John Shaw v. Experian Information Solutions
891 F.3d 749
| 9th Cir. | 2018Background
- Plaintiffs (Shaw, Coke, Rydman) executed short sales (2010–2011) and later alleged Experian misreported those short sales as foreclosures, harming mortgage applications.
- Experian receives furnisher data in Metro 2 format but translates it into proprietary codes; it reported the short sales using code combination 9-68 (lead payment history 9 + account status 68 = “Acct legally paid in full for less than the full balance,” displayed as “Paid in Settlement”).
- Fannie Mae’s Desktop Underwriter historically treated a lead payment history code of 9 the same as 8 (foreclosure), causing some lenders using Desktop Underwriter to flag short sales as possible foreclosures and impose longer waiting periods.
- Plaintiffs disputed Experian’s reports after receiving consumer disclosures; Experian responded and later implemented a new short-sale code; Fannie Mae updated its software to distinguish short sales from foreclosures.
- Plaintiffs sued Experian under the FCRA for (1) failure to follow reasonable procedures (15 U.S.C. § 1681e), (2) failure to reasonably reinvestigate disputes (15 U.S.C. § 1681i), and (3) failure to disclose file contents (15 U.S.C. § 1681g), seeking statutory damages under § 1681n; the district court granted summary judgment for Experian.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Experian’s reporting of short sales via code combination 9-68 was inaccurate under the FCRA (§ 1681e/§ 1681i) | Experian’s use of lead code 9 (a catchall) was misleading and caused subscribers (e.g., Fannie Mae) to treat short sales as foreclosures | Code 9 combined with account status 68 unambiguously denotes a settled short sale; reports were not patently incorrect or misleading | Court: Not inaccurate; plaintiffs failed to meet the threshold showing of inaccuracy, so § 1681e and § 1681i claims fail |
| Whether Experian’s consumer disclosures omitted file information in violation of § 1681g | Plaintiffs contend disclosures were misleading because they showed "CLS" or did not display code 9 in the lead payment history spot | Experian provided clear, accurate, consumer-friendly disclosures ("Paid in Settlement" and creditor statement) and is not required to include proprietary internal codes | Court: Disclosure was clear and accurate; § 1681g claim fails |
| Whether any FCRA violation (if found) was willful under § 1681n | Plaintiffs argue Experian knew or recklessly disregarded the effect of its coding on subscribers | Experian relied on its technical manuals, industry practices, and CFPB guidance; its interpretation was objectively reasonable | Court: No willfulness; summary judgment for Experian affirmed |
| Whether subscriber (Fannie Mae) misuse of Experian codes imputed liability to Experian | Plaintiffs assert Experian should have prevented Fannie Mae’s misreading | Experian is not liable for a subscriber’s misinterpretation of its manuals; it provided accurate reporting and technical guidance to subscribers | Court: Fannie Mae’s treatment caused the harm, not Experian’s reporting; plaintiffs’ theory fails |
Key Cases Cited
- Guimond v. Trans Union Credit Info. Co., 45 F.3d 1329 (9th Cir. 1995) (FCRA enacted to ensure fair and accurate credit reporting; consumer-friendly construction)
- Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147 (9th Cir. 2009) (definition of “inaccurate” includes ‘‘patently incorrect’’ or ‘‘misleading’’ to an extent affecting credit decisions)
- Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876 (9th Cir. 2010) (requiring an inaccuracy showing for reinvestigation claims)
- Cortez v. Trans Union, LLC, 617 F.3d 688 (3d Cir. 2010) (reasonableness of CRA procedures normally a factual question)
- Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) (willfulness requires knowing or reckless violation; recklessness is an objective standard)
- Gillespie v. Trans Union Corp., 482 F.3d 907 (7th Cir. 2007) (distinguishing consumer reports from internal CRA files; disclosures must be understandable to average consumer)