Koropoulos v. Credit Bureau, Inc.
| Decision Date | 04 May 1984 |
| Docket Number | No. 83-1782,83-1782 |
| Citation | 734 F.2d 37,236 U.S.App.D.C. 136 |
| Parties | , 236 U.S.App.D.C. 136 George KOROPOULOS, et al., Appellants, v. The CREDIT BUREAU, INC. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Stephen C. Glassman, Washington, D.C., with whom Alan D. Weinberger and Thomas B. Shull, Washington, D.C., were on the brief, for appellants.
Sheila J. Carpenter, Washington, D.C., with whom Michael S. Smith, Washington, D.C., was on the brief, for appellees.
Before WALD and MIKVA, Circuit Judges, and BAZELON, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge WALD.
Plaintiffs, George and Katelina Koropoulos, appeal the district court's dismissal of their suit alleging that the Credit Bureau Incorporated of Georgia (CBI), violated the Fair Credit Reporting Act (FCRA or Act), 15 U.S.C. Secs. 1681-1681t, by failing "to follow reasonable procedures to assure maximum accuracy" of credit reports it issued in response to inquiries on Mr. and Mrs. Koropoulos. The district court granted CBI's motion for summary judgment on the basis of facts it found uncontested: that the report CBI issued on Mr. Koropoulos was accurate and that CBI had issued no report on Mrs. Koropoulos. We find, however, that there are genuine issues of material fact as to whether the report on Mr. Koropoulos was accurate within the meaning of the FCRA. Additionally, we find there is a dispute as to whether CBI issued a report on Mr. Koropoulos in response to an inquiry about Mrs. Koropoulos' credit and thereby violated the Act. We therefore vacate the grant of summary judgment and remand the case for appropriate action by the trial court.
On June 7, 1976, Mr. Koropoulos borrowed $2,034.92 from Virginia National Bank (VNB), to be paid off in twelve monthly installments beginning in July, 1976. Mr. Koropoulos subsequently defaulted on the loan; VNB charged the loan off as a bad debt and referred it to Nationwide Credit Corporation (NCC) for collection. Mr. Koropoulos paid the loan in full to NCC, the final payment occurring in November, 1977. NCC kept a 40% collection fee on the payments by Mr. Koropoulos, and sent the remaining 60% of his payments to VNB.
In 1981, the Bank of Virginia denied Mr. Koropoulos' application for a credit card, allegedly on the basis of a credit report from CBI. At about the same time, Lord & Taylor turned down Mrs. Koropoulos' application for a credit card, also allegedly because of a credit report from CBI. Over the next few months Mr. Koropoulos was denied credit on a number of occasions; each time he claims that the lending institution mentioned a CBI credit report as the reason for denial.
In January, 1982, after plaintiffs' attorney contacted CBI, it disclosed Mr. Koropoulos' file to the plaintiffs. The file reported the VNB loan as having a current status of "I9" with a "0" balance. According to CBI's own definition, the "I9" status indicates that VNB either wrote the loan off as a bad debt, placed it for collection, instituted a civil suit against the debtor to collect it, or determined that the debtor "skipped" (i.e., could not be located). The "0" balance indicates that the balance, as it appears on VNB's books, is zero.
On June 1, 1982, plaintiffs filed suit alleging that this characterization of the VNB loan was misleading because it indicated to potential creditors that VNB wrote the loan off as a total loss, and that Mr. Koropoulos never paid the debt. In fact, CBI knew in November 1977 that Mr. Koropoulos had paid off the loan in full. Less than a month later, CBI moved for summary judgment on the grounds that the information it reported on Mr. Koropoulos was entirely accurate and that it never issued a credit report on Mrs. Koropoulos. Plaintiffs contested both points. They attached an affidavit of an alleged "expert" in reading credit reports, 1 interpreting the "I9-0" status to mean that Mr. Koropoulos never repaid the loan. They also claimed that the circumstances under which Lord & Taylor denied Mrs. Koropoulos a credit card were far from clear and uncontested; in particular, plaintiffs pointed out that CBI's assertion that it never sent a report on Mrs. Koropoulos in no way disputes their allegation that it sent a report on Mr. Koropoulos, in response to a request about Mrs. Koropoulos, resulting in denial of a Lord & Taylor credit card to her.
The district court granted CBI's motion for summary judgment. It dismissed plaintiffs' claim based on the inaccuracy of the report on Mr. Koropoulos, stating that "Mr. Koropoulos fundamentally misunderstands the institutional arrangements underlying his 1976 VNB loan and the impact on his credit record of VNB's extraordinary measures in securing collection of the defaulted loan." Koropoulos v. The Credit Bureau, No. 82-1510, slip op. at 3 (June 23, 1983) (Memorandum Opinion) [hereinafter cited as Memorandum Opinion ]. The district court held that the rating was accurate because VNB lost 40% of the money owed it due to its need to take collection measures. Thus, it concluded that the "9" rating--indicating a bad debt--was appropriate, and the "0" balance accurately reflected the balance on VNB's books. Id. at 5. It also dismissed Mrs. Koropoulos' claim based on the report issued to Lord & Taylor because "[a]t most, defendant provided the department store with accurate credit information regarding Mr. Koropoulos that caused the department store to deny a credit card for his wife." Id. at 7. This appeal from dismissal of plaintiffs' FCRA claims followed.
The FCRA requires that
[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.
15 U.S.C. Sec. 1681e(b). The Act further provides a cause of action by a consumer against
[a]ny consumer reporting agency or user of information which is negligent in failing to comply with any requirement imposed by this subchapter [the FCRA] with respect to any consumer ... [for] an amount equal to ... any actual damages sustained by the consumer as a result of the failure.
15 U.S.C. Sec. 1681o(1). Read together, these provisions allow a consumer to bring suit for a violation of section 1681e(b) only if a credit reporting agency issues an inaccurate report on the consumer, since only then does harm flow from the agency's violation. 2
Many cases construing section 1681e(b) have limited liability of credit reporting agencies to technically inaccurate reports--reports which include false information--and have dismissed actions where reports were factually correct but nonetheless misleading or materially incomplete. For example, one district court held that a report that the plaintiff had declared bankruptcy was accurate, within the meaning of section 1681e(b), despite its failure to mention that the consumer had withdrawn his bankruptcy petition and fully repaid his debts. See McPhee v. Chilton Corp., 468 F.Supp. 494 (D.Conn.1978). 3 The district court here followed this line of cases in dismissing plaintiffs' claims. It noted that CBI clearly states, in explanations provided to its customers, that a classification of "9" applies to any debt charged off as a loss, referred for collection, requiring a civil action, or uncollectible because the debtor "skipped." Memorandum Opinion at 3-4. Mr. Koropoulos' loan was charged off as a bad debt by VNB, and therefore, the district court reasoned, came within CBI's classification of "9". Id. The district court also found that CBI "adjusted Mr. Koropoulos' credit report to reflect a '0' balance for the VNB loan," upon notification by VNB that the loan had been paid. Id. at 5-6. It considered the affidavit of plaintiffs' expert, attesting that the "9-0" designation would be read as indicating a total default on the loan, to be irrelevant because it found the report itself "totally accurate." Id. at 3.
First of all, we do not agree with the district court that section 1681e(b) makes a credit reporting agency liable for damages only if the report contains statements that are technically untrue. Congress did not limit the Act's mandate to reasonable procedures to assure only technical accuracy; to the contrary, the Act requires reasonable procedures to assure "maximum accuracy." The Act's self-stated purpose is "to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit ... in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information." 4 15 U.S.C. 1681e(b). Certainly reports containing factually correct information that nonetheless mislead their readers are neither maximally accurate nor fair to the consumer who is the subject of the reports.
The several district court cases adopting the technical accuracy defense to a section 1681e(b) claim fail to convince us that such a defense, applied to these facts, is in accord with congressional intent. These cases, which purport to follow Peller v. Retail Credit Co., Civ. No. 17900 (N.D.Ga. Dec. 6, 1973), misread its rationale. In Peller, the plaintiff, a job applicant, took a lie detector test that revealed he had smoked marijuana. He was subsequently fired from a different job when his employer received a credit report indicating the marijuana use. The district court dismissed plaintiff's claim, alleging injury caused by the credit reporting agency's failure to independently verify the marijuana use, because he admitted that the reported marijuana use was true. In so doing, the court asked and answered the following question:
Can a "consumer" pursue a willful or negligent theory of recovery against a "consumer reporting agency" who supplies a "user" with a consumer report containing...
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