940 F.3d 1022
9th Cir.2019Background
- Fannie Mae created and licenses Desktop Underwriter (DU), an automated underwriting system lenders use to determine if loans meet Fannie Mae’s purchase guidelines in the Selling Guide.
- Lenders input borrower/property data into DU or import credit reports from consumer reporting agencies; DU then applies Fannie Mae’s proprietary algorithms and returns DU Findings (including eligibility recommendations) to lenders.
- The Zabriskies had a prior short sale; several DU Findings incorrectly stated a prior foreclosure (despite no foreclosure), causing lenders to deny refinancing.
- The Zabriskies sued under the Fair Credit Reporting Act (FCRA), alleging Fannie Mae was a "consumer reporting agency" and DU Findings were consumer reports, and a jury awarded damages and attorneys’ fees.
- On appeal, the Ninth Circuit majority reversed: it held Fannie Mae does not "assemble or evaluate" consumer information (it provides a tool) and, even if it did, its purpose is to determine loan eligibility for purchase by Fannie Mae—not to furnish consumer reports to third parties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fannie Mae "engages in assembling or evaluating" consumer information (15 U.S.C. §1681a(f)) | DU performs assembling/evaluating and those activities are attributable to Fannie Mae | Fannie Mae only provides/licences software; lenders assemble/evaluate using DU (tool analogy) | Held: Fannie Mae does not engage in assembling/evaluating; the lenders do (majority) |
| Whether Fannie Mae acts "for the purpose of furnishing consumer reports to third parties" | DU Findings are detailed reports used by lenders to decide credit and thus furnished for that purpose | DU’s purpose is to assess whether Fannie Mae would purchase the loan (facilitating lender–Fannie transaction), not to furnish consumer reports | Held: DU’s purpose is to determine Fannie Mae purchase eligibility, not to furnish consumer reports (majority) |
| Proper weight to agency guidance (FTC) and statutory interpretation principles | Argue liberal construction to protect consumers and that DU’s real-world effects show consumer-reporting function | Statutory text controls; FTC staff guidance supports treating software sellers as not CRAs; court should follow plain meaning | Held: Court follows plain meaning and finds FTC guidance persuasive but not controlling; rejects broad construction here |
| Consequences of classification (other FCRA duties / remedies) | Consumers need recourse where DU disseminates inaccurate credit-related information | Classifying Fannie Mae as CRA would impose statutory duties inconsistent with Fannie Mae’s statutory role in secondary market | Held: Statutory scheme and Fannie Mae’s role support exclusion from CRA duties; judgment for Fannie Mae (majority); dissent would have held otherwise |
Key Cases Cited
- Simmons v. Himmelreich, 136 S. Ct. 1843 (2016) (plain-meaning interpretation presumption)
- United States v. Mead Corp., 533 U.S. 218 (2001) (agency interpretations may merit deference)
- Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) (consideration of agency guidance in willfulness analysis)
- Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (2017) (statutory interpretation should start with ordinary meaning)
- Guimond v. Trans Union Credit Info. Co., 45 F.3d 1329 (9th Cir. 1995) (FCRA construed to protect consumers from inaccurate reporting)
- Curley v. City of North Las Vegas, 772 F.3d 629 (9th Cir. 2014) (standard of review for summary judgment)