The Court of Appeals for the Ninth Circuit has long held that as part of their investigation obligations under the Fair Credit Reporting Act, consumer reporting agencies (“CRAs”) are not required to assess the merits of a legal defense to a payment obligation being reported on a consumer credit report. Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 891 (9th Cir. 2010) (finding no obligation by a CRA to investigate the merits of a consumer’s claim that she was not legally obligated on a debt to a medical provider who failed to properly bill her insurer for the service because “credit reporting agencies are not tribunals… Because CRAs are ill equipped to adjudicate contract disputes, courts have been loath to allow consumers to mount collateral attacks on the legal validity of their debts in the guise of FCRA reinvestigation claims.”) (citing Saunders v. Branch Banking & Trust Co. of Va., 526 F.3d 142, 150 (4th Cir.2008)). In coming to this conclusion, the Ninth Circuit indicated that consumers disputing the legal validity of a debt that appears on their credit reports “should first attempt to resolve the matter directly with the creditor or furnisher, which stands in a far better position to make a thorough investigation of a disputed debt than the CRA does on reinvestigation,” Carvalho, 629 F.3d at 892, but did not explain whether this “advice” translates into the obligations for furnishers (unlike CRAs) to assess the legal merits of a consumer’s defense to payment as part of their FCRA indirect investigation obligations.

Whether a furnisher has a duty to do so is hotly disputed and currently before the Ninth and Eleventh Circuit Courts of appeal.  Before the Ninth Circuit is a fully-briefed appeal from the District U.S. District Court of Arizona’s ruling in Gross v. CitiMortgage Inc., No. CV-18-02103-PHX-ROS, 2020 WL 5976678, * 4 (D. Ariz. Oct. 8, 2020) that the furnisher had no obligation as part of its FCRA investigation obligations to answer the legal question about whether the subject debt was extinguished under Arizona’s anti-deficiency statute in order to ascertain whether reporting a balance owed post-foreclosure was inaccurate. Such legal questions, the District Court found, fall outside FCRA furnisher investigation obligations, which pertain only to factual, not legal disputes. Id. (citing Chiang v. Verizon New England Inc., 595 F.3d 26, 38 (1st
Cir. 2010)).

Pending before the Eleventh Circuit is an appeal from the U.S. District Court for the Southern District of Florida’s ruling in Milgram v. JPMorgan Chase Bank, N.A., No. 19-60929-CIV, 2021 WL 6755283 (S.D. Fla. Dec. 30, 2021), that comes to the same conclusion as Gross.

In that case, plaintiff Shelly Milgram alleged that a $30,000 balance incurred on a Chase personal credit card in her name was the result of identity theft by an employee and challenged the reasonableness of defendant Chase’s investigation of her indirect dispute because Chase failed to remove the debt from her credit report after concluding its investigation. On summary judgment, Chase argued, among other things, that plaintiff’s claim failed as a matter of law because her dispute turned on the legal question of her liability for the credit card account, as opposed to a factual inaccuracy that could provide a basis for a claim under the FCRA, and that the reporting was accurate because having negligently supervised her employee, plaintiff provided the employee with apparent authority to use and pay the card, rendering plaintiff responsible for the balance the employee incurred. See id. at *10.

The District Court granted summary judgment to Chase finding that the investigation duties the FCRA imposes on furnishers are “procedural” and “far afield” from legal “questions of liability under state-law principles of negligence, apparent authority, and related inquiries.” Id. at *12. Because there were no “procedural” deficiencies in Chase’s investigation (e.g. missing documents, testimony, or other factual inaccuracy in the information Chase relied on), there was no genuine dispute that Chase conducted a reasonable investigation “as required under the procedural requirements of the FCRA.” Id. (citing Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1161 (9th Cir. 2009)).

Plaintiff filed a notice of appeal on January 20, 2022 and her opening brief on April 21, 2022. Respondent’s brief is due by May 20, 2022.

Notably, the CFPB has filed Amicus briefs in both cases.


Gross Amicus Brief 4.19

In Gross, the CFPB argues that the District Court erred in finding that there exists a categorical exemption from the investigation requirement of any indirect disputes that could be characterized as legal and overstated the meaning of the precedent it cites from Chiang, the difficulty of cleanly distinguishing between legal and factual disputes renders imposing this distinction problematic because it leaves room for furnishers to evade their FCRA obligations by construing disputes as “legal,” and although a furnisher such as CitiMortgage might not necessarily have to resolve legal questions in order for its investigation to comply with the FCRA (e.g. decide whether the Arizona anti-deficiency statute extinguished the debt, a question on which the district court described the caselaw as “slim”), conducting no investigation whatsoever of such questions should be deemed an FCRA violation. CFPB Amicus Brief, filed April 19, 2021, pp. 1, 18-19.

In Milgram, the CFPB takes a more forceful approach urging the Court to rule that “furnishers are statutorily obligated to reasonably investigate both legal and factual questions raised in indirect disputes to CRAs about the accuracy or completeness of information they furnish,” arguing that cases finding otherwise were incorrectly decided, that a bright line distinction between a factual and legal dispute is unworkable in practice, and that “the rationale for excluding legal validity from the scope of a CRA’s investigative duty does not extend to a furnisher.” CFPB Amicus Brief, filed April 7, 2022, pp. 17-22 (quoting Markosyan v. Hunter Warfield, Inc., No. CV 17-5400, 2018 WL 2718089, at * 8 (C.D. Cal. May 11, 2018).

Earlier Circuit level rulings leaned toward declining to find furnishers obligated to assess the merits of a legal dispute within the scope of their FCRA investigations. See e.g. Leones v. Rushmore Loan Management Servs., LLC, 749 F. App’x 897, 901-02 (11th Cir. 2018) (distinguishing between factual inaccuracy and disputed legal questions in context of furnisher investigations); Chiang v. Verizon New England, Inc., 595 F.3d 26, 38 (1st Cir. 2010) (“Like CRAs, furnishers are neither qualified nor obligated to resolve matters that turn[ ] on questions that can only be resolved by a court of law.”).

For questions on these cases, or credit reporting matters generally, contact Alisa Givental at