRA as the “furnisher,” or both.
FCRA permits a furnisher that receives a direct dispute, but reasonably deems it frivolous or irrelevant, not to investigate the dispute or take any corrective action. However, furnishers must investigate disputes not deemed frivolous or irrelevant. A furnisher who deems a dispute to be frivolous must notify the consumer within 30 days and, if additional information is needed to confirm whether the dispute is bona fide, must inform the consumer as to what information is needed. When an investigation is conducted and it reveals that the dispute is bona fide, the furnisher must notify each credit reporting agency to which the account has been reported of the results of the investigation.
A credit reporting agency that receives an indirect dispute must notify the furnisher that provided information about the disputed account within five days of receipt of the indirect dispute that the agency has received the indirect dispute. FCRA requires a furnisher who receives from a credit reporting agency notice that it has received an indirect dispute to investigate the dispute. The credit reporting agency is also required to investigate the dispute, but like a furnisher, is not required to investigate frivolous disputes and may deem a dispute frivolous if the consumer fails to provide information reasonably necessary to investigate the dispute. The credit reporting agency must notify the consumer if an indirect dispute has been deemed frivolous. A credit reporting agency that conducts an investigation and determines that the indirect dispute is meritorious must delete any incorrect information about the consumer’s accounts from credit reports.
In an October 2, 2023 opinion, the United States Court of Appeals for the Third Circuit addressed the duty of a furnisher who receives notice of an indirect dispute from a credit reporting agency to investigate the dispute. Stefan Ingram discovered what he claimed was a fraudulent debt to Comcast for service provided to an address where he had never lived on his credit report. Ingram filed a direct dispute of the account with Comcast. Comcast requested that Ingram provide information, including a notarized fraud and identity theft affidavit. Ingram did not provide the affidavit. Comcast did not determine whether the account was fraudulent.
Comcast referred the disputed account to Waypoint Resource Group, LLC for collection. Waypoint reported Ingram’s account as delinquent to credit reporting agency Experian Information Solutions.
Ingram then filed an indirect dispute of the account with Experian. Experian forwarded Ingram’s dispute to Waypoint which had reported the account as delinquent to Experian. Waypoint did not investigate whether the account was fraudulent as Ingram claimed.
Ingram sued Comcast, Waypoint, and Experian. He asserted that they had violated FCRA by failing to investigate his claim that the Comcast debt was fraudulent and that his credit score had been adversely affected, he had been denied an apartment, and he had suffered stress because the Comcast account continued to be reflected on his credit report.
Comcast and Experian settled Ingram’s claims against them. Waypoint filed a motion for summary judgment. It asserted that since Ingram had not provided enough information to enable it to determine if his dispute was “bona fide” and “non-frivolous,” Waypoint was not obligated under FCRA to investigate his claim. The District Court agreed that Waypoint had no obligation to investigate a dispute that it deemed frivolous and granted Waypoint summary judgment.
Ingram appealed to the Third Circuit. He argued that a furnisher who receives notice of an indirect dispute from a credit reporting agency has an absolute duty to investigate with no discretion to deem a dispute frivolous or irrelevant.
The Third Circuit reversed based on the “ordinary meaning” of the language of FCRA. FCRA expressly excuses a furnisher who receives a direct dispute, but reasonably determines that it is frivolous or irrelevant, from conducting an investigation. FCRA also expressly excuses a credit reporting agency who receives an indirect dispute, but reasonably determines that it is frivolous or irrelevant, from conducting an investigation. However, FCRA requires a furnisher who receives notice of an indirect dispute from a credit reporting agency to investigate the dispute “without providing any similar exception.” Reciting the familiar propositions that courts presume “that Congress acts intentionally and purposely when it includes language of a statute but omits it in another” and that “[w]hen Congress provides exceptions in a statute, it does not follow that courts have authority to create others,” the Third Circuit concluded that “FCRA provides no explicit exception for furnishers to decline to investigate an indirect dispute that they receive from a consumer reporting agency, and we will read the statute accordingly.”
In reaching its decision, the Third Circuit declined to follow two District Court decisions in which the courts held that a furnisher that receives notice of an indirect dispute from a credit reporting agency has no duty to investigate a dispute that the furnisher reasonably determines to be frivolous or irrelevant. In discussing those cases, the Third Circuit said that the fact that the furnishers in those cases were the original creditor, rather than a collection agency, “did not affect our overall conclusion as to the duties of the party that received the indirect dispute.” However, imposing an absolute duty to investigate on a furnisher who receives notice from a credit reporting agency when the furnisher is the original creditor, who should know about its own account, makes more sense than imposing an absolute duty to investigate on a collection agency furnisher that only knows what the original creditor told it. What the Third Circuit concluded was the intent of Congress based on the “ordinary meaning” of FCRA may be more a function of the failure of Congress to recognize that in what the Third Circuit called the “often opaque and occasionally exasperating universe of credit reporting,” a furnisher’s knowledge of an account may be limited to what another furnisher told it than a conscious decision to impose an absolute duty to investigate.