Court: District Court, E.D. Wisconsin; October 24, 2016; Federal District Court
Defendant Chase Bank USA, N.A. has been granted summary judgment in a lawsuit filed by Plaintiff Gerald Herrell, who alleged that Chase violated the Fair Credit Reporting Act (FCRA) by providing incorrect credit information and failing to conduct a reasonable investigation following his dispute. The court has jurisdiction under federal law, specifically 28 U.S.C. 1331.
Herrell claimed that his debt was extinguished under Wisconsin's six-year statute of limitations, asserting that Chase should have updated the reported balance to zero. However, the court determined that Herrell did not demonstrate a "factual inaccuracy" in the information reported by Chase. The timeline established that Herrell opened a credit card account in 2004, incurred over $6,000 in debt, and made his last payment in December 2009. Despite the lapse of time, Chase had not pursued collection in state court.
In March 2016, Herrell discovered that credit reporting agencies Equifax and Experian reported his debt as $6,311. In response to his dispute letters, Chase confirmed the accuracy of the reported information. Herrell's lawsuit argued that Chase could not report a balance after the statute of limitations had expired, while Chase contended that Delaware law governed the agreement and that the expiration of Delaware's statute did not affect the debt's existence. The court ultimately ruled in favor of Chase, concluding that Herrell’s claim failed under the law, leading to the dismissal of the case.
Summary judgment is granted when there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law, as per Fed. R. Civ. P. 56(a). Courts assess evidence favorably for the non-moving party, requiring the opposing party to provide specific facts to demonstrate a genuine issue for trial, rather than merely suggesting doubt about the material facts. A party may face summary judgment if it fails to establish an essential element of its case, which it must prove at trial.
The Fair Credit Reporting Act (FCRA) aims to ensure accurate credit reporting, promote banking efficiency, and protect consumer privacy. Section 1681 of the FCRA mandates obligations for Credit Reporting Agencies (CRAs) like TransUnion, Equifax, and Experian, as well as information furnishers such as Chase. CRAs compile consumer financial information to assist lenders, employers, and insurers in making credit and risk assessments.
Herrell's claim under FCRA § 1681s-2(b) pertains to the responsibilities of furnishers upon a consumer disputing credit report accuracy. To pursue a claim, the consumer must notify the CRA about the dispute, which then informs the furnisher. The furnisher must conduct a reasonable investigation into the disputed information, review all relevant details from the CRA, report findings back to the CRA, and rectify any inaccuracies with all CRAs if needed.
While the FCRA does not explicitly define the investigation process, the Seventh Circuit has determined that a "reasonable" investigation is required. The determination of what constitutes a reasonable investigation typically falls to the jury. Herrell asserts that Chase did not perform a reasonable investigation regarding his dispute, which he argues should have revealed that in Wisconsin, the expiration of the statute of limitations extinguishes both the right and the remedy.
Chase did not assert a legal right to collect a debt after the statute of limitations had expired, and merely indicated that the account showed an outstanding balance. According to the Fair Credit Reporting Act (FCRA), credit reporting agencies cannot report debts older than seven years, but this seven-year limit had not yet been reached. This creates a one-year gap following Wisconsin's six-year statute of limitations during which the debt cannot be legally collected. Herrell interprets Wisconsin law to mean that debts are extinguished within this one-year period, supported by the Wisconsin Supreme Court's ruling in *First National Bank of Madison v. Kolbeck*, which stated that the expiration of the statute of limitations extinguishes the creditor's right to collect the debt, although it does not equate to a payment of the debt itself.
The court acknowledged the logic in the argument that a mortgage, being secondary to the debt, would also be extinguished; however, it ultimately rejected this view, emphasizing that the bank retains the right to foreclose on the mortgage even if the debt is barred by the statute. The court reasoned that if the debt did not exist in some form, the bank could not foreclose. Despite this, there is an argument that reporting such debts on credit reports is counterintuitive since they cannot be collected. However, credit reports serve a broader purpose, reflecting a borrower's payment history, which lenders may consider when evaluating creditworthiness, regardless of the statute of limitations affecting the debt collection. This perspective aligns with rulings from courts in other states addressing similar issues.
Cases from other jurisdictions consistently affirm that when a debt exists, a creditor can legally report accurate information about that debt to credit reporting agencies (CRAs), even if there are limitations on their collection ability. Under California law, a consumer's underlying debt is not extinguished by the expiration of the statute of limitations, and therefore, a furnisher cannot be held liable for accurately reporting the debt unless there is a dispute about the debt's accuracy. Similarly, a Georgia case confirmed that the expiration of the statute of limitations does not extinguish the debt, allowing the bank to verify the debt's existence without violating the Fair Credit Reporting Act (FCRA).
Chase asserts that regardless of interpretations of Wisconsin law, the cardmember agreement with Herrell is governed by Delaware law, where the debt survives the statute of limitations. Chase argues that the statute of limitations only bars remedies, not rights, and thus did not violate the FCRA. Herrell contends that the choice of law provision in the agreement is void under the Wisconsin Consumer Act, which Chase disputes as inapplicable.
It is determined that the specific choice of law is not essential for the outcome, as established in a previous case that required a plaintiff to demonstrate factual inaccuracy rather than legal disputes. Herrell claims that his dispute letters to the CRAs indicated there was no balance owed due to the statute of limitations based on his payment history. However, the central issue remains whether Wisconsin or Delaware law applies—a legal question not for the furnisher to resolve. Herrell has not demonstrated a factual inaccuracy, and a deeper factual investigation would not have changed Chase’s conclusion. Consequently, Herrell’s FCRA claim fails, leading to the denial of his summary judgment motion and the granting of Chase's motion for summary judgment, resulting in judgment against Herrell and in favor of Chase.
