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7th Cir. Holds CRA’s ‘Reasonable Investigation’ Under FCRA Does Not Include Handwriting Analysis

The U.S. Court of Appeals for the Seventh Circuit recently held that a credit reporting agency had no duty under the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681, et seq., to verify the accuracy of a consumer’s signature in a case of alleged forgery.

A link to the opinion in Brill v. TransUnion LLC is available at:  Link to Opinion.

The defendant, one of the three major credit reporting agencies, prepared a credit report based on information it received from a car dealership that the plaintiff was in arrears on a car lease.  The plaintiff informed the credit reporting agency that the signature on the lease extension at issue was forged.

Referencing 15 U.S.C. §  1681i(a)(1)(A), the plaintiff demanded that the credit reporting agency “conduct a reasonable investigation” to determine whose lease it was.  The credit reporting agency reached out to the car dealership to confirm the accuracy of the report.  Neither the credit agency nor car dealership checked to see if the signature was forged.

The plaintiff brought a claim against the credit reporting agency under FCRA, 15 U.S.C. §§ 1681n(a), o(a), and p(a), alleging that the credit reporting agency’s investigation was not “reasonable.”  The district court dismissed the claims for failure to state a claim, holding that the credit reporting agency had no duty to verify the signatures because the car dealership was in a better position to determine the validity of the signature.

As you may recall, under FCRA, “if the completeness or accuracy of any item of information contained in a consumer’s file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly, or indirectly through a reseller, of such dispute, the agency shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information.” 15 U.S.C. §  1681i(a)(1)(A).

The plaintiff argued the credit reporting agency did not conduct an adequate investigation and essentially want them to do “more.”  The Seventh Circuit noted that the “more” would be hiring a handwriting expert or speak with the dealership’s employees to find out who signed the lease extension.

The Seventh Circuit held that the car dealership was in a better position to determine the validity of its own lease, noting that the lease extension was created by the car dealership, and that the credit reporting agency had nothing to do with the agreement.

The Court noted that it would be unrealistic to expect a credit reporting agency to verify the signature by communication with the car dealership’s employees who handled the transaction.   The credit reporting agency made the appropriate decision to have the car dealership confirm the accuracy of the documents as the credit agency did not have access to any documents that could resolve the issue.  Henson v. CSC Credit Services, 29 F.3d 280, 287 (7th Cir. 1994).

The Court reasoned that forcing a credit reporting agency to hire a handwriting expert in every case of alleged forgery would impose an expense disproportionate to the likelihood of an accurate resolution of the dispute over whether it was indeed forgery.

In addition, the Seventh Circuit noted that FCRA’s provisions for identity theft, 15 U.S.C. §§ 1681c-1, c-2, asks persons who believe they are or may be victims of credit fraud to report to the police before turning to the credit reporting agency.  Here, the plaintiff did not file any report.

The Court also noted that the plaintiff sued the car dealership in a separate action.  He had the opportunity to conduct discovery of the dealership’s employees as to the signature on the lease extension.  He chose to settle the matter.  When the parties settled, the terms and documents were to be confidential and were not provided in this appeal. The court was never made aware of the terms of the agreement or given the opportunity to examine the signatures.  The plaintiff withheld evidence from the court that he believed was conclusive in his favor.

Accordingly, the Seventh Circuit  affirmed the district court’s dismissal for failure to state a plausible claim for relief under FCRA.

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