Cahlin v. General Motors Acceptance Corp.

Decision Date25 July 1991
Docket NumberNo. 89-6179,89-6179
Citation936 F.2d 1151
PartiesRichard A. CAHLIN, Plaintiff-Counterdefendant-Appellant, v. GENERAL MOTORS ACCEPTANCE CORPORATION, Defendant-Counterclaimant, TRW, Inc., the Credit Bureau Incorporated of Georgia, Defendants-Appellees.
CourtU.S. Court of Appeals — Eleventh Circuit

Adam H. Lawrence, Lawrence & Daniels, Miami, Fla., for Cahlin.

Karen L. Trafford, G. Morton Good, Miami, Fla., for the Credit Bureau Inc.

Sanford L. Bohrer, Steven W. Davis, R. Marcus Cobourn, Miami, Fla., for TRW, Inc.

Earl D. Waldin, Jr., Kelley, Drye & Warren, Miami, Fla., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before CLARK, Circuit Judge, HILL * and COFFIN **, Senior Circuit Judges.

CLARK, Circuit Judge:

Plaintiff-appellant Richard A. Cahlin brought suit against defendant-appellees TRW, Inc. and The Credit Bureau Incorporated of Georgia (CBI), alleging negligent and willful noncompliance with various provisions of the Fair Credit Reporting Act (FCRA). 1 After this case was removed from state court, the district court granted summary judgment in favor of TRW and CBI on the ground that Cahlin had failed to satisfy his threshold burden of showing that the credit agencies had reported any "inaccurate" information. Specifically, the district court held that the undisputed facts revealed that both CBI and TRW had accurately reported information concerning Cahlin's credit record as instructed from time-to-time by one of Cahlin's creditors. The district court further found that Cahlin had failed to satisfy his burden of coming forward with sufficient evidence showing that he has been damaged by being denied credit as a result of a TRW credit report. We affirm, although on slightly different grounds than those relied upon by the district court.

I.

On June 3, 1985, Cahlin leased a car for a five-year term from General Motors Acceptance Corporation (GMAC). The lease agreement provided that the lessee would be liable for any deficiencies resulting from early termination of the agreement. Cahlin, however, alleged that he received an oral promise from the salesperson that if he returned the car within 90 days, he would be relieved of any further financial obligations under the lease. Cahlin voluntarily returned the car to GMAC on August 27. GMAC sent notices in both November and December stating that Cahlin owed $3,842.44 on the lease and threatened legal action, but Cahlin disputed his liability for this amount. Cahlin settled his dispute with GMAC's collection attorney in January, 1986 by promising to pay $2,000 as full satisfaction for his outstanding indebtedness. Pursuant to this settlement agreement, Cahlin completed payment of this sum by May 1, 1986 and received a general release from GMAC that discharged him from all debts previously owed.

A. CBI's Reporting of Cahlin's GMAC Account

In August, 1985, GMAC began reporting to CBI that Cahlin's account was delinquent, and in December, GMAC further reported that the account had been charged off its books as an active receivable. As a result, CBI reported the GMAC account in Cahlin's credit report as having an "I9" rating with a balance due of $3,843.44. An "I9" rating signifies that the account has been charged off or is a bad debt.

After Cahlin satisfied the terms of the settlement agreement and received a general release, GMAC informed CBI by letter on June 16, 1986 that "[w]e previously reported a loss on the above mentioned account. The loss has now been paid in full, thus liquidating the balance on the account. We would appreciate your marking your file accordingly." In response to that letter, CBI changed the GMAC tradeline on Cahlin's credit file to a zero balance, but continued to carry an "I9" rating. In August, 1986, Cahlin received a current copy of his credit report from CBI and mailed a customer dispute form on August 20 in which he stated that his debt to GMAC had been paid in full. He also attached a copy of the general release from GMAC. Although this dispute form was received by CBI, it took no action on it other than to send him a copy of his credit report. This report dated September 11, 1986 shows that the GMAC account continued to carry the "I9" rating and a zero balance.

As a result of complaints from Cahlin, GMAC sent a letter to CBI on October 9, 1986, directing it to "change the rating on [Cahlin's] account from I-9 to I-1." An "I-1" rating signifies that a debt is paid within 30 days of billing. In response to this letter, CBI reported the current status of Cahlin's GMAC account as having an "I-1" rating, but relocated the "I-9" reference to the section of the report documenting Cahlin's previous credit history. The previous history section now reflected that GMAC had reported Cahlin as an "I-9" rating in June, 1986.

One year later on October 12, 1987, Cahlin sent a letter to CBI requesting that it remove the "I9" rating from the previous history section of his GMAC account. CBI subsequently called GMAC on October 28 and, upon instructions from GMAC, changed Cahlin's report by deleting any reference to an "I9" rating. By November 3, 1987, CBI ceased reporting any derogatory information concerning the GMAC account on Cahlin's credit report.

As a result of this negative credit information reported by CBI, Cahlin alleges that he was damaged by being denied credit on numerous occasions between the time of the October 9, 1986 GMAC letter to CBI and the final correction of his credit report on November 3, 1987.

B. TRW's Reporting of Cahlin's GMAC Account

Although the record does not show how TRW initially reported Cahlin's GMAC account, TRW, prior to June, 1986, evidently reported Cahlin's account to be a "loss charge off". In that month, however, the parties agree that GMAC instructed TRW to change Cahlin's account to a "paid charge off". After complaints by Cahlin in August that TRW was not reporting his satisfaction of the GMAC account, GMAC directed TRW on September 4, 1986 to change the reporting of the GMAC account to a "Code 13" which represents a paid account with a zero balance and is not considered a derogatory rating.

On October 16, 1986, TRW received a letter from Cahlin requesting that TRW verify the status of his account with GMAC. On that same day, TRW telephoned GMAC to verify whether GMAC wanted the "paid charge off" notation changed to "paid satisfactory." TRW processed this change through its computer records on October 21, 1986, and all credit reports issued after that date reflect that Cahlin's GMAC account was "paid satisfactory".

Between September 4 and October 21, 1986, Cahlin alleges that he had a residential mortgage loan application pending at First Nationwide Bank and avers that this application was denied as a result of a TRW credit report containing derogatory credit information concerning his GMAC account. Cahlin produced no documentary or testimonial evidence to support these allegations. TRW, however, subpoenaed the records of First Nationwide, and those documents provide no indication that a TRW report was a factor in this denial. TRW also produced an affidavit from Betty J. Del Place--a First Nationwide employee who Cahlin claimed he dealt with on his application--that also did not support Cahlin's allegations.

II.

Cahlin claims that CBI and TRW allegedly violated two separate duties of care imposed by Congress on credit reporting agencies in the Fair Credit Reporting Act. Under section 607(b) of the Act, a credit reporting agency, when preparing a credit report on a consumer, is required to "follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates." 2 In addition, if a consumer brings a dispute to the agency as to the completeness or accuracy of a credit report, the agency is required by section 611(a) "within a reasonable period of time [to] reinvestigate and record the current status of that information unless it has reasonable grounds to believe that the dispute by the consumer is frivolous or irrelevant." 3 As part of its enforcement mechanism, the Act creates a private right of action against credit reporting agencies for negligent or willful violation of these or other duties imposed by this legislation. 4

A. CBI
1. Duty to Follow Reasonable Procedures

In order to make out a prima facie violation of section 607(b), the Act implicitly requires that a consumer must present evidence tending to show that a credit reporting agency prepared a report containing "inaccurate" information. 5 If he fails to satisfy this initial burden, the consumer, as a matter of law, has not established a violation of section 607(b), and a court need not inquire further as to the reasonableness of the procedures adopted by the credit reporting agency. 6 The Act, however, does not make reporting agencies strictly liable for all inaccuracies. 7 The agency can escape liability if it establishes that an inaccurate report was generated by following reasonable procedures, 8 which will be a jury question in the overwhelming majority of cases. Thus, prior to sending a section 607(b) claim to the jury, a credit reporting agency can usually prevail only if a court finds, as a matter of law, that a credit report was "accurate".

Although courts have assumed that the so-called "accuracy defense" 9 is a question fit for disposition on motion for summary judgment, they have widely diverged in their interpretations of what constitutes an "accurate" credit report. Accuracy is quite clearly not a self-defining concept, and FCRA's fragmentary legislative history provides little, if any, guidance as to how Congress intended this standard to be applied. 10 As a result, two differing judicial perspectives on section 607(b) have developed. Under the approach implicitly adopted by the district court in this case, a plaintiff has failed to carry his initial burden if a court...

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