A recent opinion from a federal court in North Carolina emphasizes how difficult it is to succeed on a motion to dismiss a lawsuit arising under the Fair Credit Reporting Act (FCRA). Rejecting a challenge to a plaintiff’s standing and the timeliness of the FCRA claims, the court denied the motion to dismiss and reminded the parties about their mediation obligations.
Case Background
Plaintiff and her boyfriend applied to lease an apartment, but when it came time to sign, the couple had broken up, so Plaintiff never signed any lease. However, the boyfriend proceeded to use Plaintiff’s name on the lease and then failed to make rental payments. The debt was eventually assigned to Defendant for collections.
In June 2019, Defendant began furnishing information about the unpaid debt to Trans Union, which Plaintiff immediately discovered. Between 2019 and 2021, Plaintiff unsuccessfully disputed the debt with the apartment complex on the grounds that she never signed the lease, eventually submitting a police report about the fraud.
In March and May of 2023, Plaintiff applied for and was denied a credit card on the basis of the negative information concerning the unpaid rent. Months later, Plaintiff submitted multiple written disputes to Trans Union and Defendant disputing the accuracy of the information reported on the unpaid rent.
Plaintiff filed suit, asserting multiple violations of the FCRA. Defendant moved to dismiss the lawsuit, advancing arguments based on lack of Article III standing, the statute of limitations, and a failure to sufficiently state a claim.
Court’s Analysis
Starting with the issue of standing, the court considered Plaintiff’s alleged injuries generally, noting that injuries like “damaged credit, economic damages, and emotional injuries” “plainly constitute injury necessary to satisfy Article III standing.” While Defendant argued that those injuries were not “fairly traceable” to the collection agency, the court disagreed, explaining that “at this juncture,” Plaintiff alleged facts “permitting a plausible inference that Defendant’s reporting of the allegedly non-existent debt to Trans Union, and its reaffirmation of the allegedly incorrect information’s accuracy, led directly to her harms noted above.”
Regarding the statute of limitations, Defendant’s argued that “the two-year FCRA statute of limitations began running when Plaintiff discovered the allegedly inaccurate debt on her credit report in 2019, or when she sent a dispute to defendant in 2021, rendering her 2024 complaint untimely.” The Court disagreed, holding that “[b]ecause each notice of a dispute triggers a separate duty to investigate, it also triggers a separate statute of limitations.”
Finally, the Court briefly disposed of Defendant argument that Plaintiff failed to sufficiently state a claim. As summarized by the court, “an investigation under FCRA must be reasonable, and the failure to discover inaccurate information can render an investigation unreasonable and so violative of FCRA. . . . Indeed, determination of reasonableness of an investigation is ordinarily improper even at summary judgment, and normally reserved for a factfinder.” (citations omitted).
Key Takeaway for FCRA Claims
The court’s treatment of the collection agency’s motion to dismiss here is not unique. In general, it is difficult for furnishers of credit-related information to dispose of a lawsuit in a motion to dismiss. In defending against FCRA claims, furnishers must often consider whether an early motion to dismiss is worth the cost.
