Edward M. SEAMANS, Appellant v. TEMPLE UNIVERSITY.
No. 12-4298.
United States Court of Appeals, Third Circuit.
Argued Sept. 24, 2013. Filed: Feb. 21, 2014.
744 F.3d 853
Richard J. Perr, Esq. [argued], Fineman, Krekstein & Harris, Philadelphia, PA, for Appellee.
Before: CHAGARES, VANASKIE and SHWARTZ, Circuit Judges.
OPINION OF THE COURT
VANASKIE, Circuit Judge.
In this case we consider for the first time the interplay between the Fair Credit Reporting Act (“FCRA“),
I.
On January 16, 1989, Seamans received a need-based Federal Perkins Loan (the “Loan“) of $1,180.00 from Temple. The first payment on the Loan was due on January 20, 1992. Uрon Seamans‘s failure to make payment within the fifteen-day grace period, the loan was declared delin
In January 2010, Seamans enrolled as a full-time student at Drexel University. In the spring of 2011, Seamans sought financial aid in the form of a Pell Grant, but Drexel refused to provide Seamans with financial assistance until he repaid the balance of the still-outstanding Loan. On April 28, 2011, Seamans repaid the Loan in full.
In May 2011, allegedly for the first time in many years, Seamans noticed a “trade line” on his credit report summarizing data pertaining to the Loan. For reasons unknown, that trade line may or may not have actually appeared on Seamans‘s credit report at the times it indisрutably should have—namely, between February 1992 and April 2011, when the account was in default. Because Seamans‘s claim is predicated only on Temple‘s conduct after he disputed the trade line, whether and how Temple reported information about the Loan before Seamans lodged his dispute is irrelevant.
What is not in dispute is that in the aftermath of Seamans‘s repayment of the Loan, Temple reported certain Loan-related data to TransUnion, a CRA. We observe at the outset that much reporting of consumer credit data, including the bulk of the reporting by Temple in this case, takes the form of “codes” rather than text. For the sake of clarity, we refer primarily to the underlying interpretations of the codes, which are undisputed, rather than to the codes themselves. Relevant categories of coded information include (1) the “date of first delinquency,” which refers to the initial date upon which the loan had been marked as defaulted; (2) the “payment history,” which documents the debtor‘s month-by-month payment record; (3) the “account status,” which documents a particular status for a given debt, including whether an account is open, closed, paid, or unpaid; and (4) the “compliance condition,” which indicates whether the reported information is disputed by the consumer.
In the aftermath of Seamans‘s payment, Temple had provided the following information to TransUnion:
(a) [Seamans] had been over 180 days late for at least twenty-four (24) months prior to the time the Perkins [L]oan was paid in full;
(b) the Account Status was report[ed] as ‘Current; Paid or Paying as Agreed;’
(c) the Balance was report[ed] as ‘$0;’
(d) the High Balance was report[ed] as ‘$1180;’
(e) the Terms was report[ed] as ‘120 Monthly $30;’
(f) the Date Open was report[ed] as ‘10/1991;’ and
(g) the Date Closed was report[ed] as ‘04/2011.’
App. 64-65. Temple did not report the date of first delinquency for the Loan (i.e., February 4, 1992), and also did not report that the account had ever been placed for collection.
On May 17 and May 20, 2011, Seamans formally disputed portions of that information by contacting TransUnion. Seamans‘s May 17 dispute, which he submitted online, stated:
Loan defaulted 1992. Temple didn‘t report in a decade+, and charged off long ago. I paid Temple on 4/30, they retroactively reported years of 120d late payments, but it had been co‘d. Nothing from Temple was on my report until I fully paid to close account. Why does report show two years of late payments?
In response, Temрle, through its loan servicer, ACS Education Services, Inc. (“ACS“), conducted an investigation. ACS had contracted with Temple to respond to consumer disputes on Temple‘s behalf in exchange for $2 per dispute “received and processed” by ACS. The procedure followed by ACS in these investigations was essentially to verify that the reported data was in fact consistent with Temple‘s internal documentation pertaining to the Loan.1
On May 23, 2011, Temple resubmitted the information to TransUnion virtually unchanged. Again, Temple did not indicate when the Loan first became delinquent or that it had ever been placed for collection. Nor did Temple report by way of a “compliance condition” code that Seamans now disputed the trade line.
On August 1, 2011, Seamans contacted Temple, TransUnion, and another CRA, Equifax, agаin to dispute the continued appearance of Temple‘s trade line on his credit report. Seamans‘s letter to TransUnion stated:
In 1989 I received a Perkins Loan while attending Temple University. I defaulted on the loan and the loan went to collection. No activity occurred on the account for some time, and the account eventually came off my credit reports for all three of the reporting agencies. I recently began attending school again at Drexel University, and in order to qualify for financial aid, I had to settle the Perkins loan default. I walked into Temple‘s billing department and paid $2009 dollars [sic] on the spot, receiving a letter on Temple University letterhead that the debt was settled. Temple went on to retroactively report two years worth of 120-day late payments to the credit reporting agencies. It is important to note that there was no reporting on this account to the credit bureaus for many years, and then suddenly after the debt was paid, Temple reported two years worth of late payments all at once. I previously disputed this online, and received a letter stating that the creditor has reviewed the account and wishes to make no further adjustment to my credit record.
To put it plainly, I want the Temple University account removed from my credit report. The account is closed, and well beyond the time limit imposed for the reporting of derogatory credit information. Therefore, it should not appear on my credit reports now. I have been a good consumer for years now, and the Temple reporting instantly negatively impacted my Trans Union score by approximately 80 points.
App. 258. Temple was notified of the August 1 dispute and received copies of the letters written by Seamans to TransUnion and Equifax. After a second investigation, Temple modified certain elements of its report on the Loan but still did not report the Loan‘s history in collections, a date of first delinquency, or the fact that Seamans was disputing the accuracy of the reported information.
Seamans points to evidence that Temple‘s non-reporting with respect to certain
Q Let‘s go to the document ACS-2 again. Within ACS-2 can you point me to any particular portion of it which relates to reporting an account as disputed by the consumer in the compliance condition code portion of the Metro 2 code?
A No, there is not.
Q And is the reason for that because up until ... November of 2011, ACS did not report accounts as disputed to credit reporting agencies whether affirmatively or after a dispute had been received?
A Correct.
App. 485-86. The same employee explained that ACS never included dates of first delinquency in its reports even after disputes were lodged. App. 482-83. A different customer service representative from ACS testified at deposition that she spent an average of 15 minutes on any given dispute and that ACS provided no written guidelines or formal training from managers for her. App. 350-53.
On October 28, 2011, Seamans filed a complaint against Temple in the United States District Court for the Eastern District of Pennsylvania, alleging that Temple negligently or willfully violated FCRA with respect to its reporting of the Loan. On May 21, 2012, Temple moved for summary judgment, arguing in essence that HEA exempted it from compliance with FCRA because the credit instrument at issue was a Perkins Loan. On October 25, 2012, the District Court granted the motion in full and entered judgment on the following day in favor of Temple. Seamans appeals from that judgment.
II.
A.
The District Court had jurisdiction pursuant to
Our review of a District Court‘s grant of summary judgment is plenary. Official Comm. of Unsecured Creditors of Allegheny Health, Educ. & Research Found. v. PricewaterhouseCoopers, LLP, 607 F.3d 346, 351 (3d Cir. 2010). A moving party is entitled to summary judgment only if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
B.
Seamans brings this action under
Resolution of this appeal requires us to consider several discrete issues. In Part III of this Opinion we address the extent of Temple‘s duties under FCRA as a furnisher of credit information, and whether HEA materially impacts those duties. In Part IV-A, we decide whether Seamans has raised a genuine issue of material fact as to the completeness and accuracy of Temple‘s post-dispute filings and the reasonableness of Temple‘s post-dispute investigative and corrective procedures. Next, in Part IV-B, we consider Temple‘s claim that FCRA does not permit private citizens such as Seamans to sue for damages caused by a furnisher‘s failure to mark an account as disputed. Finally, in Part IV-C, we address whether Seamans has stated a claim under
III.
A.
FCRA, enacted in 1970, created a regulatory framework governing consumer credit reporting. That framework “was crafted to protect consumers from the transmission of inaccurate information about them, and to establish credit reporting practices that utilize accurate, relevant, and current information in a confidential and responsible manner.” Cortez v. Trans Union, LLC, 617 F.3d 688, 706 (3d Cir. 2010) (quotation marks omitted). Under FCRA, CRAs collect consumer credit data from “furnishers,” such as banks and other lenders, and organize that material into individualized credit reports, which are used by commеrcial entities to assess a particular consumer‘s creditworthiness.
FCRA imposes a variety of obligations on both furnishers and CRAs. For instance, to protect consumers from having their credit forever impaired by aging debts, CRAs are precluded from reporting accounts which have been “placed for collection” or “charged to profit and loss” more than seven years prior to the report.
When a furnisher provides information to a CRA regarding an account placed for collection or charged to profit or loss, the furnisher then has 90 days in which to notify the CRA of the account‘s “date of delinquency,” which is defined as “the month and year of the commencement of the delinquency on the account that immediately preceded the action.”
Temple concedes that under these provisions, if a non-education loan had been
B.
HEA, enacted in 1965 and amended repeatedly thereafter, contains a provision that instructs CRAs to disregard FCRA‘s “aging-off” provisions when reporting data on certain federally backed education loans. See
Notwithstanding paragraphs (4) and (5) of subsection (a) of section 1681c of Title 15, a consumer reporting agency may make a report containing information received from ... an institution regarding the status of a borrower‘s account on a loan made under this part until the loan is paid in full.
These changes represent a simplification effort and provide consistency between the statute of limitations for collecting loans and the period for reporting negative credit information. The committee believes that reporting of defaulted loans to credit bureaus is an effective tool and should be available to institutions and the Secretary of Education for the entire period that loan collection is allowed.
S.Rep. No. 105–181, at 58 (1998).4
C.
We now consider whether the reporting obligations of Temple, a furnisher of consumer credit data under FCRA, are affected by
The text of HEA is unambiguous in a crucial respect—namely, it refers only to CRAs:
Notwithstanding paragraphs (4) and (5) of subsection (a) of section 1681c of Title 15, a consumer reporting agency may make a report containing information received from ... an institution [of higher education] regarding the status of a borrower‘s account on a loan made under this part until the loan is paid in full.
Temple‘s primary argument is that despite the absence of a specific reference to furnishers, HEA nonetheless functionally compels educational institutions to omit the date of first delinquency and collection history when reporting Perkins Loans to CRAs. This is based on Temple‘s worry that if it had continuously reported the Loan‘s full history, including the items at issue such as collection history and date of delinquency, the CRAs may have failed to notice that the Loan was an HEA-qualifying education loan and instead may have treated the Loan as a standard-order defaulted debt. Under that scenario, according to Temple, the CRAs may have mistakenly allowed the Loan to “age off” Seamans‘s credit report in 1999. Temple rationalizes that by simply omitting from its report all facts that could trigger the “aging off” provisions, Temple was helping the CRAs comply with
As an initial matter, we find it difficult to credit the implicit suggestion that Temple had no avenue, whether through the intricate coding system described above or in some other way, by which to signal affirmatively to the CRAs that a given loan is an HEA-qualifying education loan. In other words, surely Temple could have allayed its own concerns about the CRAs’ possible mischaracterization of the Loan by providing them with more information rather than less.
Nevertheless, whether this is the case or not, the question of whether a particular loan should or should not “age off” a credit report must be answered by the CRAs, and not by furnishers such as Temple. If CRA procedures had allowed the Loan‘s trade line to expire in 1999, in possible contravention of
Temple also notes its belief that any loan fully repaid according to its original schedule will remain on a person‘s credit report for 10 years after final payment.5 Thus a “good borrower” could take out an education loan and fully pay the loan on schedule in 4 years, but would then carry the trade line on her credit report for 10 years afterward. Temple claims that under Seamans‘s reading of FCRA and HEA, a “bad borrower” who took out a federal education loan and immediately defaulted could then pay the loan 8 years
Temple has provided no evidence, however, that the appearance of a non-adverse payment history, i.e., the one appearing on the “good borrower‘s” credit report, would impair the “good borrower‘s” credit score. There is nothing to show, in other words, that these disparate outcomes are inequitable to the “good borrower” at all. Indeed, FCRA itself reflects a policy choice to allow dated adverse credit data to “age off” a credit report because such information might otherwise indefinitely hamper the borrowing capabilities of now-reformed individuals. Non-adverse credit information, by contrast, can be reported indefinitely—at least in part because it demonstrates that a person has been a reliable borrower in the past and will presumably continue to be such in the future.
We thus disagree with the District Court‘s conclusion that
Under the reading of HEA advanced by Temple, a borrower such as Seamans, who initially defaults on an education loan and then later repays it, is penalized twice: once because the loan, if unpaid, will not be removed from his credit report, and twice, because even after payment, the loan‘s trade line will persist for another seven years. We find this consequence to be inconsistent with Congress‘s expressed intent that “reporting of defaulted [education] loans to credit bureaus is an effective tool and should be available to institutions ... for the entire period that loan collection is allowed.” S.Rep. Nо. 105-181, at 58 (1998). The first penalty, to be sure, is an “effective tool” indeed, providing great motivation for a borrower to repay even very old education loans. The second penalty, however, reaches beyond the “period that loan collection is allowed,” and serves little purpose. Once the debt is paid, the threat that the negative payment history will persist for another seven years as “adverse information” gives the borrower no further motivation—he has already done everything in his power to satisfy the debt.
In sum, both a straightforward reading of the statutory text and an assessment of the legislative intent compel the conclusion that HEA did not exempt Temple, as a furnisher, from its typical reporting obligations under FCRA. We conclude that furnishers of consumer credit data remain obligated to report fully аnd accurately under FCRA regarding the collection history and date of delinquency for even an HEA-qualifying education loan.
IV.
A.
We now address whether Seamans has raised a genuine issue of material fact regarding his claim that Temple negligently failed to conduct a reasonable post-dispute investigation and thereafter failed to correct inaccurate and incomplete reporting as to the Loan. Section 1681o6 authorizes consumers to bring suit for damages caused by a furnisher‘s negligent breach of its duties to consumers under
We have previously held that a furnisher‘s post-dispute investigation into a consumer‘s complaint must be “reasonable,” SimmsParris, 652 F.3d at 359, but did not expound upon what that standard requires. We have recognized, though, that CRAs also are required to follow “reasonable procedures” with respect to the accuracy of consumer data under FCRA, see
We also stated in Cortez that when assessing reasonableness, the factfinder must balance “the potential harm from inaccuracy against the burden of safeguarding against such inaccuracy.” Id. The Court of Appeals for the Fourth Circuit has explicitly defined a furnisher‘s duty in similar terms. See Johnson v. MBNA Am. Bank, NA, 357 F.3d 426, 432-33 (4th Cir. 2004) (holding that the reasonableness of a furnisher‘s investigation involves weighing “the cost of verifying the accuracy of the information versus the possible harm of reporting inaccurate information” (quotation marks omitted)); see also Van Veen v. Equifax Info., 844 F.Supp.2d 599, 605 (E.D. Pa. 2012) (applying Johnson). We join our sister Circuit in holding that the same balancing test we applied in Cortez with respect to the reasonableness of a CRA‘s procedures applies to investigations conducted by furnishers as well.
Other Courts of Appeals have evaluated the reasonableness of a furnisher‘s investigative procedure as it relаtes to the content of the notice of dispute sent by the CRA to the furnisher.9 For instance, where a given notice contains only scant or vague allegations of inaccuracy, a more limited investigation may be warranted. See Boggio v. USAA Fed. Sav. Bank, 696 F.3d 611, 616-17 (6th Cir. 2012); Chiang v. Verizon New England Inc., 595 F.3d 26, 38-41 (1st Cir. 2010); Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1157-61 (9th Cir. 2009); Westra v. Credit Control of Pinellas, 409 F.3d 825, 827 (7th Cir. 2005). Likewise, “[i]f a CRA fails to provide ‘all
The meaning of “completeness” and “accuracy” in the specific context of a furnisher‘s duties under FCRA is also a matter of first impression in this Court. It is not seriously debated, however, that factually incorrect information is “inaccurate” for purposes of FCRA. See, e.g., Boggio, 696 F.3d at 617. And we agree with the three Courts of Appeals to have considered the question that even if the information is technically correct, it may nonetheless be inaccurate if, through omission, it “create[s] a materially misleading impression.” Saunders v. Branch Banking & Trust Co. of Va., 526 F.3d 142, 148 (4th Cir. 2008); see also Boggio, 696 F.3d at 617; Gorman, 584 F.3d at 1163. Whether technically accurate information was “misleading in such a way and to such an extent that [it] can be expected to have an adverse effect” is generally a question to be submitted to the jury. Gorman, 584 F.3d at 1163 (quoting Saunders, 526 F.3d at 150).
Here, the District Court granted Temple‘s motion for summary judgment principally because Temple‘s reporting had not caused the undesired trade line to appear on Seamans‘s credit report. App. 22-23. In the alternative, the District Court found that Temple‘s employment of
We disagree with the District Court‘s conclusion that Seamans is unable to establish causation for the alleged harm to his credit and the associated negative consequences. Under our interpretation of FCRA and HEA, the trade line‘s appearance on Seamans‘s credit report is directly traceable to Temple‘s failure to report the Loan‘s collection history and date of delinquency. Whether the harms alleged by Seamans, i.e., a drop in credit rating and associated loss of credit opportunities, can be linked to the appearance of the trade line on his credit report remains a disputed question of fact.
Similarly, the record contains genuine issues of material fact regarding the extent to which the above-described omissions were attributable to unreasonable investigative and corrective procedures. The parties agree that Temple was fully notified of the nature of Seamans‘s dispute and in fact received, through proper channels, a copy of the August 1, 2011 letter in which Seamans provided a detailed basis for his complaint. Evidence also exists that Temple‘s loan servicer routinely allotted a minimal amount of time to the investigation of each claim, and that its investigative procedures and corrective protocols regarding accounts sent for collection and dates of first delinquency were justified by a plainly erroneous interpretation of Temple‘s legal obligations as a furnisher. Under the standards we announced in Cortez, we find on the record before us a genuine issue of material fact as to whether Temple‘s conduct was reasonable.
Finally, we conclude that the District Court erred with respect to its characterization of Temple‘s reporting as indisputably accurate and complete. As described above, the information Temple provided may have been incomplete and inaccurate insofar as it did not disclose the account‘s date of first delinquency or the fact that the account had been placed for collection in 1992.
In sum, we conclude that genuine issues of material fact exist as to whether Temple negligently failed to comply with its obligations under FCRA. Accordingly, we will vacate the District Court‘s order granting summary judgment in favor of Temple and remand for further proceedings.
B.
Along with Seаmans‘s claim that Temple was obligated to correct its reporting of his account‘s collections history and date of first delinquency, he contends that Temple violated FCRA by failing to flag his account as disputed in its later reporting to TransUnion and other CRAs. FCRA imposes an explicit duty on furnishers of credit information to report a dispute to all CRAs to whom it provides the information as part of a reasonable investigation.
The two Courts of Appeals to have considered this question have both answered it in the affirmative. In Saunders v. Branch Banking, discussed supra, the Fourth Circuit considered the interaction of
We agree with this assessment, and conclude that a private cause of action arises under
Accordingly, we will vacate the District Court‘s order granting summary judgment for Temple on Seamans‘s claims under
C.
Along with permitting actual damages, costs, and attorney‘s fees for negligent violations of duties imposed under
In determining whether an actor‘s conduct was reckless, a court should examine the text of the statute, case law that existed at the time of the alleged violation, and any agency interpretations. Safeco, 551 U.S. at 69-70. “[A] dearth of authoritative guidance” makes it less likely that a party‘s conduct was objectively unreasonable, but the absence of such authority does not “immunize” an actor from potential liability where the statute is “far too clear” to support the actor‘s interpretation. Cortez, 617 F.3d at 721-22. We have noted as to FCRA in particular that:
[T]he breadth and scope ... is both evident and extraordinary.... Moreover, it is undeniably a remedial statute that must be read in a liberal manner in order to effectuate the congressional intent underlying it.... [I]t is imperative that we do not allow a company that traffics in the rеputations of ordinary people a free pass to ignore the requirements of the FCRA each time it creatively incorporates a new piece of personal consumer information in its reports.
Id. at 721-23 (citations and quotation marks omitted).
A furnisher‘s objectively unreasonable actions with respect to a particular consumer‘s account can support a jury finding of willfulness. Blanket policies, too, can underpin such a finding. See, e.g., Boggio, 696 F.3d at 620 (remanding for a jury trial as to whether a furnisher‘s policy “prohibit[ing] its employees from performing anything more than a cursory confirmation of [the consumer‘s] status before reporting back to a CRA” constituted willful violation of the FCRA); Van Veen, 844 F.Supp.2d at 610 (denying defendant‘s motion for summary judgment as to willfulness where furnisher‘s policies “never result in marking an account as disputed” and where the furnisher‘s analysts were allotted only “5 to 10 minutes” for investigations).
Here, the District Court endorsed the reasonableness of Temple‘s conduct and concluded that a jury could not find Temple had acted willfully under Safeco.
We will therefore vacate the District Court‘s order with respect to its dismissal of Seamans‘s claim for punitive dаmages under
V.
For the foregoing reasons, we will vacate the District Court‘s order of October 25, 2012, and remand for further proceedings consistent with this Opinion.
Notes
Any person who is negligent in failing to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to the sum of— (1) any actual damages sustained by the consumer as a result of the failure; and (2) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney‘s fees as determined by the court.
After receiving notice рursuant to section 1681i(a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a [CRA], the person shall— (A) conduct an investigation with respect to the disputed information; (B) review all relevant information provided by the [CRA] pursuant to section 1681i(a)(2) of this title; (C) report the results of the investigation to the [CRA]; (D) if the investigation finds that the information is incomplete or inaccurate, report those results to all other [CRAs] to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis; and (E) if an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation under paragraph (1), for purposes of reporting to a consumer rеporting agency only, as appropriate, based on the results of the reinvestigation promptly— (i) modify that item of information; (ii) delete that item of information; or (iii) permanently block the reporting of that item of information.
It may seem peculiar that FCRA compels a furnisher, who can only be formally notified of a dispute by a CRA, to then re-designate the account as disputed in its submission back to the same CRA, which of course already knows about the dispute, having bеen the initial recipient of notice from the consumer. But this requirement serves two purposes: first, the furnisher, not the CRA, is in the best position to determine whether the dispute is bona fide, and thus the furnisher‘s validation of the dispute signifies that the dispute is genuine; and second, the furnisher must provide notice of the dispute to all CRAs to whom it originally submitted the information—not just to the CRA which initially notified the furnisher of the dispute.
Any person who willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to the sum of— (1)(A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000; or (2) such amount of punitive damages as the court may allow; and (3) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney‘s fees as determined by the court.