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Published Article

Credit Reporting Agency Sued for FCRA Violation Based on Alleged Inaccurate Reporting of Mortgage Delinquency During COVID-19 Forbearance

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On March 24, 2022, a complaint was filed against Equifax Information Services, LLC based on its alleged inaccurate reporting of a mortgage loan delinquency. The borrowers filed the two-count complaint in the U.S. District Court for the Southern District of California, alleging Equifax violated the Fair Credit Reporting Act (FCRA) and the California Consumer Credit Reporting Agencies Act (CCRAA). The borrowers contend Equifax failed to follow reasonable procedures to establish maximum possible accuracy in the preparation of the borrowers’ credit reports. As a result, they seek actual, statutory, and punitive damages, attorney fees and costs, and other relief.

In support of their claims, the borrowers state they obtained a mortgage loan on their primary residence and timely made the necessary payments each month, up until their loan went into forbearance due to the COVID-19 pandemic. The borrowers contend that during this forbearance period, Equifax prepared a credit report that “wrongfully indicated [the borrowers] were delinquent.” Following the completion of the forbearance, the borrowers sold their home, and the loan was paid in full. They maintain their mortgage servicer sent an Automated Universal Data form (AUD) to Equifax requesting the date of default and delinquency reporting be removed. However, the borrowers claim that in applying for another mortgage loan, they discovered that Equifax continued to report their account as delinquent during the forbearance period. As a result of the alleged inaccurate reporting, the borrowers contend their credit scores decreased significantly. They suffered emotional distress. They could not obtain financing and lost the opportunity to purchase a new house that now has considerably appreciated in value.

As forbearance periods mandated by the Cares Act conclude, there is an increased amount of litigation resulting from alleged inaccurate credit reporting. Although this matter is in its infancy, the issues surrounding alleged incorrect credit reporting will be worth watching over several months as case law begins to develop.

Reprinted with permission from the American Bar Association’s Business Law Today May Month-In-Brief: Business Regulation & Regulated Industries.

Insights

Published Article

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December 16, 2022

David W. Thompson, Gregg Stevens, Joseph Apatov, and Sanford P. Shatz co-authored an article on "Gross v. CitiMortgage: An Expansion of the Duty to Investigate Under the FCRA" in the Conference on Consumer Finance Law (CCFL) Consumer Finance Law Quarterly Report, Vol. 75, No. 4.

Published Article

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October 7, 2022

On August 24, 2022, the U.S. Court of Appeals for the Third Circuit held that the plain text of the Fair Credit Reporting Act (FCRA) operates as a waiver of sovereign immunity, widening the circuit split on this issue.

Published Article

Third Circuit Adopts “Reasonable Reader” Standard for Credit Report Accuracy

August 30, 2022

The Fair Credit Reporting Act (FCRA) 15 USC 1681 et. seq. requires furnishers of information to report the information accurately. Recently, several payment rating/account status cases have been filed and litigated where the Plaintiff’s bar contends the industry’s reporting of account information is misleading and violates the FCRA. However, on August 8, 2022, the U.S. Court of Appeals for the Third Circuit outlined how district courts within the Circuit must analyze credit reports when determining whether an individual tradeline is inaccurate or misleading under the FCRA. This analysis may prove to be the first nail in the coffin of the so-called “payment rating” cases which began in 2015.

Alert

Third Circuit Adopts “Reasonable Reader” Standard for Credit Report Accuracy

August 10, 2022

You are likely aware that the Fair Credit Reporting Act (FCRA) 15 USC 1681 et. seq. requires furnishers of information to report the information accurately. Recently, several payment rating/account status cases have been filed and litigated where the Plaintiff's bar contends the industry's reporting of account information is misleading and violates the FCRA. However, on August 8, 2022, the U.S. Court of Appeals for the Third Circuit outlined how district courts within the Circuit must analyze credit reports when determining whether an individual tradeline is inaccurate or misleading under the FCRA. This analysis may prove to be the first nail in the coffin of the so-called 'payment rating' cases which began in 2015.

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