The cardholder received notification of potential fraudulent charges on her credit card. The cardholder subsequently cancelled the card and received a new card and account. The cardholder reported several allegedly unauthorized transactions to the card issuer (the “creditor”) and filed a police report. However, the creditor argued that the transactions were authorized. In response, the cardholder filed a complaint with the Consumer Finance Protection Bureau and stopped making payments to the creditor. The creditor reported the missed payments to credit reporting agencies. The cardholder sent a letter to one of the credit reporting agencies (the “agency”) to protest the inclusion of an overdue balance on her credit report, claiming she was a victim of identity theft and fraud. The creditor sent another letter to the cardholder stating that it believed the transactions were valid because the charges were authorized through a card that was in her possession and processed through the “embedded chip, which cannot be duplicated.” Afterward, the cardholder sued the agency under the Fair Credit Reporting Act (FCRA) for “negligently and willfully violat[ing] 15 U.S.C. § 1681e by failing to follow reasonable procedures in reporting information, as well as § 1681i by failing to conduct a reasonable investigation…” The district court dismissed both claims, and the cardholder appealed the dismissal of her § 1681 claim.
In Reyes v. Equifax Info Servs., L.L.C., 140 F.4th 279 (5th Cir. 2025), the Fifth Circuit affirmed the district court’s holding. The court began by discussing the FRCA and § 1681i, which requires that consumer reporting agencies have “‘reasonable procedures for meeting the needs of commerce for consumer credit…in a manner which is fair and equitable to the consumer, with regard to…accuracy… of such information.” The cardholder alleges that the creditor provided the agency with inaccurate information. The Fifth Circuit has previously defined inaccurate information under the FCRA to be either “‘patently incorrect, or…misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.’” Sepulvado v. CSC Credit Servs., Inc., 158 F.3d 890, 895 (5th Cir. 1998). If an agency receives notice of a potential inaccuracy, the agency “must ‘conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate.’” § 1681i(a)(1)(A). The court further stated that an “inaccuracy is a threshold requirement for § 1681i claims,” joining the Ninth and First circuits’ interpretation of the FCRA. Consequently, if the cardholder could not prove that the information reported by the creditor to the agency was inaccurate, her claim would fail. The cardholder argued that there was an inaccuracy because she claimed she did not authorize the charges. Therefore, reporting the unpaid balance on her account for those charges was inaccurate because she contested whether she actually “owed the debt.” The agency disputed this argument, claiming that it was “an impermissible collateral attack on the validity of her debt with [the creditor].” The court found persuasive a series of cases in other circuits and district courts that held that “credit reporting agencies are not tribunals and ‘are neither qualified nor obligated to resolve legal issues.’” Denan v. Trans Union LLC, 959 F.3d 290, 296 (7th Cir. 2020). Therefore, the cardholder could not challenge the validity of her debt in an FCRA claim against the agency because it was a legal issue that had to be resolved by the appropriate authority. The cardholder urged the court to disregard those cases because she claimed the agency was required to delete the credit information if it was unable to verify the accuracy of the information, and, further, the agency was unable to “verify” the debt if the debt was contested. The court disagreed and found that for a reported inaccuracy to be the basis of an FCRA claim, it must be “sufficiently objectively verifiable.” Sessa v. Trans Union, LLC, 74 F.4th 38, 40 (2d Cir. 2023). The court reiterated its holding that “consumer reporting agencies are not required to investigate the legal validity of disputed debts under the FCRA.” Therefore, because the validity of her debt was a legal issue, rather than a factual issue, the agency was not required to perform an investigation. Thus, her claim that the agency failed to conduct a reasonable investigation under § 1681i was dismissed.
By Hayden Mariott [email protected]
Edited By Kristin Meurer [email protected]