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SimmsParris v. Countrywide Financial Corp.

652 F.3d 355 (3rd Cir. 2011)

FAIR CREDIT REPORTING ACT — In order for a consumer to have a claim against a creditor for falsely reporting information to a credit reporting agency, the consumer must first contact the credit reporting agency rather than the creditor itself; otherwise, the consumer is not entitled to damages from the creditor because allowing such would interfere with the Congressionally chosen path for creating liability.

An attorney-borrower obtained a mortgage loan. The lender reported to a credit reporting agency that the borrower’s account was delinquent for two months. The borrower alleged that the lender had furnished her with false information, and contacted the lender directly. When the lender did not change the report, the borrower sued under the Fair Credit Reporting Act (FCRA) and made state law claims as well. The lower court granted summary judgment in favor of the lender and the credit agency. The lower court held that a private litigant seeking to recover against the furnisher of information under the FCRA must first make a complaint to the consumer reporting agency before the information provider can face liability under the statute. However, the lower court did not address the reasons for granting summary judgment in respect to the borrower’s state law claims.

The borrower appealed, but the United States Court of Appeals affirmed the summary judgment grant, holding a private right of action against a credit information furnisher may not proceed unless the consumer first files a dispute with the credit reporting agency that reported the allegedly erroneous information. This would trigger the credit reporting agency’s obligation to inform the information furnisher of the dispute and the furnisher’s subsequent obligation to undertake a reasonable investigation. The FCRA does not provide a private right of action against a furnisher of credit information, such as the lender, except under limited situations. A private citizen cannot sue an information furnisher unless the furnisher has been notified of the consumer’s dispute by a consumer reporting agency and fails to conduct a reasonable investigation. The credit agency notifying a furnisher must be the same consumer reporting agency allegedly reporting the false information.

The borrower argued that when her law firm sent the notice to the lender, she met statutory requirements because her firm often acted as a consumer reporting agency. The Court found the FCRA required the agency to which the lender had provided the allegedly false information to be the one that provided the notice in the first place to trigger any statutory duty. The Court held that “[t]o allow a consumer to bypass this structural framework by hiring a law firm that occasionally acts as a consumer reporting agency would interfere with this Congressionally chosen path for creating liability. In doing so, it would cause furnishers of information to have to respond directly to consumers rather than to [credit] reporting agencies, and that would upset the balance enacted by the statute.”

Because the borrower failed to follow the plain language of the statutory requirement, the lower court’s ruling was affirmed.

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