9th Circuit Revives Suit Against Credit Bureau Reporting Loan with Defunct Servicer

A panel of the U.S. Court of Appeals for the Ninth Circuit recently reversed the district court’s grant of summary judgment for a credit reporting agency that continued to report loans that had been serviced by a now-defunct payday loan servicer on consumers’ credit reports, holding that a reasonable jury could find that the agency’s reporting of a particular loan was “misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.”  

In the underlying case, a consumer alleged that a credit reporting agency violated the Fair Credit Reporting Act (FCRA) because it “failed to follow reasonable procedures to assure maximum possible accuracy in her credit report.”  The district court granted summary judgment for the credit reporting agency.  The court of appeals reversed, holding that the consumer raised a genuine issue of material fact as to whether the credit reporting agency’s reporting of the plaintiff’s loan as delinquent (while also deleting portions of her positive payment history) “was misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.” 

The loan servicer, when it went out of business, contacted the credit reporting agency and informed it that it would discontinue use of any and all services the credit reporting agency provided.  The credit reporting agency informed the loan servicer that it would delete the associated loans and that the loans would no longer appear on its credit reports.  (The agency had separately decided not to report payday loans from the lender that had made the plaintiff’s loan.)  The credit reporting agency, however, only removed some of the loans from its credit reports, and continued to report the plaintiff’s loan despite having deleted portions of her positive reporting history.

Finding that the credit reporting agency reported the consumer’s account when it was no longer verifiable and when the consumer could not make it current (because the servicer was no longer in business), the court of appeals held that a reasonable jury could conclude that the reporting was materially misleading, and that the agency’s actions were willful due to recklessness.  Accordingly, the Ninth Circuit reversed the district court’s grant of summary judgement, vacated the lower court’s orders denying the consumers motions for partial summary judgement and class certification, and remanded the suit.  The court of appeals’ decision is unpublished and is therefore not precedential in other cases.