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District Court Denied Summary Judgment on Reasonableness of Procedures in Credit Reporting for Debt Discharged in Bankruptcy

By David Tanabe posted 09-13-2022 09:33

  
BANKRUPTCY BULLETIN

 

In Ferrin v. Experian Information Solutions, Inc., No. 20-CV-841 (NEB/TNL), 2022 WL 2954026 (D. Minn. July 26, 2022), the court denied summary judgment to the credit reporting agency (“CRA”) on the issue of reasonable procedures to assure maximum possible accuracy of credit report information for the plaintiff’s claim under 11 U.S.C. § 1681e(b) of the Fair Credit Reporting Act (“FCRA”).   

Defendant Experian Information Solutions, Inc. (“Experian”) used bankruptcy scrub procedures that left certain debts less than 90 days delinquent on credit reports. The plaintiff had two accounts—a credit union account and a Target account—that were not scrubbed from his credit report despite being discharged in his Chapter 7 bankruptcy case. Both the credit union and Target attempted to report the accounts as discharged, but Experian rejected the updates as noncompliant with formatting requirements.

For the pending motions for summary judgment, Experian did not dispute that it reported inaccurate credit information of outstanding balances.

The parties sought summary judgment on the issue of whether the procedures Experian followed were reasonable as a matter of law. Experian argued that § 1681e(b) does not require it to determine the legal status of bankruptcy on a particular debt. Further, Experian contended that it could rely on presumptively reliable institutions—the credit union and Target—until it had notice that those institutions were unreliable. In denying summary judgment as a matter of law, the court held that it is for a jury to decide if Experian’s procedures that led to the rejection of updates from the credit union and Target were reasonable, and a jury may use evidence that other credit reporting agencies did not make the same error.

Experian also argued that its procedures were reasonable as a matter of law because it followed the procedure mandated by the federal injunction imposed on credit reporting agencies in White v. Experian Information Solutions, Inc., No. 05-CV-1073, 2008 WL 11518799, at *10 (C.D. Cal. Aug. 19, 2008), wherein Experian agreed to update certain unsecured debts as discharged in consumer bankruptcies, except for certain tradelines reporting as “Current Status,” meaning no outstanding, overdue, or delinquent balance at the time of the filing of the petition for Chapter 7 bankruptcy relief. Experian argued that the credit union and Target accounts fell within this exception. Nevertheless, the court held that compliance with White did not conclusively establish the reasonableness of Experian’s procedures.

The parties also sought summary judgment on the issue of the plaintiff’s damages. The court held that the plaintiff’s testimony and a friend’s corroborating declaration were enough to raise a genuine issue of material fact as to whether the plaintiff suffered emotional distress damages as a result of the inaccurate reporting.

The court granted summary judgment to Experian on the plaintiff’s claim of willful violation of the FCRA because the plaintiff failed to show that Experian’s rejection of the credit union and Target updates was more than mere carelessness.

Co-Editors in Chief
Karl J. JohnsonTaft Stettinius & Hollister LLP
David M. TanabeWinthrop & Weinstine, P.A.

 

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