Consumer Finance Insights
September 5, 2017

Eleventh Circuit Affirms Dismissal in FCRA Class Action

Last week, the Eleventh Circuit affirmed the Northern District of Georgia’s dismissal of a putative Fair Credit Reporting Act (FCRA) case against Equifax and Transunion.  In Pedro v. Equifax, Inc., plaintiff sought to represent a putative class of authorized users of delinquent credit cards who did not have payment obligations on those credit cards but whose credit reports included information about the delinquency.  The court held that dismissal was appropriate because defendants’ interpretation of the FCRA was objectively reasonable.  Pedro provides important guidance for defendants facing FCRA cases as well as those examining their FCRA compliance procedures.

In Pedro, the plaintiff alleged that credit bureaus Equifax and Transunion included inaccurate information on her credit report, causing her credit score to drop by 100 points.  The plaintiff was an authorized user on her parents’ credit card, which the plaintiff used to make purchases on their behalf.  Since it was her parents’ card, however, the plaintiff did not have any obligation to make payments on it.  When the plaintiff’s parents died, the card became delinquent, and the defendants reported that delinquency on the plaintiff’s credit report with a notation that she was an authorized user.  The plaintiff sued under the FCRA, Section 1681e(b), which prohibits the willful publication of a consumer report without following “reasonable procedures to assure maximum possible accuracy of the information.”  The district court dismissed the case, and the plaintiff appealed.

In reviewing the case, the Eleventh Circuit first determined that the plaintiff had Article III standing to sue because she alleged that her credit score dropped as a result of the defendants’ inclusion of allegedly inaccurate information on her credit report.  Turning to the substantive FCRA issue, the court held that it was objectively reasonable for the defendants to interpret the “maximum possible accuracy” requirement of Section 1681e(b) to permit them to include technically accurate information—that the plaintiff was an authorized user of the account even though she had no payment obligations—on the plaintiff’s credit report.  Because that interpretation was reasonable, the Eleventh Circuit held dismissal was appropriate because the defendant could not willfully have violated the statute.

The Eleventh Circuit also addressed the procedural question of whether willfulness determinations may be made at the motion-to-dismiss stage.  Citing several cases in the FCRA context, the Eleventh Circuit rejected the plaintiff’s argument that such determinations cannot be made on the pleadings and held that, where a consumer reporting agency’s interpretation is not objectively unreasonable, dismissal is appropriate.  Thus, for defendants facing similar claims, Pedro provides significant assistance in evaluating whether to seek dismissal.

Although the Eleventh Circuit concluded that reading Section 1681e(b) to require only technical accuracy was objectively reasonable, it noted that a “better reading” is that credit reports be both accurate and not misleading.  Because courts look to existing caselaw in evaluating whether a defendant’s interpretation was reasonable, entities providing credit reporting services should consider the Eleventh Circuit’s commentary in Pedro along with other reported decisions as they examine their own reporting practices.