As reported by Law 360, this week, the Third Circuit “adopted a new standard for evaluating whether credit reports are inaccurate or misleading when read in their entirety by a ‘reasonable reader,’ and applied that test in a precedential opinion upholding the dismissal of Fair Credit Reporting Act suits against TransUnion from student loan borrowers.”

Law 360 added that in the consolidated case of Bibbs v. Trans Union, “[a] three-judge panel affirmed the Pennsylvania federal judges’ rulings tossing the cases but found that the “reasonable creditor” standard they applied did not reflect how the FCRA contemplates various parties using the reports, such as employers and investors, and not just creditors.”

The August 2022 decision followed oral argument in January 2022 where a TroutmanPepper blog noted that “[c]ounsel for the appellant, Marissa Bibbs, met a hot bench, skeptical of the argument that courts should read individual fields on a credit report in isolation.”

A BallardSphar blog pointed out that

While stating that ‘perhaps Trans Union could have made the reports even clearer,’ the Third Circuit nevertheless found the reports to be clear as is.  It acknowledged that despite the “goal” of maximum possible accuracy set by Sec. 1681e(b), ‘the possibility of further clarity is not an indication of vagueness; just because a report could potentially be a bit clearer does not mean that it is not very clear at present.’   Agreeing with Trans Union, the Third Circuit found that a reasonable interpretation of Trans Union’s reports in their entirety was that the pay status of a closed account was historical information.  As a result, the Third Circuit held that the reports were accurate under Sec 1681e(b).

In affirming the district courts’ grants of summary judgment to Trans Union, the Third Circuit also ruled that the district courts had correctly dismissed the plaintiffs’ claims that Trans Union violated Sec. 1681i(a) by failing to conduct a good faith investigation.  It considered the plaintiffs’ claims under 1681i(a) to be foreclosed by its holding that the pay status notations were neither inaccurate nor misleading to a reasonable reader.

Finally, the Third Circuit rejected the plaintiffs’ argument that discovery was necessary to determine whether the pay status notations would mislead a creditor and whether creditors were likely to make adverse credit decisions against the plaintiffs based on the lower credit scores caused by the notations.  Because it considered the reasonable reader standard to be an objective and not a subjective standard, the Third Circuit deemed the credit reports to be accurate under 1681i(a) as matter of law, thereby making discovery unnecessary.  The Third Circuit noted that even if the pay status notations reduced the plaintiffs’ credit scores, “this sort of adverse historical notation and consequence” was permissible under Sec. 1681e(b) and that while the reduced credit scores could lead creditors to make adverse credit decisions, “it would be within their right to do so because [the plaintiffs’] credit reports are accurate.”

The cases are Bibbs v. Trans Union, Parke v. Trans Union, and Samoura v. Trans Union, Nos. 21-1350, 21-1527, and 21-1530, in the U.S. Court of Appeals for the Third Circuit. The plaintiffs are represented by Matthew B. Weisberg of Weisberg Law. TransUnion is represented by Camille R. Nicodemus and Robert J. Schuckit of Schuckit & Associates.