In Rydholm v. Equifax Information Services LLC, No. 20-3425, 2022 WL 3364952 (8th Cir. Aug. 16, 2022), the Eighth Circuit affirmed the district court’s dismissal of a complaint for failure to state plausible claims for alleged violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. (“FCRA”).
Plaintiff filed a petition for relief under Chapter 7 of the Bankruptcy Code. On his bankruptcy schedules, Plaintiff listed Wells Fargo with an unsecured nonpriority claim. After the discharge order was entered, Plaintiff received credit reports from the defendants, Experian Information Solutions, Inc. (“Experian”) and Trans Union, LLC (“Trans Union”). The Trans Union report stated that Plaintiff received a bankruptcy discharge, but still listed the Wells Fargo account as “Current; Paid or Paying as Agreed” with an outstanding balance. The Experian report also listed the account as open with the same balance. The Experian report listed the bankruptcy but did not mention the discharge.
Plaintiff sued the defendants alleging the credit reporting agencies violated § 1681e(b) for failing to maintain reasonable procedures to ensure debts that are derogatory prior to a consumer’s bankruptcy filing do not continue to report balances owing or past due amounts when those debts are almost certainly discharged in bankruptcy. The defendants filed a motion to dismiss for failure to allege unreasonable reporting procedures. The district court granted the motion and the plaintiff appealed.
Before the Eighth Circuit, the defendants argued Plaintiff does not have standing to appeal. The Eighth Circuit rejected the defendants’ argument and held that Plaintiff’s alleged tangible financial harm and intangible emotional injury due to denials of credit and less favorable credit rates were sufficient to establish standing.
However, the Eighth Circuit held Plaintiff’s complaint presented a bare legal conclusion that the defendants employed unreasonable reporting procedures. The Eighth Circuit stated that for reasonable procedures for § 1681e(b) a credit reporting agency can rely on information from a reputable furnisher, unless the agency receives notice of systemic problems with its procedures. The Eighth Circuit noted that Plaintiff’s complaint did not allege the defendants knew or should have known about systemic problems. Further, Plaintiff never directly contested credit reporting to the defendants, nor did Plaintiff allege that the furnisher, Wells Fargo, lacked reliability as a source. The Eighth Circuit stated that credit reporting agencies are not required to hire individuals with legal training to preemptively determine the validity of reported debts.
The Eighth Circuit held that the complaint failed to state plausible claims against the defendants.
Co-Editors in Chief
Karl J. Johnson, Taft Stettinius & Hollister LLP
David M. Tanabe, Winthrop & Weinstine, P.A.