John Stevenson v. Trw Inc.John Stevenson v. Trw Inc.
TRW Inc. is a credit-reporting firm that appeals a judgment against it for violations of the Fair Credit Reporting Act (
I. FACTS AND PRIOR PROCEEDINGS
TRW Inc. is one of the natiоn’s largest credit reporting agencies. Subscribing companies report to TRW both the credit information they obtain when they grant credit to a consumer and the payment history of the consumer. TRW then compiles a credit report on the consumer to distribute to other subscribers from whom the consumer has requested credit.
John M. Stevenson is a 78-year-old real estate and securities investor. In late 1988 or early 1989, Stevenson began receiving numerous phone calls from bill collectors
The reverse side of the credit report contained a printed notice describing how consumers could send a written dispute of the accuracy of their credit reports to the local TRW office. Stevenson, however, called TRW to register his complaint and then wrote TRW’s president and CEO on October 6, 1989, requesting that his credit report be corrected. Stevenson’s letter worked its way to TRW’s consumer relations department by October 20, 1989, and on November 1, 1989, that office began its reinvestigation by sending Consumer Dispute Verifiсation forms (CDVs) to the subscribers that had reported the disputed accounts. The CDVs ask subscribers to check whether the information they have about a consumer matches the information in TRW’s credit report. Subscribers who receive CDVs typically have twenty to twenty-five working days to respond. If a subscriber fails to respond or indicates that TRW’s account information is incorrect, TRW deletes the disputed information. Stevenson understood from TRW that the entire process should take from three to six weeks.
As a result of its initial investigation, TRW removed sevеral of the disputed accounts from the report by November 30, 1989. TRW retained one of the remaining accounts on the report because the subscriber insisted that the account was Stevenson’s. The others were still either pending or contained what TRW called “positive information.” It also began to appear that Stevenson’s estranged son had fraudulently obtained some of the disputed accounts by using Stevenson’s social security number. This information led TRW to add a warning statement in December 1989, advising subscribers that Stevenson’s identifying information had been used without his consent to obtain credit. Meanwhile, Stevenson paid TRW a fee and joined its Credentials Service; which allowed him to monitor his credit report as each entry was made. TRW finally completed its investigation on February 9, 1990. By then, TRW claimed that all disputed accounts containing “negative” credit information had been removed. Inaccurate information, however, either continued to appear on Stevenson’s reports or was reentered after TRW had deleted it.
Stevenson filed suit in Texas state court аlleging both common-law libel and violations of the Fair Credit Reporting Act (FCRA). TRW removed the case to federal court. On October 2, 1991, the case was tried before the court without a jury. The district court gave judgment for Stevenson on the libel and FCRA claims. It made the following findings:
1. The evidence did not show a failure by TRW to maintain “reasonable procedures to assure maximum possible accuracy” of Stevenson’s credit report. See15 U.S.C. § 1681e(b) .
2. TRW had negligently and willfully violated15 U.S.C. § 1681i(a) by not promptly deleting information found upon investigation to be inaccurate or unverifiable.
3. TRW had negligently and willfully violated15 U.S.C. § 1681i(d) by failing to provide sufficiently conspicuous notice of Stevenson’s right to have his corrected credit report sent to creditors who had made inquiries.
4. TRW had libeled Stevenson by publishing false reports “with reckless disregard of whether [they were] false or not after Mr. Stevenson made known to [TRW] that the reports had inaccuracies in them.”
The district court awarded Stevenson $1 nominal damages on the libel claim. Although the court found that Stevenson had
II. DISCUSSION
Congress enacted FCRA “to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information_”
Although the district court found that the evidence failed to show a violation of
Our standard of review is deferential to the district court. We uphold findings of fact unless we are left with the firm and definite conviction that they were “clearly erroneous,” and we give due regard to the opportunity of the district court to judge the witnesses’ credibility.
A.
Prompt Deletion under
Consumers have the right to see their credit information and to dispute the accuracy or complеteness of their credit reports.
1. Negligence
Allowing inaccurate information back onto a credit report after deleting it because it is inaccurate is negligent.
Morris v. Credit Bureau of Cincinnati, Inc.,
TRW argues in its defense that the reinvestigation was complicated by the accounts fraudulently obtained in Stevenson’s name and based upon accurate information. TRW urged at trial, however, that where fraud has occurred, the consumer must resolve the problem with the creditor. TRW’s only obligation, it urges, is to publish a “victim of fraud” statement at the end of a credit report if fraud has been established by the parties. This response by TRW to Stevenson’s complaint falls short of
2. Willfulness
Initially, the district court found that TRW had not willfully violated
Only defendants whо engaged in “willful misrepresentations or conceal-ments” have committed a willful violation and are subject to punitive damages under
TRW moved slowly in completing its investigation and was negligent in its compliance with thе prompt deletion requirement. The record does not reveal, however, any intention to thwart consciously Stevenson’s right to have inaccurate information removed promptly from his report. The district court’s finding of willful noncompliance, we must conclude, was clearly erroneous.
B. Clear and Conspicuous Notice
The Fair Credit Reporting Act requires in
The district court found that TRW had given Stevenson notice of his rights, but that it was not conspicuous enough to satisfy the statute. TRW argues that the court’s finding was clearly erroneous because there is no legal authority, either in the statute or from the Federal Trade Commission, to specify how conspicuous the required notice must be. There has been little litigation on this issue, and the Fifth Circuit has not spoken to it.
1. Negligence
On the first credit report that Stevenson received, the statement “See Reverse Side for Explanation & Instructions” is printed in red, boldface type and appears in the bottom right corner of each pаge. The required notice then appears in the instructions printed on the back of every page. The fourth paragraph of the instructions contains the notice and is printed in the same color and same type size as the other terms in that paragraph. Both paragraphs above and below are printed in larger, boldface type. The fourth paragraph reads: “It will take approximately 3 to 4 weeks to check the item you dispute. You will be sent the results of our checking. Upon your request, we will also send the rеsults of our checking to any credit grant- or listed as an inquiry on the report.”
On the back of each page of the revised report that Stevenson received in February 1990, the first paragraph was printed in large, boldface type and stated: “In response to your request, the items which you disputed have been checked. This disclosure reflects the results of our checking. If you had requested, a copy of this disclosure was sent to the credit grantor(s) you designated.” This latter statement, however, suggests that the time had passed for exercising the right provided by § 16811(d). We therefore focus our review on the notice printed in the initial credit report.
Stevenson admitted that he read the back page of his first credit report. Because the notice appeared in the dispute resolution instructions on the back of Stevenson’s first credit report, TRW maintains that he had actual notice. The district court agreed that Stevenson had been given notice;
The Fourth Circuit recently considered this question in an unpublished opinion.
Guimond v. Credit Bureau, Inc.,
Although the notice in Guimond is similar to TRW’s notice, the posture of the cases differs. First, Stevenson’s case actually proceeded to trial. Second, unlike Gui-mond, Stevenson testified that no one at TRW informed him of his right to have corrected reports sent to his creditors. Third, TRW’s notice does not appear in the agency’s consumer information pamphlet, but appears in a single sentence within a paragraph on the back of the initial credit report. The notice is neither underlined nor boldface, although the paragraphs above and below are boldface. Additionally, the notice’s type size is smaller than that of other information on the back of the report. Finally, the district court read the back of the credit report and had to ask counsel where the notice was.
While there has been little litigation over the meaning of the phrase “clear and conspicuous” in FCRA, the phrase is common in other federal and state commercial regulatory statutes, and there has been substantial litigation interpreting those words. For example, the Truth in Lending Act,
In
Smith v. Chapman,
A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals ... is conspicuous. Language in the body of a form is “conspicuous” if it is in larger or other contrasting type or color.... Whether a term or clause is“conspicuous” or not is for decision by the court.
U.C.C. § 1-201(10) (1992). The comment to § 1-201(10) states that “the test is whether attention can reasonably be expected to be called to it.” The court concluded that there was nothing about Chapman’s insurance provision that would call anyone’s attention to it.
The term “conspicuous” has been construed most frequently with the Uniform Commercial Code § 2-316(2), which requires that any exclusion or modification of the imрlied warranty of merchantability be conspicuous, and that any exclusion or modification of the implied warranty of fitness for a particular purpose be made in a conspicuous writing. A contract’s warranty disclaimer satisfies the conspicuous requirement when it is printed in all capital letters, when it appears in a larger type than the terms around it, or when it is in a larger and boldface type.
See, e.g., H.B. Fuller Co. v. Kinetic Systems, Inc.,
TRW’s notice of the consumer’s right to have corrected reports sent to creditors was printed in the same size type as the other terms in the same paragraph. The paragraphs around the notice appеared in larger, boldface type. Even if Stevenson read the back of his first credit report, there was nothing to draw his attention particularly to the statutory notice. We conclude that the district court did not err in finding that TRW negligently violated the notice requirement of
2. Willfulness
There is no evidence, however, to support the district court’s finding of willful noncompliance. TRW sent Stevenson the same boilerplate form it sends everyone. The notice appears in a paragraph on dispute resolution procedures and is not hidden. Therе was no prior guidance to suggest that TRW’s notice was insufficient, and we cannot conclude that TRW knowingly and intentionally obscured the notice in conscious disregard of consumers’ rights. We reverse the finding of willful noncompliance and the award of punitive damages.
C. Mental Anguish
TRW maintains that most of Stevenson’s distress was the result of the many calls he received from creditors of the fraudulently obtained accounts. TRW correctly questions the relevance of these creditors’ calls to violations of FCRA. Nearly all of these calls occurred before Stevenson filed his written dispute and TRW began its reinvestigation. Only after that did the FCRA violations occur. Stevenson’s distress because of creditors’ calls arose before TRW’s FCRA violations.
The record reveals evidence, however, that Stevenson suffered mental anguish over his lengthy dealings with TRW after he disputed his credit report. First, Stevenson testified that it was a “terrific shock” to him to discover his bad credit rating after maintaining a good credit reputation since 1932. Second, Stevenson was denied credit three times during TRW’s reinvestigation: by Bloomingdale’s, by Bank One, and by Gabbert’s Furniture Company. Stevenson testified that he had to go “hat in hand” to the president of Bank One, who was a business associate and friend, to explain his problems with TRW. As a result, he obtained credit at Bank One. Third, Stevenson had to explain his credit woes to the president of the First City Bank in Colleyville when he opened an account there. With a new president at First City Bank, Stevenson had to explain his situation again. Despite the fact that he was ultimately able to obtain credit, Stevenson testified to experiencing “considerable embarrassment” from having to detail to business associates and creditors his problems with TRW. Finally, Stevеnson spent a considerable amount of time since he first disputed his credit report trying to resolve his problems with TRW.
We have upheld awards of actual damages on the basis of similar evidence of mental distress. In
Pinner,
Other courts have made or upheld similar awards. In
Collins v. Retail Credit Co.,
The district court was presented with evidence of mental distress arising from the large numbers of inaccuracies in Stevenson’s credit report and from TRW’s lengthy reinvestigation. Of particular significance is the tardy deletion of incorrect entries and the reappearance in the credit report of an earlier-deleted, improper еntry. We find no clear error in the district court’s award of mental anguish damages in the amount of $30,000.
D. Attorney’s Fees
III. CONCLUSION
TRW negligently violated
AFFIRMED IN PART, REVERSED IN PART AND RENDERED.