The U.S. Court of Appeals for the Seventh Circuit has joined the First, Ninth, and Tenth Circuits in holding that 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 [Fair Credit Reporting Act].” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 891–92 (9th Cir. 2010). This decision closely follows the reasoning laid out in the court’s non-precedential decision in Humphrey v. Trans Union, LLC, 759 F. App’x 484 (7th Cir. 2019).
In Denan, the Plaintiff took loans out from two tribal lending enterprises that charged over 300% interest. The loan agreements claimed that by virtue of sovereign immunity, they were governed by tribal law and not the law of the states—New Jersey and Florida in this case—which render any agreements with such high interest rates void ab initio.
Denan disputed the accuracy of his credit report with Trans Union because he believed the loan was invalid and there was no legal obligation for him to repay it. After receiving Denan’s correspondence, Trans Union investigated the matter and concluded its process by informing Denan that it verified that the information was accurate.
Denan sued Trans Union under two theories: § 1681e(b), for failing to maintain reasonable procedures to ensure maximum possible accuracy, and § 1681i which requires consumer reporting agencies like Trans Union to “conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate.”
The panel (Wood, Bauer, and Brennan) rejected both theories. As to the e(b) claim, the court honed in on the notion that CRAs are not in the position of courts to resolve “non-adjudicated” legal defenses to the debt:
“The collectability of plaintiffs’ loans here requires resolution of three legal issues: whether the choice‐of‐law provisions in plaintiffs’ loan agreements are enforceable; whether New Jersey and Florida lending laws render plaintiffs’ loans void; and whether tribal sovereign immunity shields Plain Green and Great Plains from the application of New Jersey and Florida laws. The power to resolve these legal issues exceeds the competencies of consumer reporting agencies.”
As to the i claim, the court distinguished Henson v. CSC Credit Servs., 29 F.3d 280 (7th Cir. 1994), where the CRA reported information from a court record that the clerk had entered erroneously:
“Henson never addressed the issue before us: whether §§ 1681e(b) and 1681i compel consumer reporting agencies to adjudicate a consumer’s legal defenses to a debt . . . 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.”
The panel does recognize numerous times in its opinion that companies such as lenders that furnish information are tasked with accurately reporting liability. See 12 C.F.R. § 1022.41(a): “Accuracy” for furnishers means information that “correctly [r]eflects … liability for the account.”