3rd Circuit Addresses the Interplay Between Higher Education Act and FCRA with Regard to Reporting Student Loan Accounts

In Seamans v. Temple University, — F.3d —-, 2014 WL 658401 (3d Cir. 2014), the Court of Appeals for the Third Circuit addressed, in matters of first impression, the interplay between the Higher Education Act and the Fair Credit Reporting Act with respect to the responsibilities of an institution of higher education that furnishes information on student loan indebtedness to a consumer reporting agency (“CRA”).   The Court of Appeals addressed the extent of Temple’s duties under FCRA as a furnisher of credit information, and whether HEA materially impacts those duties, whether Plaintiff has raised a genuine issue of material fact as to the completeness and accuracy of Temple’s post-dispute filings and the reasonableness of Temple’s post-dispute investigative and corrective procedures, and whether FCRA does not permit private citizens to sue for damages caused by a furnisher’s failure to mark an account as disputed. The Court of Appeals held that the HEA did not materially affect the University’s obligations as a furnisher.   “[B]oth a straightforward reading of the statutory text and an assessment of the legislative intent compel the conclusion that HEA did not exempt Temple, as a furnisher, from its typical reporting obligations under FRCA. We conclude that furnishers of consumer credit data remain obligated to report fully and accurately under FCRA regarding the collection history and date of delinquency for even an HEA-qualifying education loan.” The Court of Appeals found that the inaccuracies in the consumer’s credit report were directly traceable to the University, even though the University used a third party vendor for its credit reporting.

[W]e agree with the three Courts of Appeals to have considered the question that even if the information is technically correct, it may nonetheless be inaccurate if, through omission, it “create[s] a materially misleading impression.” Saunders v. Branch Banking & Trust Co. of Va., 526 F.3d 142, 148 (4th Cir.2008); see also Boggio, 696 F.3d at 617; Gorman, 584 F.3d at 1163. Whether technically accurate information was “ ‘misleading in such a way and to such an extent that [it] can be expected to have an adverse effect’ “ is generally a question to be submitted to the jury.   Gorman, 584 F.3d at 1163 (quoting Saunders, 526 F.3d at 150). ¶  . . . We disagree with the District Court’s conclusion that Seamans is unable to establish causation for the alleged harm to his credit and the associated negative consequences. Under our interpretation of FCRA and HEA, the trade line’s appearance on Seamans’s credit report is directly traceable to Temple’s failure to report the Loan’s collection history and date of delinquency. Whether the harms alleged by Seamans, i.e., a drop in credit rating and associated loss of credit opportunities, can be linked to the appearance of the trade line on his credit report remains a disputed question of fact.

The Court of Appeals followed the 4th Circuit’s Saunders decision and found the obligation to flag an account as “disputed” to be privately enforceable.

We agree with this assessment, and conclude that a private cause of action arises under 15 U.S.C. § 1681s–2(b) when, having received notice of a consumer’s potentially meritorious dispute, a furnisher subsequently fails to report that the claim is disputed. We further find that a genuine issue of material fact exists as to whether Temple violated that duty here. The District Court held that Temple was under no obligation to report Seamans’s dispute because that dispute “was not bona fide given the status of [the Loan] under the HEA.” For the reasons already stated, however, we find that Seamans’s dispute appears to have merit, and the failure to report that dispute may constitute a material inaccuracy on Seamans’s credit report.

  Finally, the Court of Appeals remanded on the issue of punitive damages and willfullness under FCRA:

Here, the District Court endorsed the reasonableness of Temple’s conduct and concluded that a jury could not find Temple had acted willfully under Safeco. App. 24–25. But as noted earlier, we conclude that Temple’s construction of the HEA is in fact foreclosed by the straightforward statutory text. HEA simply does not affect reporting obligations under FCRA for furnishers such as Temple. Beyond that, Seamans points to evidence that undertrained ACS representatives spent, on average, only 15 minutes investigating each dispute, and that the policy of ACS was to never flag accounts as disputed or to report dates of first delinquency. If true, these policies would appear to be in outright conflict with a furnisher’s duties under FCRA.