Banking and Finance Law Daily Wrap Up, FAIR CREDIT REPORTING—Appeals court affirms FCRA summary judgment in favor of Experian and FedLoan, (Jun 24, 2024)

By Donielle Tigay Stutland, J.D.

A borrower failed to provide sufficient evidence to prove willful or negligent violations of the FCRA by a loan servicer and a credit reporting agency.

The court of Appeals for the Eighth Circuit has affirmed a ruling by a lower court which granted summary judgment in favor of Experian Information Solutions, Inc. (Experian) and FedLoan Servicing LLC (FedLoan). The panel of judges agreed with the lower court’s determination that a borrower, who brought suit under the Fair Credit Reporting Act (FCRA) had failed to provide sufficient evidence to prove willful or negligent violations of the FCRA. The panel found that the borrower had failed to offer sufficient evidence to show that Experian failed to follow reasonable procedures under the FCRA and the borrower’s evidence failed to show that that Experian should have recognized FedLoan as an unreliable source. With respect to FedLoan, the panel found that the borrower did not offer sufficient evidence to prove that FedLoan’s actions were willful or that FedLoan’s investigation procedures were unreasonable. The panel also concluded that the borrower failed to show actual damages that were linked to FedLoan’s actions. Judge Smith concurred in part and dissented in part, noting that there was evidence for a jury to find negligence by FedLoan (Lloyd v. FedLoan Servicing LLC, No. 22-2840 (8th Cir. June 21, 2024)).

Background. The plaintiff had borrowed student loans that were serviced by FedLoan. As a servicer, FedLoan furnished information to Experian regarding the borrower’s student loan payment history. In turn, Experian, a consumer reporting agency (CRA), regularly issued consumer reports pursuant to the FCRA.

In August 2019, FedLoan submitted information to Experian that the borrower’s loans were overdue. She submitted an online dispute with Experian contesting all of the reported delinquencies, and provided what she thought was evidence to dispute the delinquencies. Experian sent Automated Consumer Dispute Verifications (ACDVs) to FedLoan, which initially upheld the overdue status of the plaintiff’s payments. After multiple disputes, FedLoan and Experian ultimately corrected the inaccuracies, and by February 2020, Experian removed all delinquent marks from the borrower’s credit report. The borrower alleged that due to the inaccuracies, credit applications of hers had been denied.

The borrower filed a suit under the FCRA, 15 U.S.C. §§ 1681 et seq., against FedLoan, Equifax Information Services, LLC (Equifax), Trans Union, LLC (Trans Union), and Experian. Equifax and Trans Union settled with the borrower and were dismissed from the case; after their dismissal, the district court granted a motion for summary judgment in favor of Experian, and, later, one in favor of FedLoan. The borrower appealed.

Experian. On appeal, the panel began its analysis by looking at the claims against Experian. The borrower sought a review of the district court’s dismissal of the unreasonable reinvestigation claim under § 1681i(a).

The FCRA requires a CRA, like Experian, to “conduct a reasonable reinvestigation” when it receives a dispute from a consumer. 15 U.S.C. § 1681i(a)(1)(A). The court agreed with the lower court that Experian had followed the FCRA’s required procedures for reinvestigation. The court highlighted that upon receiving Lloyd’s dispute, Experian sent an ACDV to FedLoan, requesting further information on Lloyd’s accounts. Lloyd concedes that an ACDV “typically includes a description of the dispute, information about the disputed account, and any documents and comments provided by the consumer.” Lloyd provided no evidence that Experian failed to follow the typical ACDV process during its reinvestigation.

The court also noted that the borrower did not point to any step in Experian’s reinvestigation procedure which was insufficient, nor did she request a description of Experian’s reinvestigation procedure, which a consumer may do under § 1681i(a)(7). The panel concluded that the borrower failed to show that Experian did not satisfy its statutory requirements when conducting a reinvestigation under the FCRA.

The borrower also argued that her evidence, which consisted of screenshots and a forbearance letter, prove that FedLoan is an unreliable CRA and Experian had no right to rely on FedLoan’s representations. The court found that the borrower’s evidence was insufficient proof to show that Experian should have recognized FedLoan as an unreliable source. Moreover, the panel found that “nothing in the record reflects that Experian should have suspected that FedLoan was an unreliable source.”

FedLoan. Next, the court turned to the borrower’s claims against FedLoan. First, the borrower argued that the district court erred when it found the evidence was insufficient to show a willful violation of the FCRA by FedLoan. To prove willfulness, the court detailed that the borrower “is required to provide some evidence showing that FedLoan knowingly, intentionally, or recklessly committed an act in conscious disregard of her rights.” The court concluded that the borrower’s evidence was insufficient to show that FedLoan’s actions were willful. For example, the borrower relied on statements documented in a transcript she created from a phone conversation with an unknown FedLoan customer service representative on an unknown date. The court highlighted that, “Lloyd’s transcription is not competent evidence because Lloyd cannot lay an appropriate foundation for it, as she cannot identify who was speaking on behalf of FedLoan, the authority the speaker had to make representations on behalf of FedLoan, or even when the conversation occurred.

Additionally, the court concluded that the borrower failed to show that FedLoan’s investigation procedures were unreasonable, as she did not identify which of its statutory duties FedLoan failed to satisfy. Under the evidence admitted for each dispute, FedLoan followed the steps set forth in § 1681s-2(b)(1)(A)- (E), which ultimately resulted in removing inaccurate information from the borrower’s credit report each time.

Finally, the court turned to the issue of damages. The court indicated that “even if Lloyd had presented sufficient evidence demonstrating FedLoan acted willfully or unreasonably, Lloyd bears the burden of showing actual damages resulted from FedLoan’s alleged reporting error.” The borrower alleged that she suffered actual damages in the form of credit card denials and a mortgage denial. However, the court concluded that the denial letters were too vague to show that the denials were caused by FedLoan’s actions, as the borrower had “other history of loan delinquencies.” The court affirmed the lower court’s decision.

Dissent. Chief Judge Smith concurred in part and dissented in part: “I agree with the disposition of the willfulness and evidentiary issues. However, I would reverse the district court’s grant of summary judgment with respect to the negligence claims. In my opinion, a reasonable jury could find negligence and award damages.” Smith’s dissent noted that the inaccuracies in the borrower’s credit report and the resulting credit denials could lead to a negligence finding by a jury.

The case is No. 22-2840.

Judge: Per Curiam.

Attorneys: Chiya C. Lloyd, pro se. Joshua C. Dickinson (Spencer Fane LLP) for FedLoan Servicing.

Companies: Experian Information Solutions, Inc.; FedLoan Servicing; Equifax Information Services LLC; Trans Union, LLC

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