56 F.4th 264
2d Cir.2023Background
- In 2008 Mader took an $18,000 private “Excel Grad” loan (Sallie Mae, later assigned to Navient) to attend a non-Title IV seminary.
- Mader filed Chapter 7 in 2012; the bankruptcy court’s 2013 discharge order said only that he was released from “all dischargeable debts” and did not specify the Excel Grad loan.
- Navient informed Mader the loan was not discharged, negotiated a modification, and Mader made payments; Experian’s credit report continued to list the loan as outstanding.
- Mader sued Experian under the FCRA (and NYFCRA), alleging the report was inaccurate because the loan was discharged; he did not first dispute the debt with Navient or in bankruptcy.
- The district court granted summary judgment for Experian based on a Navient declaration and the loan note; Mader submitted a Navient prospectus suggesting the program was privately funded, creating a factual dispute.
- The Second Circuit held that alleged inaccuracies that turn on unsettled legal questions (here, whether 11 U.S.C. §523(a)(8)(A)(i) made the loan non-dischargeable) are not cognizable under §1681e(b) of the FCRA and affirmed on that alternative ground.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether reporting a post-bankruptcy debt that may be legally discharged is an "inaccuracy" under FCRA §1681e(b) | Mader: Experian’s report is inaccurate because the Excel Grad loan was discharged and should not appear as owed | Experian: Dischargeability requires resolving legal questions; reporting based on creditor records is not objectively inaccurate | Court: Legal disputes over debt validity are not cognizable inaccuracies under §1681e(b); claim fails |
| Whether there was a genuine factual dispute about the Excel Grad program’s funding (i.e., whether the loan was made under a program funded in whole/part by government or nonprofits) | Mader: Prospectus shows Excel Grad was privately funded, creating triable fact issue | Experian/Navient: Promissory note and employee declaration state loan was made under a program funded in part by nonprofit/government | Court: Record does show a genuine factual dispute, so district court erred on that narrow point, but affirmed on the alternative legal-cognizability ground |
| Whether reasonable procedures under the FCRA require CRAs to resolve unsettled legal questions about debt validity | Mader: CRAs must assure maximum possible accuracy and can be required to reflect legal effects of bankruptcy on debts | Experian: Reasonable procedures do not require resolving unsettled legal disputes; CRAs may rely on furnishers and objective records | Court: CRAs need not resolve unsettled legal questions; they must report objectively verifiable facts, not adjudicate legal status of debts |
Key Cases Cited
- United States v. Ron Pair Enters., 489 U.S. 235 (1989) (start statutory-interpretation inquiry with text)
- Shimon v. Equifax Info. Servs. LLC, 994 F.3d 88 (2d Cir. 2021) (credit-report inaccuracy defined as patently incorrect or misleading)
- Homaidan v. Sallie Mae, Inc., 3 F.4th 595 (2d Cir. 2021) (narrow reading of §523 provisions to avoid swallowing other subsections)
- DeAndrade v. Trans Union LLC, 523 F.3d 61 (1st Cir. 2008) (FCRA claim cannot be used as collateral attack on legal validity of debt)
- Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876 (9th Cir. 2010) (collateral legal attacks on debt validity not actionable under FCRA)
- Wright v. Experian Info. Sols., Inc., 805 F.3d 1232 (10th Cir. 2015) (reasonable procedures do not require resolving legal disputes about debt validity)
- Denan v. Trans Union LLC, 959 F.3d 290 (7th Cir. 2020) (distinguishing factual vs legal inaccuracies; CRAs need not resolve unsettled legal questions)
- Losch v. Nationstar Mortg. LLC, 995 F.3d 937 (11th Cir. 2021) (misreporting clear legal effect of bankruptcy on mortgage can be actionable)
- Espinosa v. United Student Aid Funds, Inc., 559 U.S. 260 (2010) (bankruptcy rules require adversary proceedings to determine dischargeability of student loans)