CFPB Files Another Amicus on Legal v. Factual Disputes

Topics and Issues

On December 8, 2023, the CFPB filed an amicus in the U.S. Court of Appeals for the 4th Circuit in another case involving legal versus factual disputes. That case is Roberts v. Carter-Young, Inc., No. 23-1911.

CDIA filed an amicus in the case in February 2024, as did ACA.

The case is on appeal from the U.S. District Court for the Middle District of North Carolina. There U.S. Magistrate L. Patrick Auld issued a Memorandum Opinion and Order recommending the granting of the Defendant’s Motion to Dismiss (July 2023). The U.S. District Court, Judge William Osteen, adopted the recommendation and granted the motion (August 2023).

In filing its amicus, the CFPB wrote that

To ensure fair and accurate credit reporting, the Fair Credit Reporting Act requires consumer reporting agencies (CRAs) and entities that furnish information to CRAs (furnishers)—often, but not always, creditors—to follow various requirements when they compile and disseminate personal information about individuals. One of those requirements is that furnishers must reasonably investigate consumers’ disputes regarding the completeness or accuracy of the information furnished.

The Bureau filed an amicus brief arguing that the duty to investigate applies not only to factual disputes, but also disputes that can be labeled as legal in nature. The brief explains that, among other things, a contrary approach is not supported by the statute, risks exposing consumers to more inaccurate credit reporting, and undercuts the remedial purpose of the FCRA. It also explains that the statute does not authorize furnishers to forgo investigating any dispute simply because there may be colorable arguments on both sides. The brief also argues that, to conduct a reasonable investigation, a furnisher may need to look beyond the information already within the furnisher’s possession.

The plaintiff, Shelby Roberts, was a tenant in an apartment in Arden, North Carolina. In the litigation, As noted in a Troutman blog, the District Court granted the

defendant collection agency’s motion to dismiss holding that the defendant was under no obligation to investigate the plaintiff’s dispute because it deemed the dispute legal in nature rather than factual. The dispute arose when the plaintiff vacated her apartment and the complex both retained her $500 security deposit and charged her almost $800 for alleged damages to the stove in the rental unit. The plaintiff disputed the damages alleging that replacing the stove was instead ordinary maintenance per the lease and North Carolina law. When her account was referred to the defendant, the plaintiff filed a formal dispute with three national consumer reporting agencies (CRAs). As part of its investigation into and response to this credit dispute, the defendant asked the apartment complex to recertify the validity of its claim, which it did, and the defendant continued to funish the disputed account information to the CRAs. The plaintiff then filed suit alleging the defendant violated the FCRA by failing to conduct a reasonable investigation of her indirect dispute. In granting the defendant’s motion to dismiss, the district court found that investigating and determining the validity of the plaintiff’s debt would have required the defendant to interpret her lease and North Carolina landlord-tenant law.

But the agencies argue in their brief that the text of §1681s-2(b) of the FCRA requires entitles that furnish information to CRAs to reasonably investigate consumers’ disputes without any differentiation between legal and factual ones. In the agencies’ view, “[t]he district court’s ruling excepting ‘legal’ disputes risks exposing consumers to more inaccurate credit reporting, conflicts with other circuit decisions, and undercuts the remedial purpose of the FCRA.” Notably, the Ninth and Seventh Circuits have indicated that furnishers do have an obligation to investigage legal disputes as well as factual ones. The agencies further dismissed the argument that furnishers should not have to investigate legal disputes because there may be colorable issues on both sides and pointed out that such can be true of purely factual disputes as well: “Moreover, any burden imposed on furnishers is mitigated by the fact that the investigation — including into a legal dispute — need only be reasonable, a standard that considers the context of the dispute (such as its novelty).”

Counsel:

Plaintiff/Appellant: Charles Preyer Roberts, III of Constangy, Brooks, Smith & Prophete of Winston-Salem.
Defendant/Appellee: Bedard Law Group, Duluth, Georgia.

Relevant Documents:

In February 2023, the defendant filed a motion to dismiss. In March 2023, the plaintiff filed its Response in Opposition to the motion to dismiss. Also in March, the defendant filed its reply to the plaintiff’s opposition to the motion to dismiss.
In July 2023, U.S. Magistrate L. Patrick Auld issued a Memorandum Opinion and Order recommending the granting of the Defendant’s Motion to Dismiss. In August 2023, the U.S. District Court, Judge William Osteen, adopted the recommendation and granted the motion.
In December 2023, the CFPB and FTC filed an amicus asking the 4th Circuit to overturn the lower court.
In January 2024, Carter-Young filed its brief.
In February 2024, CDIA filed an amicus in the case, as did ACA.
In February 2024, Roberts filed his reply.