Written By Digital Content Editor Thomas Ahearn

On July 17, 2023, a Court of Appeals ruled on an appeal from an order of a District Court announcing a new rule under which certain claims brought under the Fair Credit Reporting Act (FCRA) would be subject to a threshold inquiry into whether an alleged inaccuracy was “legal” and therefore “non-cognizable under the FCRA.”

The United States Court of Appeals for the Second Circuit ruled on an appeal from the U.S. District Court for the Southern District of New York and held that the FCRA does not contemplate such a threshold inquiry. Rather, an FCRA claim alleges an “inaccuracy” so long as the challenged information is objectively and readily verifiable.

The Plaintiff in the case leased a vehicle in 2018 and the Defendant-appellee received certain information about the lease and reported that information on Plaintiff’s credit report. Defendant reported that Plaintiff owed a “balloon payment” at the end of the lease term – a payment that the terms of the lease did not require.

The Plaintiff sued the Defendant under section 1681e(b) of the FCRA which covers the accuracy of consumer reports that requires credit reporting agencies (CRAs) such as the Defendant to “follow reasonable procedures to assure maximum possible accuracy of the information” contained in a consumer’s credit report.

The District Court granted the Defendant summary judgment, reasoning that the Plaintiff’s credit report could not be considered “inaccurate” under section 1681e(b) because the question of whether the Plaintiff owed a balloon payment amounted to a “legal” – rather than a “factual” – dispute.

The Court of Appeals concluded that section 1681e(b) did not incorporate a threshold inquiry as to whether an alleged inaccuracy is “legal” or “factual” in nature, determining the District Court erred in its analysis. The Court of Appeals vacated the District Court’s order and remanded for further proceedings.

The FCRA is federal legislation enacted by Congress in 1970 to promote the accuracy, fairness, and privacy of consumer information contained in the files of CRAs, and to protect consumers from the willful and/or negligent inclusion of inaccurate information in their consumer reports.

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