District Court (Cal.) Rules that Furnisher’s Reinvestigation of Identity Theft Dispute Violated FCRA and CCRAA

In Miller v. Westlake Servs. LLC, No. 8:21-cv-00692-JLS-KES, 2022 U.S. Dist. LEXIS 197076, at *21-30 (C.D. Cal. Oct. 28, 2022), Judge Staton granted partial summary judgment to an FCRA Plaintiff who claimed that she was a victim of identity theft.

First, the Court declines Plaintiff’s invitation to rule that “solely engaging in data conformity” renders a furnisher’s investigation per se unreasonable as a matter of law. (Mem. at 15-16.) Plaintiff’s primary cited authority in support of this position, Marchisio v. Carrington Mortg. Servs., LLC, 919 F.3d 1288 (11th Cir. 2019), does not stand for the proposition that a furnisher’s investigation that consists of comparing data in an ACDV with data in the furnisher’s database is necessarily unreasonable as a matter of law. As a district court in the Northern District of Georgia—which, unlike this Court, was bound to follow Marchisio—explained:  “In [Marchisio], the Eleventh Circuit did not hold that a furnisher’s mere reliance on its own database establishes that the investigation is unreasonable as a matter of law. Instead, the Eleventh Circuit agreed with the district court that the defendant-furnisher’s investigative efforts were unreasonable because the furnisher “failed to create a reliable system for inputting information” into its own databases. Marchisio, 919 F.3d at 1302. The defendant in Marchisio was even aware that the system for inputting information into the databases “was unreliable and [was] aware that incorrect information concerning Plaintiffs’ loan balance was still being reported[.]” Id. The Marchisio court also explained that “there was a large ‘disconnect’ between Defendant’s system for debt verification and its ad hoc handling of settlement-related changes to debt obligations.” Id. Despite the defendant’s awareness of its own unreliable system and incorrect information, the defendant did not take any steps to ensure that accurate information regarding the plaintiffs’ account (specifically, the terms of a settlement agreement) was “communicated to those who generate reports to reporting agencies.” Id.”   Ponder v. Ocwen Loan Servicing, LLC, 2020 WL 4550934, at *12 (N.D. Ga. Apr. 23, 2020), R&R adopted, 2021 WL 5027495 (N.D. Ga. Aug. 4, 2021). In sum, Marchisio contemplates that in certain circumstances the “data conformity” review that Plaintiff finds fault with may be sufficient to discharge a furnisher’s duty to investigate under the FCRA.  Under applicable Ninth Circuit precedent, “the term ‘investigation’ on its own force implies a fairly searching inquiry.” Gorman, 584 F.3d at 1157 (emphasis added). “Requiring furnishers, on inquiry by a CRA, to conduct at least a reasonable, non-cursory investigation comports with the aim of the statute to ‘protect consumers from the transmission of inaccurate information about them.’ Id. (quoting Kates v. Crocker Nat’l Bank, 776 F.2d 1396, 1397 (9th Cir. 1985) (emphasis added). The key question is “whether the furnisher’s procedures were reasonable in light of what it learned about the nature of the dispute from the description in the CRA’s notice of dispute.” Id. Here, there is no dispute that Plaintiff submitted at least six dispute letters to the CRAs—one to each CRA on January 22, 2020, and additional letters to each CRA on February 27, 2022—and that all of those dispute letters were transmitted to Defendant via ACDVs. (Def.’s Response ¶¶ 33-34.) Further, there is no dispute that each letter states that Plaintiff did not open the account that Defendant was attributing to her, and some of the letters informed Defendant of three reports that she filed with the Huntington Beach Police Department, the report identification numbers, and the identification number of the report she filed with the Federal Trade Commission. (Id. ¶ 30.) The letters also contain copies of Plaintiff’s Social Security Card, driver’s license, and a letter confirming her mailing address, and other statements of additional identifying information. (Id. ¶ 31.) In one of the letters, Plaintiff included cover pages of the police reports and contact information for Huntington Beach police officers Defendant could speak to about the reports. (Id. ¶ 32.) Last, several of Plaintiff’s disputes were coded “103: claims true identity fraud/account fraudulently opened.” (Id. ¶ 42.)  Further, Defendant does not dispute that its credit dispute analysts “conduct cursory reviews of disputes.” (Bergiman Decl. ¶ 20 (emphasis added).) The credit dispute analysts who reviewed the ACDVs associated with Plaintiff’s account testified in deposition that they did not examine the substance of Plaintiff’s dispute letters, which Defendant has admitted was consistent with its standard procedure for disputes. (Def.’s Response ¶¶ 40-41.) Defendant has also admitted that credit dispute analysts’ investigations are limited in several respects. These analysts do not review prior disputes from a consumer when reviewing an ACDV. (Id. ¶ 56.) Further, the analysts generally do not review account notes in Defendant’s system or contact consumers. (Id. ¶¶ 57-58.) Nor do they obtain separate reports about the disputing consumer, like a skip-trace or LexisNexis report or use the internet to conduct additional research pertinent to the dispute. (Id. ¶¶ 59-60.) Last, they do not contact dealers from whom contracts originated or other personnel employed by Defendant for additional information. (Id. ¶¶ 61-62.) There is no dispute here that Jose Mata and Karen Campos, the analysts who reviewed Plaintiff’s ACDVs, did not review the internal notes on the account indicating Plaintiff’s direct disputes alleging identity theft as well as an apparent call from a detective from the Huntington Beach Police Department. (Marchiando Decl. Ex. 27 (Mata Dep. Tr.) at 92:1-14; Marchiando Reply Decl. Ex. 6 (Campos Dep. Tr.) at 75:19-25, 76:13-17.) Nor is it disputed that, whenever an analyst reviewed an ACDV containing Plaintiff’s disputes, he or she did not review any other ACDVs that Defendant had already received. (Id. ¶ 56.) . . . Defendant argues that its investigation procedure for identity theft disputes is reasonable because identity theft disputes that are supported with appropriate documents, such as an affidavit or a police report, are escalated to its legal department. (Opp. at 20-22; Bergiman Decl. ¶¶ 23-24, 33.) Defendant also argues that its approach is one that courts have endorsed, citing to Woods v. LVNV Funding, LLC, 27 F.4th 544 (7th Cir. 2022). (Opp. at 20.) In Woods, the Seventh Circuit held that a furnisher’s data-matching investigation was not unreasonable when the ADCV containing the consumer’s dispute had attached to it a police report indicating that the original creditor had sent the consumer two letters stating that their investigation had concluded that he was in fact responsible for disputed purchases. Id. at 550. In light of all the information that it received with the ACDV, the furnisher had requested additional documentation related to the dispute from the consumer, but received no response. Id. at 550-1. According to Defendant, its investigations of Plaintiff’s disputes in this case were reasonable because Plaintiff was told several times that Defendant would not investigate her disputes unless she provided an affidavit of identity theft or complete copies of the police reports that she filed. (Opp. at 21.) Defendant claims that—like the defendant in Wood—it sent Plaintiff a request to for additional supporting documentation that included an affidavit of identity theft for her to complete on April 13, 2020 and never received a response. (Id. at 13-14.) The procedure that Defendant followed here does not satisfy the FCRA’s “reasonable investigation” requirement. First, there is no dispute that credit dispute analysts’ mode of reviewing ACDVs, which Defendant admits is “cursory” and significantly restricted, cannot be a reasonable investigation under the FCRA. See Gorman, 584 F.3d at 1155 (“[A]n ‘investigation’ requires an inquiry likely to turn up information about the underlying facts and positions of the parties, not a cursory or sloppy review of the dispute.”). Second, there is no dispute that when these analysts determine that a consumer’s dispute based on identity theft has enough support to merit escalation to Defendant’s legal department they nevertheless communicate to the CRAs that the disputed information’s accuracy has been verified. (Def.’s Response ¶ 49; Hendricks Decl. Ex. 1 (Hendricks Rep.) at 3; Reply at 15.) In this case, the credit dispute analysts verified the accuracy of the reported information to the CRAs even though they had access to, but did not consult, internal notes on the account that indicated Plaintiff’s prior direct disputes and a telephone call from an apparent Huntington Beach police detective. Third, Defendant claims that Plaintiff’s disputes were escalated to the legal department at some point, but it has not stated when the investigation was escalated or what the legal department did to investigate Plaintiff’s disputes beside sending her a request for additional documents on April 13, 2020. (Opp. at 13-14; Reply at 15.) The only evidence to support the conclusion that the legal department’s investigation here was reasonable is that document request. But sending a letter requesting documents is not an investigation. . . .In sum, Defendant has, on one hand, conceded that credit dispute analysts’ review of ACDVs here was not sufficiently searching to constitute a reasonable investigation and, on the other hand, failed to provide sufficient evidence to support an inference that its legal department investigated Plaintiff’s disputes. Cf. Wood v. Credit One, 277 F. Supp. 3d at 851-53 (granting summary judgment to FCRA plaintiff on “reasonable investigation” element when plaintiff had presented “compelling evidence” that the furnisher’s investigation had been “cursory” and the furnisher “presented no evidence that it performed any degree of careful inquiry or that it conducted anything other than superficial, unreasonable inquiry” that the account at issue belonged to the plaintiff) (cleaned up). Given the undisputed facts here, the Court concludes that Defendant’s investigation of Plaintiff’s disputes was unreasonable as a matter of law.

As to Plaintiff’s CCRAA claim, the Court explained the intersection of the FCRA and CCRAA, concluding that liability under the CCRAA correlates not with the original reporting but with the FCRA’s reinvestigation and responding to the dispute through e-OSCAR.

“The California Legislature enacted [the] CCCRAA ‘to require that consumer credit reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit … and other information in a manner that is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.'” Soria, 2019 WL 8167925, at *8 (quoting Cal. Civ. Code § 1785.1(d)). “Similar to the FCRA, the CCCRAA requires furnishers not to provide ‘information on a specific transaction or experience to any consumer credit reporting agency if the [furnisher] knows or should know that the information is incomplete or inaccurate.'” Id. at 20 (quoting § 1785.25(a)). “To prevail on a [CCCRAA] claim, the plaintiff must prove that (1) Defendant is a ‘person’ under the [CCCRAA], (2) Defendant reported information to a CRA, (3) the information reported was inaccurate, (4) Plaintiff was harmed, and (5) Defendant knew or should have known that the information was inaccurate.” Robbins, 2017 WL 6513662, at *14. The parties’ arguments as to this claim parallel their FCRA arguments, and whether Defendant “knew or should have known that the information was inaccurate” mirrors the FCRA’s “reasonable investigation” requirement. See Sanchez v. U.S. Bank Nat’l Ass’n, 2019 WL 4540121, at *5 (C.D. Cal. June 27, 2019) (Staton, J.); cf. Scharer v. OneWest Bank, FSB, 2014 WL 12558124, at *7 (C.D. Cal. Sept. 8, 2014) (failure to raise genuine dispute as to reasonable investigation under FCRA sufficient to show no dispute as to CCCRAA’s “knows or should know” requirement). Thus, for the reasons discussed above in relation to the FCRA claim, the Court concludes that Defendant violated the CCCRAA as well when it “verified” the accuracy of the information on the account attributed to Plaintiff without conducting a reasonable investigation. Accordingly, the Court GRANTS Plaintiff’s Motion for Partial Summary Judgment as to Defendant’s liability under the CCCRAA. As with the FCRA, however, the Court finds that there is a genuine dispute of material fact as to whether Defendant’s violation was willful, and does not grant summary judgment on that issue.