Before you waste your time with a private right of action for a Fair Credit Reporting Act (FCRA) violation, make sure that the statute you're attempting to enforce provides for private suits.
As the Second Circuit recently ruled, many of FCRA's false statement provisions can only be enforced by state or federal authorities.
Stuart Longman, an experienced real estate developer, financed a property purchase with a "balloon" note from Wachovia. The note called for Longman to make monthly interest payments for three years, after which the full principal became due.
But Longman failed to make the balloon payment.
Longman spoke with Wachovia employees about resolving the situation and they advised him to continue making monthly interest payments until the bank approved a "short sale" of the property, i.e., a sale in which the proceeds would satisfy the outstanding debt even though they will fall short of the total balance due.
Consequently, Longman continued making monthly interest payments, which Wachovia received and credited. Despite these payments, Wachovia began notifying credit reporting agencies that Longman was late on his obligations because he never made the balloon payment.
Longman sued Wachovia for willful noncompliance with the Fair Credit Reporting Act, claiming that the bank knew its statements to the credit reporting agencies were false, failed to correct them, and failed to perform a reasonable investigation after Longman notified the bank that its reporting was inaccurate.
Longman, however, only disputed Wachovia's reports with these agencies after he sued.
The district court granted summary judgment in favor of Wachovia on all claims, concluding that there was no private right of action for violations of 15 U.S.C. §1681s-2(a) and that the complaint failed to state a claim under 15 U.S.C. §1681s-2(b) because that provision requires that the dispute be submitted to a credit reporting agency.
Longman appealed, challenging the private right of action ruling.
In a matter of first impression, the Second Circuit Court of Appeals agreed that §1681s-2(a) plainly restricts enforcement to federal and state authorities. Because Longman's complaint only alleged violations of subsection (a), the appellate court affirmed the district court's summary judgment decision.
- Longman v. Wachovia Bank, N.A. (FindLaw's CaseLaw)
- Third Circuit Adopts Broad Take on FCRA Safe Harbor (FindLaw's Third Circuit Blog)
- Fair Credit Reporting Act (Federal Trade Commission)