Alsibai v. Experian Information Solutions, Inc.

Background

Abdulhadi Alsibai sued consumer credit reporting agencies under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681e(b). That provision requires a consumer reporting agency to follow reasonable procedures to assure the maximum possible accuracy of information in a consumer’s credit report.

Alsibai alleged that he filed a Chapter 7 bankruptcy petition in April 2019 and received a discharge on July 9, 2019. In September 2019, he obtained credit reports from Experian, Equifax, and Trans Union to check the bankruptcy reporting. Trans Union’s report described a former Citibank account as closed, with a zero balance, but also listed its pay status as “Charged Off” and showed a “High Balance of $5,344” for periods that included months after the bankruptcy discharge.

Alsibai alleged that the report was inaccurate or misleading because the “Charged Off” description could suggest that a debt remained owed, even though no debt from the account survived the bankruptcy discharge. He alleged harm to his credit, including receiving a TCF credit card at less favorable rates, as well as embarrassment, anguish, and emotional and mental pain.

Motion and legal standard

Trans Union filed a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The court applied the same standard used for a motion to dismiss for failure to state a claim under Rule 12(b)(6): accepting the complaint’s factual allegations as true and drawing reasonable inferences in Alsibai’s favor. The issue was whether Alsibai had plausibly alleged a claim, not whether he had already proved it.

To maintain the claim, Alsibai had to plausibly allege that Trans Union failed to follow reasonable procedures to assure accuracy, reported inaccurate credit information about him, caused him harm, and caused that harm through its failure to use reasonable procedures.

Accuracy of the report

Trans Union argued that its report was accurate because the account had been closed years before the bankruptcy and showed a zero balance, zero scheduled payment, and zero past-due amount. It characterized the other information as accurate historical information and argued that it would have been inaccurate to report the debt as discharged if the debt no longer existed when Alsibai filed for bankruptcy.

The court rejected that argument at the pleading stage. It explained that information may be actionable under the FCRA if it is technically correct but misleading. The relevant question was whether the report clearly communicated that no debt existed when Alsibai filed for bankruptcy. The court found ambiguity because the report used the term “Charged Off,” which Alsibai alleged could mean that a debt remained owed, and because it listed a high balance for July and August 2019, during and after the bankruptcy proceedings. The report did not indicate that Citibank had sold the debt or otherwise explain why a high balance appeared after the discharge.

Because the report could plausibly be read as describing an existing, undischarged debt, the court concluded that Alsibai had adequately alleged that the report was inaccurate or misleading. The court noted that Trans Union might later present evidence showing that a reasonable reader would not have been misled, but that issue could not be resolved on the pleadings.

Reasonable procedures and notice

Trans Union also argued that its procedures were reasonable under a prior settlement order and that Alsibai could not sue without first notifying Trans Union of the alleged inaccuracy. The court found those arguments insufficient to defeat the claim.

The court stated that the prior settlement order was not binding on a federal district court in Minnesota. It also found that the report’s “Charged Off” status and post-discharge high-balance entries created ambiguity that the settlement order did not resolve.

The court further held that the FCRA provision at issue did not require Alsibai to notify Trans Union of the inaccuracy before filing this lawsuit. Instead, a plaintiff could proceed by plausibly alleging that the agency acted unreasonably based on information already in its possession. Alsibai alleged that Trans Union knew his bankruptcy had been discharged and reported his other bankruptcy debts as discharged, yet did not report the Citibank account as discharged or otherwise indicate that no debt was owed. The court found those allegations sufficient at the pleading stage.

Disposition

The court denied Defendant Trans Union, LLC’s motion for judgment on the pleadings. The opinion did not make a final determination that Trans Union violated the FCRA. The opinion notes that Equifax Information Services, LLC, had been dismissed by stipulation and that Alsibai separately moved to enforce a settlement agreement against Experian Information Solutions, Inc.