Accuracy Defined Under the FCRA

The Fair Credit Reporting Act requires Credit Reporting Agencies (i.e. Equifax, Experian, and TransUnion) requires that CRAs utilize reasonable procedures to ensure maximum possible accuracy of the information in a consumer’s report.  In connection, when a consumer disputes information on his credit report, the CRA must properly conduct a reinvestigation after the consumer disputes the accuracy of information.  One of the first considerations is determining if the information in inaccurate or accurate.  While sometimes this can be a very easy question, there are often times when the answer can be more complicated.

For instance, in Cahlin v. Gen. Motors Acceptance Corp., 936 F.2d 1151 (11th Cir. 1991), the Eleventh Circuit stated:

The issue presented here is whether a credit report containing derogatory information about an account which was charged off by a creditor for accounting purposes and which was later settled by the consumer for an amount less than the full balance due is “accurate”. In determining whether a credit reporting agency’s treatment of an account was “accurate,” we are first guided by the intent of the creditor who transmitted the information about a particular account. Because GMAC was once a party to this dispute, there is significant, uncontroverted evidence in the record which sheds light on GMAC’s attitude toward Cahlin’s account. The district court found that the undisputed facts show that GMAC charged off Cahlin’s account as a bad debt in November, 1985 and that when this debt was later settled for $ 2,000, GMAC intended the account to be reported as a “paid charge off” or the equivalent. The record also shows that GMAC’s various instructions in October 1986 and 1987 to CBI to remove any derogatory information about Cahlin’s account were largely motivated by a desire to mollify Cahlin and avoid potential litigation, not to correct any reporting errors by CBI. Thus, from GMAC’s perspective, Cahlin’s account would have been most accurately reported if it had been carried as a charged off account that was later paid off.

…

In interpreting the meaning of “accuracy” within section 607(b), we cannot conclude that a debt which has been charged off by the creditor and is later settled for an amount less than the original balance due should be reported without any derogatory references on a credit report. This information, which reflects the efforts required to collect a debt, is clearly of interest to potential creditors and would be effectively hidden by a credit report that treated the account as being in good standing.

And in Crane v. Trans Union, LLC, 282 F. Supp. 2d 311 (E.D. Pa. 2003):

By requiring “something more than mere[] parroting” by CRAs, Cushman teaches that the FCRA uses the word “accuracy” more “objectively” than TU would prefer.  An objective understanding of accuracy requires congruence between the legal status of a consumer’s account and the status a CRA reports. Put another way, a consumer report cannot be “accurate” under either section 1681e(b) or section 1681i if it contains information that is legally incorrect.

The parties agree that TU reported the status of Crane’s Hann account as a “profit and loss writeoff” with a “$ 2338” balance that was “charged off as bad debt” and as a “paid profit and loss” with a “$ 0” balance that was a “paid charge off.” They do not, however, concur as to the legal status of Hann’s account. Crane argues that Hann’s acceptance of the insurance payment from Allstate fully discharged his debt to Hann and that, therefore, TU should not have included any adverse information about his Hann account in his file. TU claims that the insurance payment only reduced the amount of Crane’s debt to Hann, that Crane owed $ 2,338.64 to Hann even after Hann received the insurance payment, and that TU properly included this adverse information in Crane’s file.

To resolve this legal dispute, we look to whatever agreements existed between Crane, Hann, and Allstate. At a minimum, we can infer that Crane and Hann entered a contract governing Crane’s obligations to repay the loan and that Allstate agreed to insure Crane’s automobile. More significantly, we can infer that Crane, Allstate, and Hann agreed that Allstate’s direct payment of $ 9,741.65 to Hann would extinguish Crane’s debt to Hann.  The insurance payment fully discharged Crane’s debt, but TU reported the loan as a “profit and loss writeoff” with a “$ 2338” balance that was “charged off as bad debt” and as a “paid profit and loss” with a “$ 0” balance that was a “paid charge off.” Even if Hann “verified” these characterizations, they were not objectively accurate because Hann had no legal right to additional payment from Crane.

As shown, accuracy can be harder to define when it comes to more complex financial transactions but it is an essential element to an FCRA claim.