How to Properly Advocate Under the Fair Credit Reporting Act
The Third Circuit recently ended a long-standing dispute and in doing so warned us of the danger of conclusive allegations, particularly in the context of the Fair Credit Reporting Act (“FCRA”).
In Schiano v. HomEq Servicing Corp., 2020 US App. LEXIS 33912 (3rd Cir. October 28, 2020), an arbitrator ordered the plaintiffs to pay more than $ 30,000 in credit card debt to their bank. To raise funds to comply with the order, the plaintiffs refinanced their home, took out a loan, and asked the mortgagor to pay his bank directly to pay off his credit card debt. The applicants and their mortgagor disputed whether the mortgagor paid off the credit card debt. The plaintiffs then filed a lawsuit, alleging a multitude of federal claims, including claims arising from the FCRA.
The third circuit confirmed the rejection of the complaints of the plaintiffs. The court concluded that the plaintiffs’ allegation against his mortgagor was conclusive and focused on four words: The plaintiffs alleged that one of his mortgagors had not “fully and properly investigated” his claim. Under the FCRA, if a consumer disputes the accuracy of something in their record and informs a consumer reporting agency, then the agency is required to “conduct a reasonable investigation.” 15 USC § 1681i (a) (1) (A).
For the court, the allegation that a mortgagor failed to “fully and properly investigate” the plaintiff’s claim was “a mere concluding statement., ”Which did not meet advocacy standards Iqbal. The court also quickly dismissed the plaintiffs’ FCRA claims against the bank, finding that the plaintiffs did not have enough that the bank received notice of the dispute with the agency. 15 USC § 1681i (a) (2) (A).
With all of the federal claims dismissed, the court ruled that adding a part precluded full diversity, and the case was dismissed in its entirety.
Schiano reminds us of the continuing vulnerability of conclusive allegations. An allegation that an agency failed to “fully and properly investigate” was not an allegation in sufficient detail to survive a motion to dismiss. Entities bringing complaints against the FCRA should be aware of similar allegations when deciding to terminate.
© Copyright 2021 Squire Patton Boggs (US) LLPRevue nationale de droit, volume X, number 314