Beseke v. Equifax Information Services LLC

Background

Kurt A. Beseke brought this action individually and on behalf of similarly situated people, but the case was bifurcated so that discovery and motions on his individual claims would come before class-certification discovery. The opinion addresses Beseke’s individual claims.

Equifax Information Services LLC is a consumer reporting agency regulated by the Fair Credit Reporting Act (FCRA). Beseke’s claims concerned Equifax’s reporting of his Chase Bank mortgage account. Beseke was behind on the mortgage from at least October 2008 through June 2011. In 2011, he entered into a loan modification, brought the mortgage current, and eventually paid it off in 2014.

In 2017, Beseke obtained a credit disclosure showing a history of past-due payments during the period of his mortgage delinquency. He disputed Equifax’s reporting in March 2017. He alleged that Equifax continued to report information arising from the delinquency after the FCRA’s reporting period had expired and that Equifax sold credit reports containing that information to third parties. He testified that the reporting caused stress, anger, and frustration.

Equifax’s reporting system used a date of first delinquency to calculate when information should be removed. According to Equifax, when a delinquent account became current, its system removed the date of first delinquency, replaced it with the date of last activity, and removed individual late-payment entries separately. Equifax argued that it had not reported any individual late payment more than seven years old and that its automated reinvestigation confirmed the information with Chase.

Claims and Motions

Beseke asserted three FCRA claims:

Beseke moved for partial summary judgment on Count I. Equifax moved for summary judgment on all three counts. Summary judgment is appropriate only when there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law.

Court’s Analysis of Count I

The court held that the mortgage was an account placed for collection. It relied on collection letters submitted by Beseke that stated “Notice of Collection Activity.” The court also rejected Equifax’s argument that it could not be liable because it did not know the account had been placed for collection. The court stated that Equifax had a duty to use reasonable procedures to ensure maximum possible accuracy and that the FCRA required Chase to provide the date the delinquency began.

The court further held that bringing the mortgage current did not restart the reporting period for the original delinquency. When Beseke brought the account current, Equifax should have treated the current repayment arrangement as a new account, while applying the FCRA’s obsolescence rules to the prior delinquency. The court found that the late payments arising from the original delinquency should not have been reported after April 2016.

The court concluded that Equifax’s replacement of the date of first delinquency with the date of last activity effectively re-aged the delinquent payments. It found that this practice conflicted with the FCRA’s purpose of allowing dated adverse information to age off credit reports and created a disincentive for consumers to pay delinquent mortgages.

The court also found sufficient evidence that Equifax disclosed Beseke’s credit report, including the obsolete mortgage history, to at least one third party. The record showed that Equifax provided access to Beseke’s credit file and credit score to creditors, and that two creditors issued adverse decisions based in whole or in part on information from a consumer reporting agency.

The court ruled that there was no genuine dispute of material fact that Equifax violated § 1681c(a)(4). It did not decide whether the violation was willful as a matter of law. Willfulness under the FCRA includes knowing or reckless conduct, and the court found that whether Equifax’s interpretation of the statute was objectively unreasonable was a question for the jury. Because the court found a violation under § 1681c(a)(4), it did not decide whether Equifax also violated § 1681c(a)(5).

Court’s Analysis of Counts II and III

As to Count II, the court found a factual dispute about whether omitting the date of first delinquency, while reporting the related derogatory payment history, created a materially misleading impression. The court explained that a report can be legally actionable even if some information is technically accurate when the report is misleading. Whether the omission was misleading enough to constitute a negligent or willful violation of § 1681e(b) was left for the jury.

As to Count III, the court found a factual dispute about whether Equifax conducted a reasonable reinvestigation. Although Equifax sent Beseke’s dispute to Chase through an automated verification system and Chase verified the reported information, the court stated that a reasonable reinvestigation requires more than simply repeating information from another source. Beseke presented evidence that Equifax had historical records, including frozen scans, that could have helped determine whether the date of first delinquency was more than seven years old. A jury could therefore find that Equifax needed to do more than rely on Chase’s response.

The court also rejected Equifax’s argument that Beseke could not establish damages at summary judgment. Beseke’s testimony about stress, anger, and frustration was sufficient to create a factual issue concerning emotional-distress damages, although a jury could ultimately decide that he was not entitled to damages.

Disposition

The court granted in part and denied in part Beseke’s motion for partial summary judgment. It ruled that Equifax violated § 1681c of the FCRA, while leaving willfulness for the jury. The court denied Equifax’s motion for summary judgment. Counts II and III therefore remained subject to factual disputes, as did the questions of willfulness and damages.