Martinez v. Celtic Bank

Background

Lisa Martinez sued Celtic Bank under Section 1681s-2(b) of the Fair Credit Reporting Act. That provision requires a company that supplies information to credit reporting agencies—a “furnisher”—to investigate a consumer’s dispute after receiving notice from a credit reporting agency and to correct information found to be incomplete or inaccurate.

Martinez opened an Indigo Platinum Mastercard account with Celtic in 2019. During the COVID-19 pandemic, Celtic’s servicer, Genesis FS Card Services, enrolled eligible cardholders in a Disaster Relief Program that included reduced interest rates, reduced minimum payments, and waived fees. During a May 27, 2020, telephone call, a Genesis representative told Martinez that, once her account was registered in the program, it would not be reported to a credit bureau as late. Martinez made an $80 payment on June 13, 2020. Celtic later reported the account as 30 days delinquent for August 2020.

Martinez disputed the delinquency with Genesis, the Consumer Financial Protection Bureau, and credit reporting agencies. In May 2022, Genesis and Celtic told her they would ask the credit reporting agencies to remove the August 2020 delinquency. Genesis submitted five automated forms requesting removal. Separately, the credit reporting agencies sent Celtic six dispute notices. Celtic says it investigated each notice and verified the reported delinquencies. The record showed that three investigations used automated systems and three were conducted by live agents, but all reviewed only Martinez’s payment history. They did not review account notes recording customer interactions and actions taken on the account.

Motions and Issues

Celtic moved for partial summary judgment on whether it willfully violated the FCRA and on the reasonableness of its investigations of three dispute notices. Martinez moved to strike arguments about the reasonableness issue because Celtic’s pre-motion letter had sought permission to file a motion only on willfulness. Celtic withdrew its request for a separate ruling that the investigations were reasonable as a matter of law, while maintaining that the investigations’ reasonableness was relevant to whether any violation was willful.

The court treated willfulness as covering both knowing violations and reckless violations. A knowing violation requires conscious or deliberate disregard of the statutory duty. A reckless violation requires conduct that disregards a substantial risk of violating the law. The court explained that a company’s interpretation of the FCRA is not reckless if it is objectively reasonable, but that this protection does not automatically resolve whether the company’s fact-based investigation was reckless.

Court’s Analysis

The court granted summary judgment to Celtic on the knowing-violation issue. It found that a reasonable factfinder could not conclude that Celtic deliberately violated the FCRA. Celtic acknowledged its duty to investigate and conducted investigations after receiving the dispute notices. The court also found no evidence that Celtic was consciously aware that its chosen investigative approach violated the Act. Martinez did not meaningfully contest this part of Celtic’s argument.

The court denied summary judgment on recklessness. The FCRA does not specify the precise type of investigation required, but the court explained that an investigation ordinarily involves a careful inquiry rather than a superficial review. The court viewed prior decisions as suggesting that a furnisher should review records associated with the disputed account, considering what the furnisher learned about the nature of the dispute.

The court identified significant evidentiary gaps in Celtic’s account of its investigations. Misty Dale, Celtic’s compliance manager, stated that Genesis analyzed Martinez’s payment history, but she did not establish the basis for that statement. In her deposition, Dale acknowledged that she lacked personal knowledge of what the investigating agents actually did and could not determine from the account records what they reviewed. The dispute notices themselves showed that Celtic received notice of disputes concerning account status, payment rating, and account history, but they did not establish what investigation occurred.

The court also found that a reasonable jury could conclude that reviewing only payment history created a substantial risk of an unreasonable investigation. Celtic maintained both payment-history records and account notes. The account notes included records of interactions with Martinez and the requests to remove the August 2020 delinquency. A jury could find that a reasonable investigation should have reviewed both categories of records and that Celtic knew payment history alone was incomplete but disregarded that limitation.

The court rejected Celtic’s argument that the dispute notices were so narrow that the account notes were irrelevant. Although some notices suggested that Martinez denied ever making a late payment, others challenged the reporting of late payments. The court also noted that Martinez’s complaints to the Consumer Financial Protection Bureau and Celtic’s own decision to request removal of the delinquency could have put Celtic on notice that she was disputing the reporting itself. A jury could therefore find that Celtic should have examined records concerning whether the delinquency should be reported.

The court further observed that Celtic repeatedly verified information that it had separately asked the credit reporting agencies to delete. Viewed in Martinez’s favor, that disconnect supported a factual dispute about whether Celtic’s investigations were excessively narrow. The court did not decide whether the reported delinquency was legally inaccurate; it held that the record contained a factual dispute about whether a fuller investigation would have produced a different result.

Disposition

The court granted in part and denied in part Celtic Bank’s Motion for Partial Summary Judgment. It granted the motion as to whether Celtic knowingly violated the FCRA and denied it as to whether Celtic acted recklessly. The court denied Martinez’s Motion to Strike as moot. The court scheduled a status conference for March 27, 2024, and directed the clerk to terminate the pending motions.