Filed: Sep. 10, 2020
Latest Update: Sep. 10, 2020
Summary: Case: 19-10199 Document: 00515558131 Page: 1 Date Filed: 09/09/2020 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit No. 19-10199 FILED September 9, 2020 Lyle W. Cayce SCOTT DAVID HAMMER, Clerk Plaintiff - Appellant v. EQUIFAX INFORMATION SERVICES, L.L.C., EXPERIAN INFORMATION SOLUTIONS, INCORPORATED, Defendants - Appellees Appeal from the United States District Court for the Northern District of Texas USDC No. 3:18-CV-1502 Before HIGGINBOT
Summary: Case: 19-10199 Document: 00515558131 Page: 1 Date Filed: 09/09/2020 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit No. 19-10199 FILED September 9, 2020 Lyle W. Cayce SCOTT DAVID HAMMER, Clerk Plaintiff - Appellant v. EQUIFAX INFORMATION SERVICES, L.L.C., EXPERIAN INFORMATION SOLUTIONS, INCORPORATED, Defendants - Appellees Appeal from the United States District Court for the Northern District of Texas USDC No. 3:18-CV-1502 Before HIGGINBOTH..
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Case: 19-10199 Document: 00515558131 Page: 1 Date Filed: 09/09/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 19-10199 FILED
September 9, 2020
Lyle W. Cayce
SCOTT DAVID HAMMER, Clerk
Plaintiff - Appellant
v.
EQUIFAX INFORMATION SERVICES, L.L.C., EXPERIAN INFORMATION
SOLUTIONS, INCORPORATED,
Defendants - Appellees
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:18-CV-1502
Before HIGGINBOTHAM, JONES, and DUNCAN, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Scott Hammer filed suit under the Fair Credit Reporting Act against two
consumer reporting agencies—Equifax Information Services and Experian
Information Solutions—after they deleted a favorable credit item from his
credit report and refused to restore it. The district court dismissed Hammer’s
claims. We affirm.
Case: 19-10199 Document: 00515558131 Page: 2 Date Filed: 09/09/2020
No. 19-10199
I
In 2010, Scott Hammer obtained a credit card from Capital One Bank. 1
Every month thereafter, he made timely payments on his credit card. The three
largest consumer reporting agencies (“CRAs”) in the United States—Equifax,
Experian, and TransUnion—reported his Capital One account until 2017.
After learning that the CRAs stopped reporting the account, he requested that
each CRA restore it. TransUnion complied with his request, but Equifax and
Experian refused.
Capital One told Hammer that it was reporting the status of his credit
account to each CRA. Hammer again disputed his report with Equifax and
Experian, this time sending them proof of his Capital One account and
payment history. They again refused to add his account to their credit reports.
After Hammer disputed the credit reports for a third time, Experian and
eventually Equifax added the Capital One account to his credit report. Within
a week, however, Equifax removed the account again.
Hammer’s credit score fell as a result of losing a positive trade line from
his report. He was then denied a credit card, rejected for one mortgage, and
offered a high interest rate on another. Hammer sued Experian and Equifax
for negligent and willful violations of the Fair Credit Reporting Act (“FCRA”).
The district court granted the Defendants’ motions to dismiss and entered final
judgment resolving Hammer’s claims. Hammer now appeals.
1 Because factual allegations pleaded in a complaint are accepted as true for purposes
of reviewing a district court’s decision granting a motion to dismiss, we assume the truth of
the factual allegations in the Second Amended Complaint.
2
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II
We review de novo a district court’s grant of a Rule 12(b)(6) motion to
dismiss. 2 “To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on
its face.’” 3 Although “a court must accept as true all of the allegations contained
in a complaint,” that tenet “is inapplicable to legal conclusions” or
“[t]hreadbare recitals of the elements of a cause of action, supported by mere
conclusory statements.” 4
III
Concerned by “abuses in the credit reporting industry,” 5 Congress
enacted the FCRA to ensure fair and accurate credit reporting that protects
consumers while meeting the needs of commerce. 6 To that end, the Act imposes
several obligations on CRAs and authorizes consumers to bring a private cause
of action in response to negligent or willful violations. 7 Where possible, courts
construe these obligations consistently with the Act’s “ambitious objective . . .
which uses expansive terms to describe the adverse effects of unfair and
inaccurate credit reporting and the responsibilities of consumer reporting
2True v. Robles, 571 F.3d 412, 417 (5th Cir. 2009) (quoting Stokes v. Gann,
498 F.3d
483, 484 (5th Cir. 2007)) (internal quotation marks omitted).
3Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550
U.S. 544, 570 (2007)).
4 Id. (citing Twombly, 550 U.S. at 555).
5 St. Paul Guardian Ins. Co. v. Johnson, 884 F.2d 881, 883 (5th Cir. 1989).
615 U.S.C. § 1681(b) (“It is the purpose of this [Act] to require that consumer reporting
agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit
. . . in a manner which is fair and equitable to the consumer, with regard to the
confidentiality, accuracy, relevancy, and proper utilization of such information in accordance
with the requirements of this [Act].”).
7 Id. § 1681o(a) (negligent violations);
id. § 1681n(a) (willful violations).
3
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agencies.” 8 In this appeal, Hammer argues that the CRAs violated three of
these statutory obligations. Equifax, Hammer urges, failed to follow
reasonable procedures to assure the maximum possible accuracy of his credit
report. He also contends that both CRAs failed to investigate their omission of
his Capital One account from their credit reports. And he maintains that
Equifax failed to notify him when it reinserted the Capital One account into
his credit report.
A
Section 1681e(b) provides: “Whenever a consumer reporting agency
prepares a consumer report it shall follow reasonable procedures to assure
maximum possible accuracy of the information concerning the individual about
whom the report relates.” 9 This provision does not hold a CRA strictly liable
for all inaccuracies. Rather, the adequacy of a CRA’s procedures is judged
according to “what a reasonably prudent person would do under the
circumstances.” 10
Hammer alleges that Equifax violated the FCRA because it had
favorable information about his Capital One card, omitted it from his credit
report, and thereby harmed his creditworthiness. In his view, a credit report
is inaccurate under § 1681e(b) if a CRA (1) has verified information on the
consumer, (2) omits that information from the report, and (3) that omission
8 Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 62 (2007) (citing 15 U.S.C. § 1681(a)); St.
Paul
Guardian, 884 F.2d at 885 n.3 (“We also note that the conclusion we reach today is in
accord with the legislative purposes behind the FCRA.”); see also Cortez v. Trans Union, LLC,
617 F.3d 688, 706 (3d Cir. 2010) (internal quotation omitted) (“These consumer oriented
objectives support a liberal construction of the FCRA.”).
9 15 U.S.C. § 1681e(b). A consumer report, also known as a credit report, is a
“communication of any information by a [CRA] bearing on a consumer’s credit worthiness . .
. which is used . . . as a factor in establishing the consumer’s eligibility for [] credit . . . to be
used primarily for personal, family, or household purposes.” 15 U.S.C. § 1681a(d)(1).
10 Thompson v. San Antonio Retail Merchants Ass’n,
682 F.2d 509, 513 (5th Cir. 1982).
4
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harms the consumer’s credit. Our case law does not support this reading of
§ 1681e(b). A credit report does not become inaccurate whenever there is an
omission, but only when an omission renders the report “misleading in such a
way and to such an extent that it can be expected to adversely affect credit
decisions.” 11 For example, in Sepulvado v. CSC Credit Services, Inc., a credit
report stated that an entry had been “assigned” in 1994, but failed to state that
the obligation arose six years earlier. 12 The consumer argued that this
omission rendered the report incomplete and thus inaccurate. We held that the
“report may have been incomplete, but it was not . . . facially misleading or
inaccurate when prepared” because an “assigned” obligation must have existed
before the assignment. 13 The Court “decline[d], at least in [that] case, to
construe § 1681e(b) in a way that would require completeness without regard
to whether the disputed entry was misleading.” 14
For that reason, the omission of a single credit item does not render a
report “inaccurate” or “misleading.” Businesses relying on credit reports have
no reason to believe that a credit report reflects all relevant information on a
consumer. 15 Indeed, such a requirement would be impossible for a CRA to
satisfy, as creditors furnish CRAs with consumer information only on a
11 Sepulvado v. CSC Credit Servs., Inc., 158 F.3d 890, 895 (5th Cir. 1998).
12 Id.
13 Id. at 896.
14 Id.
15 See FEDERAL TRADE COMM’N, 40 YEARS OF EXPERIENCE WITH THE FAIR CREDIT
REPORTING ACT: AN FTC STAFF REPORT WITH SUMMARY OF INTERPRETATIONS, at 67–68
(2011), https://www.ftc.gov/sites/default/files/documents/reports/40-years-experience-fair-
credit-reporting-act-ftc-staff-report-summary-interpretations/110720fcrareport.pdf (“CRAs
are not required to include all existing derogatory or favorable information about a consumer
in their reports.”).
5
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voluntary basis. 16 Hammer has not alleged, for example, that the CRAs
violated their stated disclosure policies or maintained an undisclosed policy of
deleting certain favorable items. 17 And Hammer’s case is not one that is “truly
extraordinary.” 18 As a result, his § 1681e(b) claim fails.
B
Hammer claims that the Defendants violated § 1681i(a) by failing to
investigate the omission of his Capital One account from his consumer report.
That provision allows consumers to dispute “the completeness or accuracy of
any item of information contained in a consumer’s file” and requires the CRA
to “conduct a reasonable reinvestigation to determine whether the disputed
information is inaccurate.” 19 If the disputed item is “inaccurate or incomplete
or cannot be verified,” the CRA must promptly modify or delete it. 20 Unlike
§ 1681e(b) which concerns the accuracy of “information,” § 1681i(a) applies only
to “item[s] of information,” which are credit entries, such as an account,
bankruptcy case, civil suit, or tax lien. 21 While his Capital One account is an
item in a credit file, Hammer did not dispute its accuracy or completeness.
16 CHERYL R. COOPER & DARRYL E. GETTER, CONG. RESEARCH SERV., R44125,
CONSUMER CREDIT REPORTING, CREDIT BUREAUS, CREDIT SCORING, AND RELATED POLICY
ISSUES 4–5 (2019) (“Furnishing tradelines is voluntary, and furnishers are not required to
submit tradelines to all CRAs. . . . Furnishers also have discretion over the types of
obligations they wish to report.”).
17Cf. FEDERAL TRADE COMM’N, supra note 15, at 67–68 (“[A] CRA may not mislead its
subscribers as to the completeness of its reports by deleting favorable information and not
disclosing its policy of making such deletions.”) (emphasis added).
18 Sepulvado, 158 F.3d at 896.
1915 U.S.C. § 1681i(a)(1)(A). A consumer file is composed of “all of the information on
that consumer recorded and retained by a consumer reporting agency regardless of how the
information is stored.” Id. § 1681a(g).
20 Id. § 1681i(a)(5)(A).
See, e.g.
, id. § 1681c(a) (listing “items of information” that must be excluded from a
21
consumer report).
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According to his complaint, he only “disputed the missing account[,] . . . stating
that the Capital One account should appear on his credit report.” That is, he
disputed the completeness of his credit report, not of an item in that report. As
a result, he did not trigger the CRA’s § 1681i(a) obligation to investigate.
C
Section 1681i(a)(5)(B)(ii) provides that if a CRA deletes information from
a consumer’s file due to a consumer dispute, it must notify the consumer within
five days of reinserting that information into the consumer file. Here, Hammer
alleges that Equifax failed to provide him the statutory notice when it
reinserted the Capital One account in his credit report. But § 1681i(a)(5)(B)
only concerns items deleted from and reinserted into credit files, and Hammer
repeatedly argued in his briefs that Equifax had not removed the Capital One
card from his credit file but only excluded it from his credit report. Equifax
therefore had no duty under § 1681i(a)(5)(B)(ii) to notify Hammer.
Hammer argues that even if he failed to state a claim under
§ 1681i(a)(5)(B), he should be allowed to amend the pleading. “A district court’s
refusal to allow leave to amend is reviewed for abuse of discretion by the court
of appeals.” 22 “In light of the presumption in favor of allowing pleading
amendments, courts of appeals routinely hold that a district court’s failure to
provide an adequate explanation to support its denial of leave to amend
justifies reversal.” 23 But when the justification for the denial is “readily
apparent,” a judge’s failure to explain “is unfortunate but not fatal to
affirmance if the record reflects ample and obvious grounds for denying leave
22 5B FED. PRAC. & PROC. CIV. § 1357 (3d ed.) (citing Miller v. BAC Home Loans
Servicing, L.P., 726 F.3d 717, 722 (5th Cir. 2013)) (other citations omitted).
23 Mayeaux v. La. Health Serv. & Indent. Co., 376 F.3d 420, 426 (5th Cir. 2004)
(citation omitted).
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to amend.” 24 Futility is one such basis, and we review a proposed amendment
under “the same standard of legal sufficiency as applies under Rule 12(b)(6).” 25
The district court already provided Hammer with two opportunities to amend
his complaint, and Hammer has repeatedly claimed that Equifax never deleted
his Capital One item from his credit file. As a result, Hammer’s claim is likely
futile, and the district court did not abuse its discretion by dismissing the
complaint with prejudice.
IV
We affirm the district court’s judgment.
24 Id. (citation and internal quotation marks omitted).
25Marucci Sports, L.L.C. v. Nat’l Collegiate Athletic Ass’n, 751 F.3d 368, 378 (5th Cir.
2014) (quoting Stripling v. Jordan Prod. Co., LLC,
234 F.3d 863, 873 (5th Cir. 2000)).
8
