Sixth Circuit Holds Fraud Policy Does Not Excuse a Furnisher’s Reasonable Investigation Obligations Under the FCRA
Most furnishers of consumer information have standard policies and procedures for investigating the information being reported to consumer reporting agencies when a consumer disputes its accuracy, especially for claims of fraud. However, the Sixth Circuit recently held that simply following standard company policy will not excuse furnishers from their obligations under the Fair Credit Reporting Act to conduct investigations into the accuracy of reported information, nor insulate them from punitive damage claims for recklessly disregarding the statute’s requirements. Even if a consumer refuses to provide a police report or a fraud affidavit, this does not excuse a furnisher from its obligation to conduct a reasonable investigation because section 1681s-2(b) does not permit furnishers to demand further documentation from consumers.
In Boggio v. USAA Federal Savings Bank, the Sixth Circuit Court of Appeals reversed a district court’s grant of summary judgment to USAA, holding that whether its investigation under section 1681s-2(b) of the FCRA was reasonable is a jury issue. Since this standard is not a one- size-fits-all determination, and Boggio claims he is not a co-obligor on the loan, the Court held a jury should determine whether USAA’s investigation was reasonable in light of the documents available to it during its investigation. And if an investigation is not “reasonable” when applied to a particular consumer’s circumstances, the furnisher may be liable for actual and punitive damages, as well as attorney’s fees and costs.
Boggio contacted USAA and the major consumer reporting agencies to dispute his status as a co-obligor on a delinquent car loan. He provided USAA with documents showing that his ex-wife forged his name on a check, purchased the car while they were separated, and later signed a separation agreement confirming she was solely responsible for the loan payments.
Over a four-month period, USAA also received dispute notices from the three major credit reporting agencies to verify the accuracy of its reporting that Boggio was responsible for the disputed loan. In response, USAA reported to the CRAs that Boggio was a co-signer on the loan and the information was accurate, despite possessing documents suggesting Boggio did not own the car, including letters from USAA suggesting the ex-wife is the only person responsible for the loan, and letters from Boggio’s attorney denying he is a co-obligor. After completing its investigations and responding to the CRAs, USAA also informed the consumer that it would only further investigate the dispute if he provided a police report or fraud affidavit as required by USAA’s fraud policy.
After Boggio refused to provide a police report or fraud affidavit, he filed suit claiming that USAA’s failure to conduct a reasonable investigation into the disputed car loan caused him to suffer a lower credit score and denial of credit. The lower court entered summary judgment in favor of USAA, finding it had conducted a reasonable investigation and emphasizing that Boggio had failed to comply with USAA’s fraud investigation policy.
The Sixth Circuit reversed and reiterated that a furnisher of consumer information has five separate obligations under § 1681s-2(b) of the FCRA when a furnisher learns that the consumer is disputing its accuracy:
- Conduct a “reasonable” investigation into the disputed information;
- Review the information provided to it by the consumer reporting agency;
- Report the results of the investigation to the consumer reporting agency;
- Report the results to all other national consumer reporting agencies to which it furnished the consumer’s information if the investigation reveals the information was incomplete or inaccurate; and
- Modify, delete, or permanently block the reporting of the inaccurate or incomplete information.
The Court then held that a jury could find both that USAA’s investigation was unreasonable and that Boggio was not responsible for the car loan. In reaching this decision, the Court found that the CRA dispute notice received by USAA, which stated that Boggio’s ex-wife purchased the car while they were separated, provided notice of the specific nature of the underlying dispute and required a review of the underlying documents in order to conduct a reasonable investigation. The Court was persuaded by the evidence that USAA had documents suggesting the ex-wife’s sole ownership of the car and an employee’s deposition testimony that USAA’s procedures prohibited consulting documents from a consumer’s file – including the allegedly forged check – before responding to a dispute notice from a CRA. Instead, the employee testified that the company’s procedures only require a cursory verification of his identify and confirmation of the loan’s status before responding to a CRA dispute notice.
Of particular note, the Court of Appeals ruled that “the mere existence of a company policy does not resolve the inquiry into the reasonableness of its investigation.” The Court noted that section 1681s-2(b) does not allow “furnishers to require independent confirmation of materials contained in a CRA notice of dispute before conducting the required investigation.” And, in this case, Boggio was not notified of USAA’s standard procedure to require consumers to provide a fraud affidavit or a police report before it will conduct further inquiry into a disputed claim until after USAA had responded to the CRAs that the information was accurate as reported. Therefore, the Court came to the conclusion that the consumer’s refusal to comply with this company policy could have not had any effect on the already completed investigation.
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