As a furnisher of information, the bank’s FCRA duty of investigation is triggered only after it receives a notice of a dispute from a consumer reporting agency.
A pair of consumers failed to sufficiently allege that a bank violated the Fair Credit Reporting Act by "negligently and willfully" having failed to perform a reasonable reinvestigation and to correct inaccurate information that the bank provided to consumer credit reporting agencies for the formulation of their credit report, the U.S. Court of Appeals for the Second Circuit has decided. In affirming the federal trial court’s dismissal of the consumers’ amended complaint (with prejudice), the federal appellate panel determined that the consumers not only failed to allege that they informed a consumer reporting agency about the discrepancies in their credit report, but also failed to allege that a consumer reporting agency notified the bank about the consumers’ challenge—as required by the FCRA (§ 1681s–2). Even though the consumers maintained that they notified the bank directly about their disputing the information contained in the credit report, that, "standing alone, was insufficient to state a claim under 15 U.S.C. § 1681s–2(b)," the court ruled (Sprague v. Salisbury Bank and Trust Co., Aug. 10, 2020, per curiam).
The pair of consumers borrowed nearly $110,000 from Salisbury Bank and Trust Company to finance their purchase of a house in Connecticut. Shortly afterward, the consumers decided to refinance their mortgage, and they borrowed an additional $250,000 from the bank. Several years later, in August 2011, Salisbury Bank initiated foreclosure proceedings against the property, which resulted in a judgment of strict foreclosure in favor of the bank. In April 2014, a Connecticut state court approved the parties’ stipulation of a $40,000 deficiency judgment.
In February 2016, one of the consumers ordered a credit report (Report). According to the consumers, the Report inaccurately indicated that the mortgage on the foreclosed house was "still open and payments had not been made in more than two years." The consumers notified Salisbury Bank of the error, and, in March 2016, the bank acknowledged that the loan had been erroneously reported as "open" but that a correction had been made to indicate that the loan was "closed." While the consumers maintained that the bank also indicated that the information would be "supplied to the credit reporting agencies," the consumers later learned that the bank did not actually correct the erroneous information until November 2016.
Complaint; procedural context. In their amended complaint, the consumers alleged that Salisbury Bank violated the FCRA by "negligently and willfully": (i) failing to perform a reasonable reinvestigation and correction of inaccurate information contained in their Report; and (ii) engaging in behavior prohibited by the FCRA by failing to correct errors in the information that it furnished to credit reporting agencies.
In November 2018, Salisbury Bank moved to dismiss the consumers amended complaint, contending, among other things, that the bank’s duty of investigation under the FCRA is only triggered after "a furnisher of information receives notice of a dispute from a consumer reporting agency" and that the consumers failed to allege that the bank ever received notice of a dispute from a consumer reporting agency.
Ultimately, the federal trial court agreed and dismissed the consumers’ amended complaint, concluding that the consumers failed to adequately state claims arising under section 1681s–2(b) of the FCRA. In addition, the lower court concluded that no available claim was available under section 1681s–2(a) of the FCRA "because there is no private right of action under that subsection of the FCRA" concerning a furnisher of information. Further, the court determined that leave to amend the complaint was "not warranted" because the consumers "failed to cure deficiencies by amendments previously allowed" and because "further leave to amend would be futile." The consumers appealed the lower court’s decision to the Second Circuit.
Appellate review. On appeal, in a per curiam opinion, a three-judge panel of the Second Circuit affirmed the federal trial court’s rulings.
In examining FCRA § 1681s–2(b)(1), the appellate panel emphasized that "the statute is clear" that the notice triggering duties of a furnisher of information—such as Salisbury Bank—"must come from a CRA [consumer reporting agency], not the consumer." In the panel’s view, "section 1681s–2(b) is not implicated simply because a consumer contacts a furnisher such as Salisbury regarding inaccuracies in her credit report."
Further, the consumers did not allege in their amended complaint that a consumer reporting agency "notified Salisbury of their dispute concerning the information in the Report," let alone allege that the consumers themselves notified a consumer reporting agency of the contested discrepancies in the Report, the panel emphasized. Rather, the consumers’ amended complaint alleged only that, after receiving the Report, one of the consumers "directly notified Salisbury of the Report’s inaccuracy." However, "[t]his alone is insufficient to state a claim under Section 1681s–2(b)," the panel explained.
From the panel’s perspective, by alleging that Salisbury Bank violated the FCRA by continuing to furnish inaccurate information after receiving notice of an error directly from one the consumers, the consumers "effectively seek to employ the private right of action permitted under Section 1681s–2(b) as a means of enforcing Salisbury’s general obligation under Section 1681s–2(a) not to knowingly furnish inaccurate information." However, "Section 1681s–2(b) imposes on Salisbury a more specific duty, triggered only by a proper chain of notice," the panel noted.
The case is No. 19-3241.
Attorneys: Clifford Their (Thier Law Offices, LLC) for Robert Sprague. Thomas C. Blatchley and Joseph J. Blyskal (Gordon Rees Scully Mansukhani, LLP) for Salisbury Bank and Trust Co.
Companies: Salisbury Bank and Trust Co.
MainStory: TopStory ConnecticutNews FairCreditReporting NewYorkNews VermontNews
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