In Gatanas v. Am. Honda Fin. Corp., No. 20-07788 (KM) (JBC), 2020 U.S. Dist. LEXIS 228973 (D.N.J. Dec. 7, 2020), Judge McNulty allowed an FCRA claim to proceed against an auto finance company.
Gatanas contracted with Honda for an auto loan. (See Compl. ¶ 1.) He paid off that loan, and the account was closed. (See id. ¶ 15.) Honda provided information about the loan to TransUnion, LLC, a credit reporting agency (“CRA”). (See id. ¶ 16.) A credit report prepared by TransUnion stated that Gatanas’ Honda account was closed with a $0 balance but the account was “30-59 days late.” (Id. ¶ 15.) Because Gatanas was not “currently delinquent” on the account, he submitted a written dispute to TransUnion. (Id. ¶¶ 15-16.) In turn, TransUnion notified Honda of the dispute. (Id. ¶ 16.) Nonetheless, TransUnion and Honda did not conduct any further investigation into Gatanas’ dispute, mark his account as disputed, or remove the misleading payment status from the account. (Id. ¶ 17.) Instead, TransUnion and Honda “summarily verified that the reporting was accurate, and closed [Gatanas’] dispute.” (Id. ¶ 18.) According to Gatanas, “a reasonable investigation . . . would have determined that an account with a ‘$0’ balance could not be late and past due.” (Id. ¶ 19.)
Judge McNulty allowed the claim to proceed past the pleadings.
Honda moves to dismiss on the ground that the report of a $0 balance along with a late-payment notation was in fact accurate. (MTD at 3; Reply at 4.) Even “technically correct” information, however, can be inaccurate if “it creates a materially misleading impression,” and—critically here—”[w]hether technically accurate information was misleading . . . is generally a question to be submitted to the jury.” Seamans, 744 F.3d at 865 (internal citations, quotation marks, and alterations omitted). Accordingly, in a case applying that standard to near-identical facts, a court held that reporting a $0 balance along with a late-payment notation could mislead future lenders reading a consumer’s credit report to perceive the consumer as currently delinquent. Friedman, 2019 WL 4194350, at *3. So too here. It may be the case, as Honda argues, that Gatanas has closed the account but was late on some payments, so the information is accurate, or that such reporting is standard practice. (MTD at 3-4.) But I cannot say as a matter of law, or simply based on the pleadings, that this is so—the standard adopted in Seamans requires more factual development and exploration. See Hills v. Trans Union, LLC, 969 F. Supp. 2d 419, 421 (E.D. Pa. 2013). For the third theory, Honda argues that it cannot be liable for failing to mark Gatanas’s account as disputed because § 1681s-2(a)(3), which sets forth that obligation, is not enforceable via a private right of action. (Reply at 5.) Because this argument was raised for the first time in a reply brief, it could be disregarded on that basis alone. See D’Aiuto v. City of Jersey City, Civ. No. 06-6222, 2007 WL 2306791, at *4 n.1 (D.N.J. Aug. 8, 2007) (Greenaway, J.). Regardless, it is foreclosed by Third Circuit precedent. The Seamans court explained that § 1681s-2(a)(3) indeed “imposes an explicit duty on furnishers . . . to report a dispute to all CRAs to whom it provides the information.” 744 F.3d at 866. Because § 1681s-2(a) deals with furnishers’ pre-dispute obligations to CRAs (not consumers), private enforcement of § 1681s-2(a)(3) “is not permitted.” Id. Nonetheless, the court explained that, § 1681s-2(a)(3) aside, failing to mark that an account is disputed could be misleading and thus a violation of § 1681s-2(b), which is privately enforceable. Id. at 867. Here, Gatanas alleges that Honda failed to mark his account as disputed (Compl. ¶ 43), and that allegation fits squarely within what Seamans recognized as a valid § 1681s-2(b) claim.