A three-judge panel of the Ninth Circuit recently affirmed a district court’s summary judgment finding that a national consumer reporting agency (CRA) did not violate the Fair Credit Reporting Act (FCRA). The court explained that the CRA could not be held responsible for the adverse consequences that consumers may face when a subscriber interprets consumer reports differently from the instructions provided by the CRA. Because the panel also found that the consumer information in the credit reports at issue was accurate and not misleading, the Ninth Circuit affirmed the district court’s decision to grant summary judgment in favor of the CRA.
The consumers who brought this putative class action against the CRA alleged violations of the FCRA when they were denied mortgages because the consumers’ mortgage loan files erroneously showed prior foreclosures. Instead, the consumers had actually executed short sales on their previous property. This error occurred because Fannie Mae, through its proprietary software, Desktop Underwriter, elected to treat the credit data of prospective borrowers regarding foreclosures and short sales in a similar manner, even though the CRA’s data indicated otherwise. This distinction was important because consumers with prior foreclosures must wait seven years before obtaining a new mortgage through Fannie Mae, while consumers with prior short sales only need to wait two years. Thus, some consumers endured adverse consequences as a result of such treatment. This error was later addressed and corrected by both the CRA and Fannie Mae.
In this case, the consumers argued that even after notifying the CRA of this issue, the CRA did not act on this knowledge to rectify the reporting error. However, the Ninth Circuit affirmed that the inaccurate reporting of the consumers’ short sales was due to Fannie Mae’s mistreatment of the CRA’s data, and not from the CRA’s own inaccuracies. The panel also held that the FCRA does not require the CRA to amend its reporting systems when a subscriber disregards the instructions for interpreting credit data in order to avoid liability, especially when other subscribers are accurately reading the reported data. Further, the FCRA does not impose an obligation on the CRA to report when a subscriber mishandles the credit data they report. Thus, the Ninth Circuit affirmed the district court’s summary judgment in favor of the CRA.
The case is Shaw v. Experian Information Solutions, Inc. and is available here.