SimmsParris v. Countrywide Financial Corp., No. 09-4542; Third Circuit; opinion by Chagares, U.S.C.J.; filed July 28, 2011. Before Judges Barry, Chagares and Vanaskie. On appeal from the District of New Jersey. [Sat below: Judge Hayden.] DDS No. 15-8-3242 [10 pp.]

Michele SimmsParris brought this action under the Fair Credit Reporting Act (FCRA) to recover for the reporting of allegedly false information about her mortgage repayments.

SimmsParris obtained a mortgage loan from Countrywide Home Loans (CHL) on Feb. 22, 2007. CHL maintains that, although SimmsParris’s payments were due on the first of each month, her December 2007 payment was not received until Dec. 31, and her January 2008 payment was not received until Jan. 25. CHL states that it reports the status of its entire active loan portfolio to Experian, Equifax, Transunion and Innovis every month, and followed this practice by reporting that SimmsParris’s payments were not timely received.

SimmsParris learned CHL had furnished information to credit reporting agencies that her mortgage payments were late. She immediately had the law firm in which she was a partner draft a letter to CHL and its parent company, Countrywide Financial Corp. (CFC), to inform them that CHL had furnished false information. CFC and CHL did not alter the information they provided and continued to report that her payments had been delinquent.

SimmsParris filed suit, seeking to recover for defamation, false light invasion of privacy, breach of contract, negligence, negligent supervision, conversion, fraud, and violations of the FCRA. She also sought and received a temporary restraining order that enjoined CHL from reporting false information to third parties regarding SimmsParris’s loan payments. The District Court granted summary judgment against her, determining that a private litigant seeking to recover against the furnisher of information under the FCRA must first make a complaint to the consumer reporting agency before the furnisher of information can face liability under the statute.

On appeal, SimmsParris contests the grant of summary judgment only as to her FCRA claim.

Held: Notice of a dispute under the Fair Credit Reporting Act must be given by the credit reporting agency to the furnisher of information, and cannot come directly from the consumer.

The FCRA has several provisions that create liability for violations of the act; 15 U.S.C. 1681s-2(b) is the only section that can be enforced by a private citizen seeking to recover damages caused by a furnisher of information. The duties that are placed on furnishers of information are implicated only “[a]fter receiving notice pursuant to section 1681i(a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency.” Notice must be given by the credit reporting agency, and cannot come directly from the consumer.

SimmsParris argues that the District Court overly limited the cause of action in § 1681s-2(b) by requiring that a credit reporting agency be included “as one of the necessary players” in a private individual’s claim. SimmsParris contends that the required notice may come from any consumer reporting agency, and that it need not come from an agency to which the furnisher provided information. The court rejects this contention. First, the language that Congress used in § 1681i(a)(2)(A) provides that “the agency shall provide notification of the dispute to any person who provided any item of information in dispute.” The notice required to trigger the furnisher’s duties under the statute does not come from “any” consumer reporting agency or “an” agency, but, rather, must come from “the” agency. Given the context of the use of the word “the,” Congress could only have been referring to the consumer reporting agency that received notice of a dispute from the consumer.

Second, the statute sets forth a framework under which the consumer reporting agency is the central focus of any private litigation. Although consumer reporting agencies are subject to immediate suit by consumers under §§ 1681n and 1681o, furnishers of the information are not. Instead, a private citizen wishing to bring an action against a furnisher must first file a dispute with the consumer reporting agency, which then must notify the furnisher of information that a dispute exists. Only after this notification can the furnisher face any liability to a private individual. To allow a consumer to bypass this framework by hiring a law firm that occasionally acts as a consumer reporting agency would interfere with this congressionally chosen path for creating liability. It would cause furnishers of information to have to respond directly to consumers rather than to reporting agencies, and would upset the balance enacted by the statute.

Under the statutory framework and clear language of the statute, a consumer must first alert the credit reporting agency that reported the allegedly erroneous information of a dispute. It is then up to the reporting agency to inform the furnisher of information that there has been a dispute, triggering the furnisher’s duty to investigate. It is only when the furnisher fails to undertake a reasonable investigation that it may become liable to a private litigant under § 1681s-2(b). Here, SimmsParris did not comply with the statutory framework before bringing suit.

SimmsParris, as a private litigant, is unable to maintain a cause of action under § 1681s-2(a). Further, as she did not provide notice of a dispute to the consumer reporting agency that reported the information to which she objected, that agency could not provide notice to CFC or CHL pursuant to § 1681i(a)(2), and in the absence of such notice, CFC and CHL were not obligated under the FCRA to undertake any investigation under § 1681s-2(b). The District Court did not err in granting summary judgment.

— By Debra McLoughlin

For appellant — Michele M. SimmsParris and Amy Maldonado (SimmsParris Maldonado Tehauno). For appellees — Martin C. Bryce Jr. and Daniel J.T. McKenna (Ballard Spahr).