Consumer Compliance Outlook: Second Issue 2021

On the Docket: Recent Federal Court Opinions


Eleventh Circuit addresses consumer reporting agency’s duties when consumer disputes information in a credit report.

Losch v. Experian Information Solutions, Inc., 995 F.3d 937 (11th Cir. 2021). The plaintiff had previously filed for bankruptcy, in which he reaffirmed his mortgage debt to CitiMortgage to retain his house. Nevertheless, the bankruptcy trustee sold the property. After the mortgage servicer sent the plaintiff past due notices, the plaintiff rescinded his debt reaffirmation and discharged the debt. When the plaintiff learned that his Experian credit report still listed a debt of $140,000 to the servicer and a past due balance of more than $10,000, he disputed this information with Experian. In response, Experian asked the servicer to verify the debt, and the servicer responded that the reporting was accurate. The plaintiff sued the servicer and Experian for violating the FCRA. The servicer settled with the plaintiff, while Experian moved to dismiss the case on a summary judgment motion, which the district court granted.

On appeal, the Eleventh Circuit examined whether Experian had reasonably discharged its obligations under the FCRA in preparing reports and reinvestigating disputed information. As a threshold matter, Experian argued that it did not violate the FCRA because the information in the plaintiff’s Experian consumer report indicating he owed a mortgage debt was accurate. Experian argued that a bankruptcy discharge enjoins a creditor from collecting a debt but does not expunge it from the debtor’s record. The court disagreed, noting that “although a bankruptcy discharge doesn’t ‘expunge’ a debt, Experian’s report was still factually inaccurate. Experian didn’t just report the existence of a debt but also the balance that [the plaintiff] owed, the amount [the plaintiff] was past due, and how long [the plaintiff] was past due.” Thus, the court concluded Experian included inaccurate information in the plaintiff’s credit report.

Regarding Experian’s investigation of the plaintiff’s dispute, the court found that the consumer provided detailed information to show the consumer report was inaccurate, and Experian did not take additional investigative steps beyond having the servicer verify the debt. Thus, the court concluded that a jury could find that Experian was negligent in discharging its obligations to conduct a reasonable investigation and reinvestigation into the disputed information. However, the court rejected the plaintiff’s claim that Experian willfully violated the FCRA. The court vacated the district court’s summary judgment and remanded the case to the district court for further proceedings.

Editor’s note: As Outlook was preparing to publish this issue, the U.S. Supreme Court ruled in TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021) that a plaintiff alleging an FCRA violation because his consumer report contains inaccurate information lacks legal standing to file a lawsuit in federal court if the information is not disseminated to a third party. “The mere presence of an inaccuracy in an internal credit file, if it is not disclosed to a third party, causes no concrete harm.” Outlook will discuss this case in the next issue.

Second Circuit holds that Equifax did not violate the FCRA by reporting a default judgment as “satisfied.”

Shimon v. Equifax Information Services LLC, 994 F.3d 88 (2d Cir. 2021). The plaintiff’s lawsuit against Equifax alleged violations of the FCRA because of the way Equifax reported a debt collector’s lawsuit on the plaintiff’s credit report. When the plaintiff failed to respond to the collection lawsuit in state court, a default judgment was entered. After the debt collector garnished the plaintiff’s wages, the parties settled the case. The plaintiff learned that Equifax was still reporting the default judgment on his credit report, describing it as “satisfied.” The plaintiff alleged that this description was inaccurate and violated the FCRA because it implied that a judgment remained. The court noted that a consumer report is inaccurate either when “it is patently incorrect or when it is misleading in such a way and to such an extent that it can be expected to have an adverse effect.” The court rejected the plaintiff’s claim, finding that the reporting of the judgment as satisfied was accurate. The plaintiff also alleged that Equifax violated the FCRA’s requirement that consumer reporting agencies disclose the sources of their information because Equifax failed to disclose that LexisNexis supplied the plaintiff’s court information. However, the court found the plaintiff did not suffer actual damages as a result. In addition, the court stated that under the FCRA, Equifax could disclose the original source of the reported information as the information source, as opposed to the identity of any contractors, such as LexisNexis, that gathered the information on an agency’s behalf. The court therefore affirmed the dismissal and summary judgments of the district court.


Second Circuit holds that the New York State Department of Financial Services (DFS) lacks standing to challenge the fintech charter from the Office of the Comptroller of the Currency (OCC).

Lacewell v. Office of the Comptroller of the Currency, 999 F.3d 130 (2d Cir. 2021). In July 2018, the OCC began accepting charter applications from nondepository fintech companies to become a Special Purpose National Bank (SPNB), subject to the OCC’s supervision. In response, the DFS filed a lawsuit alleging that the charter was impermissible because the National Bank Act only permits the OCC to charter depository institutions. In 2019, the district court ruled in favor of DFS. On appeal, the Second Circuit reversed the decision because it determined DFS lacked the standing to challenge the charter.

The court noted that constitutional standing requires a plaintiff to allege (1) an injury in fact, (2) that is fairly traceable to the challenged conduct, and (3) that is likely to be redressed by a favorable court decision. DFS argued it suffered two injuries: that its regulatory power over nondepository fintech companies that obtained the charter would be reduced to the extent the charter preempted New York law, including its usury law regulating interest rates, and that it could lose assessment fees that it charges nondepository fintechs if they became chartered by the OCC. The court found DFS’s fear of preemption or other regulatory disruption was speculative because the extent to which the charter disrupted DFS’s regulatory powers would depend on the number and type of companies seeking a charter. The court said injury for standing purposes must be actual or imminent, and no company has yet applied for a SPNB charter. The court found DFS’s alleged injury for loss of assessment revenue was similarly speculative, stating: “At least until a non-depository fintech that DFS currently regulates — or would otherwise regulate — decides to apply for an SPNB charter, this alleged assessment loss will remain purely ‘conjectural or hypothetical,‘ rather than ‘imminent’ as the Constitution requires.” The court ordered the lawsuit dismissed without prejudice, which would allow DFS to refile it if the OCC begins granting charters.


Supreme Court rules that §13(b) of the FTC Act only authorizes the FTC to seek injunctive, and not monetary, relief in federal district court.

AMG Capital Management, LLC v. Federal Trade Commission, 141 S. Ct. 1341 (2021). The FTC sued a payday lender under §13(b) of the FTC Act for engaging in unfair and deceptive acts and practices with respect to the disclosures for its payday loans and sought an injunction and other relief. The lender’s disclosures stated that a customer could repay the loan in a single payment, but the fine print provided that the loan would automatically renew unless the customer opted out. The FTC sought $1.27 billion in restitution and disgorgement, which the district court granted. The lender appealed, arguing that §13(b) only allows the FTC to obtain injunctive relief and does not allow restitution. The Ninth Circuit affirmed the district court’s rulings, but the Supreme Court reversed the decision. The court reasoned that the explicit statutory language of §13(b) only permitted injunctions, and not monetary relief. The court observed that the FTC still could pursue restitution for consumers in district court under §19 of the FTC Act, but only after the FTC first invoked the administrative procedures of §5 of the FTC Act. The court suggested that if it were too cumbersome for the FTC to proceed under §5 and §19, it should ask Congress to amend the FTC Act. In response to this decision, a member of the House of Representatives introduced H.R. 2668, the Consumer Protection and Recovery Act, which would amend §13(b) to explicitly authorize the FTC to order restitution and other relief.

The court’s ruling does not affect the authority of the federal prudential agencies or the Bureau to order restitution for violations of federal consumer protection laws. The prudential agencies derive their restitution authority from §8(b)(6) of the Federal Deposit Insurance Act (12 U.S.C. §1818(b)(6)), which expressly authorizes the agencies to order restitution when a violation unjustly enriches an institution and in certain other circumstances. In addition, some consumer protection laws have their own restitution enforcement provisions, such as §108(e)(2) of the Truth in Lending Act (15 U.S.C. §1607(e)(2)) for certain violations of finance charge and annual percentage rate disclosure requirement. Similarly, the Bureau has specific restitution authority for the laws it enforces under §1055 of the Consumer Financial Protection Act (12 U.S.C. §5565).