Khouri v. Trans Union LLC

Background

Amir Khouri alleged that in March 2025 he found a vehicle advertised on Facebook Marketplace by Auto Sales Palm Beach LLC. Navy Federal Credit Union had pre-approved him for a loan, reviewed paperwork about the dealership, approved the transaction, and wired $28,000 directly to the dealership. Khouri alleged that he never received the vehicle and could not contact the dealership. He reported suspected fraud to Navy Federal, and he believed Navy Federal investigated and determined that the transaction and dealership were fraudulent. He also alleged that Navy Federal told him he would not be responsible for the money.

Navy Federal later reported the loan as having a past-due balance of $28,000. Khouri made a police report and a Federal Trade Commission identity-theft report, froze his credit reports, and disputed Navy Federal’s reporting with Trans Union LLC, Equifax Information Services, LLC, Experian Information Solutions, Inc., and Innovis Data Solutions, Inc. He alleged that the credit-reporting agencies forwarded the disputes to Navy Federal, which failed to conduct a reasonable investigation, review relevant information, or recognize that the account resulted from fraud.

Khouri asserted five causes of action: a Fair Credit Reporting Act claim against the credit-reporting agencies; a Fair Credit Reporting Act claim against Navy Federal; a California Consumer Credit Reporting Agencies Act claim against Navy Federal; a Consumer Credit Reporting Agencies Act claim against the credit-reporting agencies; and a Rosenthal Fair Debt Collection Practices Act claim against Navy Federal. Navy Federal moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim.

Fair Credit Reporting Act claim

The court focused on whether Navy Federal’s reporting was inaccurate or materially misleading because it did not report that Khouri disputed the loan based on fraud. Under 15 U.S.C. § 1681s-2(b), a furnisher of credit information that receives notice of a dispute must investigate, review relevant information, report the investigation’s results, and correct, delete, or block information found to be inaccurate or incomplete. The court explained that a consumer pursuing such a claim must make an initial showing that the furnisher’s report was inaccurate. A failure to note a dispute can qualify as inaccuracy when the dispute is genuine and could materially change how the reported debt is understood.

The court held that Khouri had not met that requirement. It distinguished cases involving debts that the consumer no longer legally owed and cases involving accounts fraudulently opened in the consumer’s name. According to the court, Khouri alleged that he had requested the loan and that the loan proceeds were paid to the dealership; the alleged fraud was that the dealership did not provide the vehicle. Khouri identified no law or statute that relieved him of the obligation to repay the loan. Because he had not shown that Navy Federal’s reporting was inaccurate or materially misleading, the court dismissed the Fair Credit Reporting Act claim. It therefore did not need to decide whether Navy Federal’s investigation was reasonable.

California Consumer Credit Reporting Agencies Act claim

The court applied the same reasoning to Khouri’s California claim. The parties agreed that the alleged inaccuracy under the California statute was based on the same allegations as the federal claim. Because Khouri had not adequately pleaded that Navy Federal’s reporting was inaccurate or incomplete, the court held that the California claim failed as well.

Rosenthal Fair Debt Collection Practices Act claim

Navy Federal argued that the Rosenthal Act claim was preempted, meaning displaced, by the Fair Credit Reporting Act to the extent it challenged the furnishing of information to credit-reporting agencies. The court agreed that the bulk of the allegations concerned allegedly misleading information supplied to those agencies and held that the Fair Credit Reporting Act preempted the Rosenthal Act claim to that extent.

The court separately held that allegations concerning debt-collection conduct outside Navy Federal’s communications with the credit-reporting agencies were too nonspecific and conclusory to satisfy the pleading standard. Khouri requested leave to amend and proposed adding allegations that Navy Federal sent loan statements showing the loan as past due, assessed late fees, and listed increasing amounts due. The court concluded that the proposed amendment would be futile because, given its conclusion that Khouri remained liable for repayment, sending bills and assessing late fees would not show coercive, deceptive, or unfair conduct.

Disposition

Judge William H. Orrick granted Navy Federal’s motion to dismiss. The opinion states that the motion was granted with prejudice. The conclusion states that Counts Two, Three, and Five against Navy Federal were dismissed without leave to amend.