Federal District Court of Pennsylvania Says Public Records Provider is a Consumer Reporting Agency Subject to the Fair Credit Reporting Act | Ballard Spahr LLP

A Pennsylvania district court has ruled that a company that provides reports based on public records search is a “consumer reporting agency” (CRA) as defined by the Fair Credit Reporting Act.

In McGrath v. Credit Lenders Service Agency, Inc., the plaintiffs applied to a bank for a loan to refinance their home loan. The bank engaged the Credit Lenders Service Agency (CLSA) to search the complainants’ public records and provide a report. To prepare a report, CLSA has contracted with people who search various document repositories (for example, repositories of open judgments and municipal liens maintained by the courts) to perform a physical search and send the results to CLSA. CLSA’s report to the bank regarding the plaintiffs erroneously listed civil judgments pending against them. The complainants claimed to have contacted CLSA who declined to investigate the alleged inaccuracies.

Plaintiffs sued CLSA, alleging that it violated the FCRA by failing to follow reasonable procedures to ensure maximum accuracy when preparing a consumer report (15 USC Sec. 1681e(b)) and by failing to no reasonable re-investigation of the Complainants’ dispute. (15 USC Sec. 1681i(a)). CLSA sought summary judgment, saying it was not subject to the FCRA at law because it was not a CRA and did not provide “consumer reports” as defined by the FCRA. He also claimed that even if he were subject to the FCRA, no reasonable juror could conclude that he violated any provision of the FCRA.

First, the district court found that CLSA was an ARC. In doing so, he rejected CLSA’s argument that an entity can only be a CRA if it issues “consumer reports.” Based on the FCRA’s definitions of the terms CRA and “consumer report,” the district court found that to be a CRA, an entity does not actually have to provide “consumer reports,” but rather must act for the purpose of providing “consumption reports”. ” Thus, an entity could be a CRA if it acted for the purpose of providing “consumer reports” even if it never produced a report or if the intended report is determined not to be a “consumer report”. on consumers”. In other words, “the Court does not need to determine that an entity has in fact produced a ‘customer report’ to conclude that it is a [CRA].” However, the court said the opposite was not true, meaning that the FCRA’s definition of “client report” requires the report to come from a CRA.

Turning to the question of whether CLSA was a CRA, the court found that CLSA’s activities met the elements of the FCRA definition. In addition to receiving monetary charges and using interstate commerce, the other elements of the CRA definition require an entity to regularly engage in the practice of gathering or evaluating credit information at the consumption or other consumer information for the purpose of providing consumer reports to third parties. CLSA argued that it did not “gather” information, but only accessed records of open judgments in the court’s database that had been gathered by the court. The court rejected this argument, finding that the judgments were only part of the report, which included other information such as outstanding mortgages, home value and other outstanding liens. According to the court, “assembling” does not require the change of content, but only the collection and aggregation of information. The court also found that the CLSA reports were “consumer reports” for FCRA purposes.

With respect to CLSA’s alleged violations of the FCRA, the court was unwilling to grant summary judgment in favor of CLSA on plaintiffs’ allegation that CLSA negligently violated Section 1681e(b) by failing to follow reasonable procedures to ensure maximum accuracy when preparing consumer reports. . Among the things that must be established to prove a violation of Section 1681e(b) is that inaccurate information was included in a consumer report due to a CRA’s failure to follow reasonable procedures. . The District Court declined to follow the 1994 Seventh Circuit decision in Henson v. CSC Credit Services, which ruled that as a matter of law, a CRA does not violate the FCRA by reporting inaccurate information obtained from a court judgment record without first warning the consumer that the information may be inaccurate . According to the court, the Third Circuit rulings had made it clear that the reasonableness of an ARC’s proceedings was a matter of jury and because there was evidence that CLSA had taken no steps to verify the accuracy of the information it provides to clients and CLSA had not presented evidence to show that its procedures were reasonable, a reasonable jury could conclude that its procedures were unreasonable.

The court, however, entered summary judgment in favor of CLSA on plaintiffs’ allegations that CLSA willfully violated Section 1681e(b) and that it negligently and willfully violated Section 1681i(a) by failing to no reasonable reinvestigation of the plaintiffs’ litigation. According to the court, on the basis of Henson and in the absence of direct Third Circuit precedent, CLSA’s reading of Section 1681e(b) might reasonably have found support in the courts. Accordingly, his violation of Section 1681e(b) was not deliberate. With respect to plaintiffs’ claims under Section 1681i(a), the court found that since there was no evidence on the record that plaintiffs had notified CLSA of an error and requested a reinvestigation, there was no real dispute as to the material fact of whether CLSA was negligent or willfully failed to conduct a reasonable reinvestigation.

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