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Second Circuit Upholds Dismissal of FCRA Claim Due to Customer’s Failure to Allege Dispute to CRA

A three-judge panel in the Second Circuit recently affirmed a Connecticut district court decision dismissing a Fair Credit Reporting Act suit against Salisbury Bank and Trust Company because the customer had not notified a credit reporting agency of the alleged error in his credit report.

In Sprague v. Salisbury Bank and Trust Company, No. 19-3241, 2020 U.S. App. LEXIS 25157 (2d Cir. Aug. 10, 2020), Appellants borrowed money from Salisbury to purchase a home and, after several years, Salisbury initiated foreclosure proceedings. The parties stipulated to a $40,000 deficiency judgment. When Appellant later noticed his credit report improperly listed the mortgage as still open, he notified Salisbury, who acknowledged the erroneous report and informed Appellant that a correction had been made. Appellants subsequently learned that Salisbury did not correct the erroneous information until several months later.

Appellants filed a complaint alleging Salisbury violated FCRA by “negligently and willfully fail[ing] to perform a reasonable reinvestigation and correction of inaccurate information,” and by “engag[ing] in behavior prohibited by FCRA by failing to correct errors in the information that it provided to credit reporting agencies…after [Appellants] notified [Salisbury Bank] of the error.”

The district court dismissed the complaint reasoning Appellants failed to state a claim under 15 U.S.C. § 1681s-2(b) because they (1) did not plead that they notified a CRA of the disputed accuracy of Salisbury’s reports and (2) did not allege that a CRA notified Salisbury of the dispute. Further, the court reasoned Appellants failed to state a claim under 15 U.S.C. § 1681s-2(a) because there is no private right of action under this subsection.

The Second Circuit affirmed the district court’s conclusions as to both subsections of FCRA. First, the court held enforcement of 15 U.S.C. § 1681s-2(a) is restricted to federal and state authorities. Second, the court held that 15 U.S.C. § 1681s-2(b) is not implicated simply because a consumer contacts a furnisher, reasoning “the statute is clear that the notice triggering [a furnisher’s] duties must come from a CRA.” Because Appellants did not allege that a CRA notified Salisbury Bank of their dispute, nor did they allege that they notified a CRA of the discrepancy, they did not allege facts sufficient to state a claim under Section 1681s-2(b).

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