19-10199
5th Cir.Sep 10, 2020Background
- In 2010 Hammer opened a Capital One credit card and made timely payments; TransUnion, Experian, and Equifax reported the account until 2017.
- After the CRAs stopped reporting the positive tradeline, Hammer asked each CRA to restore it; TransUnion did so but Experian and Equifax initially refused.
- Hammer submitted proof of the account and repeatedly disputed; Experian and Equifax briefly added the account but Equifax removed it again within a week.
- Loss of the favorable tradeline allegedly lowered Hammer’s credit score and caused credit denials and higher rates.
- Hammer sued Experian and Equifax for negligent and willful violations of the Fair Credit Reporting Act; the district court dismissed and Hammer appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Equifax violated §1681e(b) (reasonable procedures/accuracy) | Omission of verified favorable information makes a report inaccurate under §1681e(b) | An omission does not render a report inaccurate unless it is misleading to creditors; CRAs aren’t strictly liable for omissions | Court: Rejects Hammer’s broad rule; omission alone does not make a report inaccurate—accuracy requires the omission be misleading to an extent likely to affect credit decisions |
| Whether CRAs violated §1681i(a) (reasonable reinvestigation) | Hammer: CRAs failed to investigate the omission of his Capital One account from his report | Defendants: Hammer disputed a missing item from the report (completeness), not the accuracy/completeness of an item in the file, so §1681i(a) wasn’t triggered | Court: §1681i(a) applies to disputes about items in the file; Hammer disputed absence of an item and thus did not trigger §1681i(a) duties |
| Whether Equifax violated §1681i(a)(5)(B)(ii) (notice on reinsertion) | Equifax reinserted the account and failed to notify Hammer as required | Equifax: It never deleted the item from the consumer file—only excluded it from the report—so the reinsertion-notice duty does not apply | Court: Statute covers items deleted from and reinserted into a consumer file; because Hammer pleaded Equifax did not delete from the file, no §1681i(a)(5)(B)(ii) duty arose |
| Whether dismissal with prejudice was an abuse of discretion (leave to amend) | Hammer: Should be allowed another amendment to cure pleading defects | Defendants: Further amendment would be futile; Hammer already had two chances and consistently alleged Equifax never deleted the item from the file | Court: Denial of leave was not an abuse—amendment would be futile under the Rule 12(b)(6) standard |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard; courts need not accept legal conclusions)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility requirement for complaints)
- Sepulvado v. CSC Credit Servs., Inc., 158 F.3d 890 (5th Cir. 1998) (an omission makes a report inaccurate only if it is misleading in a way likely to affect credit decisions)
- Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) (FCRA obligations viewed in light of consumer-protective objectives)
- Thompson v. San Antonio Retail Merchants Ass'n, 682 F.2d 509 (5th Cir. 1982) (reasonable-procedures standard for CRA accuracy under §1681e(b))
- Marucci Sports, L.L.C. v. Nat’l Collegiate Athletic Ass’n, 751 F.3d 368 (5th Cir. 2014) (amendment denial reviewed for futility under 12(b)(6) standard)