Seventh Circuit holds that the accuracy of information under FCRA determined by the ACDV response, not the ultimate credit report

Frazier v. Dovenmuehle Mortg., Inc., No. 22-2570 (7th Cir. July 5, 2023) addressed the question whether the completeness or accuracy of information furnished by a data furnisher under § 1681s-2(b) of Fair Credit Reporting Act must be judged, not on the ACDV response the data furnisher provides to the credit reporting agency, but on the credit report generated from it. The Seventh Circuit, in a case of first impression, found that accuracy is determined solely by what the furnisher provides and not what is included in the credit report.

In Frazier, the consumer fell behind on her home mortgage loan in December 2015. She ultimately settled her debt with her loan servicer through a short sale in January 2016. A few years later, she noticed that the closed mortgage account was reported as delinquent on her credit reports, so she disputed the information to a credit reporting agency. To confirm the accuracy of its records the credit reporting agency sent the servicer four ACDV forms. In its ACDV responses, the loan servicer amended or verified certain data items. It amended the “Pay Rate” data item from empty to “3”, meaning the loan was 90 days delinquent. It also changed the “Account History” data item from “3” (90 days delinquent) in 2018 and 2019 to dashes “–” for all months after December 2015, meaning “no reporting.”

The consumer sued the loan servicer claiming it violated § 1681s-2(b) of the FCRA by providing false and misleading information to credit reporting agencies. She contended the amended codes were inaccurate. As evidence she pointed to how the credit reporting agency interpreted and reported the amended data in her credit reports. The agency reported this amended data to indicate she was currently delinquent on the mortgage with missed payments in months following the settlement in January 2016.

On summary judgment, the consumer argued that the completeness or accuracy requirement under must be judged not on the ACDV responses but on the credit report generated from it. In affirming summary judgment for the servicer, the Seventh Circuit examined the text of § 1681s-2(b) and found it says nothing about a credit report, let alone a duty of a data furnisher with respect to credit reports produced using its amended data. Rather, it says the data furnisher’s duties are to investigate disputes, correct incomplete or inaccurate information, and report the results of an investigation to the credit reporting agency. Section 1681s-2(b)(E), and the regulations, clarify that the furnisher’s duty to correct data applies “for purposes of reporting to a consumer reporting agency only.”

The Court agreed that the ACDV responses were not inaccurate. For the changes to the “Account History” data item, the dashes were not a verification of the inaccurate late payments but meant “no reporting” for all the months following the short sale. The mortgage was settled in January 2016, so it was accurate to show no reporting of payments for all months after December 2015.

The consumer argued the change to the “Pay Rate” data item from empty to 90 days delinquent inaccurately signified that her account was currently delinquent, rather than historically delinquent. Because it is not clear whether the ‘3’ code is an incorrect indicator of current delinquency or a correct one of historical delinquency, the Court said it was not patently incorrect. But the dispositive question was whether the code as presented on the ACDV would materially mislead a reasonable observer to conclude that the consumer was currently delinquent. When reviewed in context, the “Pay Rate” of “3” was not materially misleading. The code was directly beside the “Account Status” code of “13,” which meant the account was closed. And a few columns down, the “Balance” and “Amount Past Due” data items state “$0” and the “Date Closed is accurately marked as ‘01-14-2016,’” and so is the Date of Last Payment as “09-09-2015.” Finally, the Special Comments Code was verified as “AU,” which meant that the loan was paid in full for less than the remaining balance. “With this full context, no reasonable jury could find that the ‘3’ code meant [the consumer] was currently delinquent on her debt” and was therefore not materially misleading as a matter of law.

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