744 F.3d 853 (3rd Cir. 2014), 12-4298, Seamans v. Temple University

Docket Nº:12-4298
Citation:744 F.3d 853
Opinion Judge:VANASKIE, Circuit Judge.
Attorney:Gregory J. Gorski, Esq. [ARGUED], Mark D. Mailman, Esq., John Soumilas, Esq., Francis & Mailman, Philadelphia, PA, Counsel for Appellant. Richard J. Perr, Esq. [ARGUED], Fineman, Krekstein & Harris, Philadelphia, PA, Counsel for Appellee.
Judge Panel:Before: CHAGARES, VANASKIE and SHWARTZ, Circuit Judges.
Case Date:February 21, 2014
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

Page 853

744 F.3d 853 (3rd Cir. 2014)




No. 12-4298

United States Court of Appeals, Third Circuit

February 21, 2014

Argued September 24, 2013.

Page 854

[Copyrighted Material Omitted]

Page 855

On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civil No. 2:11-cv-06774) District Judge: Honorable Stewart Dalzell.

Gregory J. Gorski, Esq. [ARGUED], Mark D. Mailman, Esq., John Soumilas, Esq., Francis & Mailman, Philadelphia, PA, Counsel for Appellant.

Richard J. Perr, Esq. [ARGUED], Fineman, Krekstein & Harris, Philadelphia, PA, Counsel for Appellee.

Before: CHAGARES, VANASKIE and SHWARTZ, Circuit Judges.


Page 856

VANASKIE, Circuit Judge.

In this case we consider for the first time the interplay between the Fair Credit Reporting Act (" FCRA" ), 15 U.S.C. § § 1681-1681x, and the Higher Education Act of 1965 (" HEA" ), 20 U.S.C. § § 1001-1155, with respect to the responsibilities of an institution of higher education that furnishes information on student loan indebtedness to a consumer reporting agency (" CRA" ). Edward M. Seamans appeals an order of the United States District Court for the Eastern District of Pennsylvania, which granted summary judgment to defendant Temple University (" Temple" ) on Seamans's claims for negligent and willful violations of FCRA in connection with Temple's reporting of certain information to CRAs concerning Seamans's student loan. For the following reasons, we will vacate and remand.


On January 16, 1989, Seamans received a need-based Federal Perkins Loan (the " Loan" ) of $1,180.00 from Temple. The first payment on the Loan was due on January 20, 1992. Upon Seamans's failure to make payment within the fifteen-day grace period, the loan was declared delinquent

Page 857

on February 4, 1992. On August 3, 1992, with the full balance of the Loan still unpaid, Temple notified Seamans that the account had been placed for collection.

In January 2010, Seamans enrolled as a full-time student at Drexel University. In the spring of 2011, Seamans sought financial aid in the form of a Pell Grant, but Drexel refused to provide Seamans with financial assistance until he repaid the balance of the still-outstanding Loan. On April 28, 2011, Seamans repaid the Loan in full.

In May 2011, allegedly for the first time in many years, Seamans noticed a " trade line" on his credit report summarizing data pertaining to the Loan. For reasons unknown, that trade line may or may not have actually appeared on Seamans's credit report at the times it indisputably should have--namely, between February 1992 and April 2011, when the account was in default. Because Seamans's claim is predicated only on Temple's conduct after he disputed the trade line, whether and how Temple reported information about the Loan before Seamans lodged his dispute is irrelevant.

What is not in dispute is that in the aftermath of Seamans's repayment of the Loan, Temple reported certain Loan-related data to TransUnion, a CRA. We observe at the outset that much reporting of consumer credit data, including the bulk of the reporting by Temple in this case, takes the form of " codes" rather than text. For the sake of clarity, we refer primarily to the underlying interpretations of the codes, which are undisputed, rather than to the codes themselves. Relevant categories of coded information include (1) the " date of first delinquency," which refers to the initial date upon which the loan had been marked as defaulted; (2) the " payment history," which documents the debtor's month-by-month payment record; (3) the " account status," which documents a particular status for a given debt, including whether an account is open, closed, paid, or unpaid; and (4) the " compliance condition," which indicates whether the reported information is disputed by the consumer.

In the aftermath of Seamans's payment, Temple had provided the following information to TransUnion:

(a) [Seamans] had been over 180 days late for at least twenty-four (24) months prior to the time the Perkins [L]oan was paid in full;

(b) the Account Status was report[ed] as 'Current; Paid or Paying as Agreed; ' (c) the Balance was report[ed] as '$0; ' (d) the High Balance was report[ed] as '$1180; ' (e) the Terms was report[ed] as '120 Monthly $30; ' (f) the Date Open was report[ed] as '10/1991; ' and (g) the Date Closed was report[ed] as '04/2011.'

App. 64-65. Temple did not report the date of first delinquency for the Loan ( i.e., February 4, 1992), and also did not report that the account had ever been placed for collection.

On May 17 and May 20, 2011, Seamans formally disputed portions of that information by contacting TransUnion. Seamans's May 17 dispute, which he submitted online, stated:

Loan defaulted 1992. Temple didn't report in a decade+, and charged off long ago. I paid Temple on 4/30, they retroactively reported years of 120d late payments, but it had been co'd. Nothing from Temple was on my report until I fully paid to close account. Why does report show two years of late payments?

Page 858

App. 207. Seamans's May 20 dispute was made by telephone. TransUnion in turn notified Temple of the May 17 and May 20 disputes and asked it to verify, among other things, the " payment history profile" and " account status" of the Loan.

In response, Temple, through its loan servicer, ACS Education Services, Inc. (" ACS" ), conducted an investigation. ACS had contracted with Temple to respond to consumer disputes on Temple's behalf in exchange for $2 per dispute " received and processed" by ACS. The procedure followed by ACS in these investigations was essentially to verify that the reported data was in fact consistent with Temple's internal documentation pertaining to the Loan.1

On May 23, 2011, Temple resubmitted the information to TransUnion virtually unchanged. Again, Temple did not indicate when the Loan first became delinquent or that it had ever been placed for collection. Nor did Temple report by way of a " compliance condition" code that Seamans now disputed the trade line.

On August 1, 2011, Seamans contacted Temple, TransUnion, and another CRA, Equifax, again to dispute the continued appearance of Temple's trade line on his credit report. Seamans's letter to TransUnion stated:

In 1989 I received a Perkins Loan while attending Temple University. I defaulted on the loan and the loan went to collection. No activity occurred on the account for some time, and the account eventually came off my credit reports for all three of the reporting agencies. I recently began attending school again at Drexel University, and in order to qualify for financial aid, I had to settle the Perkins loan default. I walked into Temple's billing department and paid $2009 dollars [sic] on the spot, receiving a letter on Temple University letterhead that the debt was settled. Temple went on to retroactively report two years worth of 120-day late payments to the credit reporting agencies. It is important to note that there was no reporting on this account to the credit bureaus for many years, and then suddenly after the debt was paid, Temple reported two years worth of late payments all at once.

I previously disputed this online, and received a letter stating that the creditor has reviewed the account and wishes to make no further adjustment to my credit record. To put it plainly, I want the Temple University account removed from my credit report. The account is closed, and well beyond the time limit imposed for the reporting of derogatory credit information. Therefore, it should not appear on my credit reports now. I have been a good consumer for years now, and the Temple reporting instantly negatively impacted my Trans Union score by approximately 80 points.

App. 258. Temple was notified of the August 1 dispute and received copies of the letters written by Seamans to TransUnion and Equifax. After a second investigation, Temple modified certain elements of its report on the Loan but still did not report the Loan's history in collections, a date of first delinquency, or the fact that Seamans was disputing the accuracy of the reported information.

Seamans points to evidence that Temple's non-reporting with respect to certain

Page 859

information about the Loan was not unique. For example, an ACS employee testified at deposition that at least until late 2011, ACS's policy was that its employees would never flag an account as disputed, regardless of the nature of the consumer's challenge:

Q Let's go to the document ACS-2 again. Within ACS-2 can you point me to any particular portion of it which relates to reporting an account as disputed by the consumer in the compliance condition code portion of the Metro 2 code?

A No, there is not. Q And is the reason for that because up until... November of 2011, ACS did not report accounts as disputed to credit reporting agencies whether affirmatively or after a dispute had been received? A Correct.

App. 485-86. The same employee explained that ACS never included dates of first delinquency in its reports even after disputes were lodged. App. 482-83. A different customer service representative from ACS testified at deposition that she spent an average of 15 minutes on any given dispute and that ACS provided no written guidelines or formal training from managers for her. App. 350-53.

On October 28, 2011, Seamans filed a complaint against Temple in the United States District Court for the Eastern District of Pennsylvania, alleging that Temple negligently or willfully violated FCRA with respect to its reporting of the Loan. On May 21, 2012, Temple moved for summary judgment, arguing in essence that HEA exempted it from compliance with FCRA because the credit instrument at issue was a Perkins Loan. On October 25, 2012, the District Court granted the motion in full and entered judgment...

To continue reading