The 7th Circuit recently issued a favorable ruling in a case where CDIA filed an amicus.  We said that consumer reporting agencies cannot and should not be in a position of arbitrating the legality of an underlying loan.  The Court agreed with CDIA and our members.  The Court said, in Denan v. TransUnion, that CRAs are not “tribunals; they collect consumer information supplied by furnishers, compile it into consumer reports, and provide those reports to authorized users.”  This opinion brings the 7th Circuit in line with the 1st, 9th and 10th Circuits.  The 7th where a “consumer’s defense to a debt “is a question for a court to resolve in a suit against the [creditor,] not a job imposed upon consumer reporting agencies by the FCRA.”

The plaintiffs pointed to a 1994 7th Circuit decision in Henson v. CSC Credit Servs. “as requiring consumer reporting agencies to consider both legal and factual accuracy of the data contained in their credit reports.”  Yet, the Court said,  “Henson imposes no such requirement.”  In Henson, a CRA reported a debt from a court clerk who “erroneously entered [a] judgment.”  There, the Court “held that ‘a credit reporting agency is not liable under the FCRA for reporting inaccurate information obtained from a court’s Judgment Docket, absent prior notice from the consumer that the information may be inaccurate.'”  The Denan decision pointed to the lesson of the Henson decision.

Henson considered two threshold elements to challenge the reasonableness of a consumer reporting agency’s investigation procedures: (1) “noti[ce] of potentially inaccurate information”; and (2) “resources … [to] conduct a more thorough investigation.” Id. at 286–87. Plaintiffs cannot overcome this second requirement for reasons already explained. No amount of resources could empower Trans Union to assume the role of a tribunal. And relatedly, because plaintiffs lack a formal adjudication voiding their debts, “a more thorough investigation” would not uncover an inaccuracy in their credit reports. It also bears mention that the inaccuracy challenged in Henson (whether a judgment was issued against the consumer) was straightforward, fact‐based, and could be resolved through a reasonable investigation. But plaintiffs here insist Trans Union should settle legal issues involving choice‐of‐law clauses, state usury laws, and sovereign immunity doctrines—all issues only a court can resolve.