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A Florida resident has a valid claim under the Federal Credit Reporting Act if JPMorgan Chase failed to investigate a disputed item and used false pretenses to obtain a credit report, the Eleventh Circuit Court of Appeals has held. However, JPMorgan Chase's use of an alternative, but similar, name when reporting the past due amount to TransUnion did not violate the Fair Debt Collection Practices Act.
The decision, which included novel issues in the Eleventh Circuit, establishes the standard under which consumers can bring a claim under the FDCPA when a lender uses an alternative name in reporting a past due debt to credit reporting agencies.
John Pinson, a homeowner with a mortgage with JP Morgan Chase, fell behind on his payments. In reporting this to TransUnion, JP Morgan Chase used the name Chase Home Finance LLC. When he discovered this entry, Pinson disputed it with TransUnion. Pinson subsequently wrote to TransUnion and JPMorgan Chase numerous times, but JPMorgan Chase never responded. TransUnion responded only to state that the information would remain on his credit report.
Pinson sued, claiming violations of the FCRA and the FDCPA. The district court dismissed all claims.
The FDCPA prohibits direct lenders from using a different name when reporting past due amounts to credit reporting agencies in order to make it appear as if a third party is involved.
The Eleventh Circuit had not yet established the standard for determining when a lender is trying to mislead a credit reporting agency by using an alternative name. Here, the Eleventh Circuit joined the Second and Seventh Circuits in holding to a “least sophisticated consumer" standard. Rather than a bright-line rule, the standard is whether consumers – even “gullible" and “naïve" consumers – would be fooled.
While it is a low standard, Pinson still did not meet it. The panel wrote that even the least sophisticated consumer would understand that JP Morgan Chase and Chase Home Finance were related entities when it came to the TransUnion credit report regarding a past due mortgage.
Still, the district court was wrong to dismiss the claims under the FCRA, the panel held. The FCRA requires credit reporting agencies to notify the lendor when a consumer disputes information in the credit report. When notified, the lendor must investigate whether the information is accurate. It also sets out the reasons for which creditors can obtain a consumer's credit report. Here, the panel reasoned that JP Morgan Chase plausibly failed to investigate the disputed information.
JPMorgan Chase also requested 20 credit reports on Pinson prior to litigation. The FCRA has an exhaustive list of reasons to validly request a credit report. JPMorgan Chase argued those were legitimate requests, made because Pinson was behind on his mortgage. Pinson, however, argued that they were made for use in litigation, which is not a valid reason.
This was also a matter of first impression for the Eleventh Circuit. The panel adopted the standard other courts have universally used, which is that a consumer has a valid claim if someone uses false pretenses to request a credit report.
The facts still need to be litigated, but the decision helps clarify when a consumer has a private right of action under the FCRA and FDCPA.