Happy Halloween to FCRA Defendants in Wisconsin: Court Rules that the Courts, not CRAs, are Charged with Resolving Legal Disputes

Although this time of year may be the favorite of ghouls and goblins, it was not so scary for the FCRA defendants in Garland v. Marine Credit Union, 2018 WL 5313769 (E.D. Wis. Oct. 26, 2018), who escaped liability to their plaintiff because she sued them over the legal effect of her Wisconsin state-law amortization suit, not over whether they inaccurately reported facts about her credit history.

The Garland plaintiff took advantage of a peculiar, Depression-era Wisconsin statute that allows a wage-earner to file suit in state court to amortize his or her debts.  Much like a Chapter 13 bankruptcy case, the statute allows a party, who cannot pay his or her debts immediately when they are due but who can pay them in full over three years, to amortize the debts and pay them over time.  In the instant case, the plaintiff filed her state law action, completed her payments, and obtained a state court order that “each creditor had been paid 100% of their claim” and that creditors must “report their claim balance as zero.”

Afterward, plaintiff checked her credit report and found that two of her creditors continued to report a balance due and owing.  Plaintiff sent letters to the consumer reporting agencies regarding the information related to these two accounts and enclosed a copy of the state court order.  Experian responded by telling plaintiff that it had forwarded her letter to the creditors, who informed it that their debts remained because plaintiff understated the debts in the state court action, causing plaintiff’s payments to be insufficient to pay them in full.

Plaintiff responded by filing FCRA claims against the creditors and Experian for failing to conduct a reasonable investigation after  receiving notice of her dispute over the debts, as required by 15 U.S.C. § 1681s-2(b), and against Experian alone for allegedly failing to follow reasonable procedures to ensure that her consumer report was accurate, as required by 15 U.S.C. § 1681e(b).

The Garland court granted summary judgment to the defendants.  In doing so, the court reasoned that the purpose of requiring furnishers of information and credit reporting agencies to investigate disputed information is to require them to correct factual inaccuracies.  Plaintiff’s complaint did not raise a factual inaccuracy; rather, plaintiff raised a question of the legal effect of the Wisconsin state court action.  While the state court order could be read to preclude the creditors from claiming that plaintiff owed them anything, Wisconsin state law also provides that neither the court’s determination of the amount due nor the acceptance of plan payments precludes creditors from litigating and obtaining a judgment on their claim.  Also, while the Constitution of the United States specifically precludes a state law from altering a valid contract, the notices and orders in the state court case could be read to state that the creditors voluntarily agreed to alter their claims to be consistent with the state law repayment plan, a claim that the creditors denied.  As a result, the court found that the legal effect of the state court case was disputed and that plaintiff’s claim, in fact, did not turn on whether inaccurate factual information was reported by the creditors and the consumer reporting agencies but, rather, on the effect of the state court proceeding.  Because courts, and not creditors or consumer reporting agencies, are charged with resolving legal disputes, the Garland court held that its plaintiff could not bring a FCRA claim against the defendants for their failure to resolve these legal issues to her liking.

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