Henson v. CSC Credit Services, IP 92-637-C.
| Decision Date | 08 September 1993 |
| Docket Number | No. IP 92-637-C.,IP 92-637-C. |
| Parties | Greg and Mary HENSON, Plaintiffs, v. CSC CREDIT SERVICES, Trans Union Corporation, and Cosco Federal Credit Union, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
J. Kevin King, Cline, King & King, Columbus, IN, for plaintiffs.
Robert J. Schuckit, Dann Pecar Newman Talesnick & Kleiman, Philip A. Whistler, Ice Miller Donadio & Ryan, Jeffrey McDermott, M. Kent Newton, Philip J. Faccenda Jr., Krieg DeVault Alexander & Capehart, Indianapolis, IN, for defendants.
ENTRY
Defendants CSC Credit Services ("CSC"), Trans Union Corporation ("Trans Union"), and Cosco Federal Credit Union ("Cosco") bring motions to dismiss Plaintiff's Second Amended Complaint. For the reasons stated below, we grant all three defendants' motions to dismiss.
Plaintiff Greg Henson ("Greg") purchased a Camaro by executing a note with Irwin Union Bank. Jeff Henson, Greg's brother, bought the Camaro from Greg and entered into a security agreement with defendant Cosco, which paid Irwin Union Bank to discharge Greg's note. When Jeff subsequently did not honor his payment schedule, Cosco initiated a replevin action seeking a default judgment against Jeff and Greg. On April 17, 1990, the Bartholomew Superior Court entered a default judgment and judgment of foreclosure against Jeff and Greg which stated that Greg had no ownership interest in the Camaro and that Cosco could sell the car free and clear of any claim or right of Greg. See Plaintiff's Second Amended Complaint, Common Allegations ¶ 10. On July 18, 1990, the Bartholomew Superior Court No. 2 entered a deficiency judgment in the amount of $3,616.57 against Jeff Henson only; however, the judgment docket showed a money judgment against both Jeff and Greg. See Plaintiff's Memorandum in Opposition to CSC's Motion to Dismiss ¶ 12. Greg and his wife Mary claim that they contacted Cosco to have Greg's name released from the default judgment but Cosco did not act until they filed suit. Second Amended Complaint, Common Allegations ¶¶ 14-15. During the period before Greg's name was released from the default judgment, defendants Trans Union and CSC picked up the information regarding the judgment and published it.
The Hensons claim that Cosco's failure to release the default judgment against Greg in a timely manner resulted in their denial of credit, higher interest loans, and public humiliation and embarrassment. They also claim that Trans Union and CSC violated provisions of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq., by failing to follow reasonable procedures to assure maximum accuracy of the credit reports they issued.
A Rule 12(b)(6) motion admits the well-pleaded allegations of the complaint but denies their legal sufficiency. Hospital Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976). Dismissal for failure to state a claim is appropriate where a review of the complaint, taking all factual allegations in the complaint as true, reveals that no viable cause of action exists. Greene v. Finley, 749 F.2d 467, 468 (7th Cir.1984). American Nurses' Ass'n v. Illinois, 783 F.2d 716, 727 (7th Cir.1986).
The Hensons claim that CSC and Trans Union violated the Fair Credit Reporting Act (FCRA) by failing to use reasonable procedures to assure the maximum possible accuracy of the information regarding Greg as required by 15 U.S.C. § 1681e(b). This section provides in the relevant part:
Whenever 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.
As a result of CSC's and Trans Union's alleged non-compliance with the above provision, the Hensons claim they are entitled to damages under 15 U.S.C. § 1681o(1).1
To prove a prima facie case under FCRA, a consumer must first demonstrate that a credit reporting agency prepared a report containing inaccurate information. In Cahlin v. General Motors Acceptance Corp., 936 F.2d 1151, 1156 (11th Cir.1991), the Court of Appeals held that if a consumer fails to show inaccuracy, he has not established a violation of 15 U.S.C. § 1681e(b) and a court need not inquire further as to the reasonableness of the procedures adopted by the credit reporting agency. Thus, unless we find that Trans Union's and CSC's reports contain inaccurate information, we need not consider whether they adopted reasonable procedures.
Trans Union and CSC maintain that because the court did in fact enter a default judgment against Greg and Jeff, their reporting of that information was not "inaccurate." The Seventh Circuit has not addressed whether technical accuracy suffices under FCRA. In a leading case, Koropoulos v. Credit Bureau, Inc., 734 F.2d 37, 40-42 (D.C.Cir.1984), the District of Columbia Circuit held that if a credit reporting agency reports factually correct information that could also be interpreted as being misleading or incomplete, a factual question exists regarding whether the credit reporting agency's report is so misleading as to be "inaccurate" within the meaning of FCRA. In vacating the district court's summary judgment in favor of a credit reporting agency, the court noted:
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." ... Certainly reports containing factually correct information that nonetheless mislead their readers are neither maximally accurate nor fair to the consumer who is subject of the reports.
However, the court further stated that Id. at 42. Under the test, a court should weigh Id.
In this case, we balance the harm caused to the Hensons by the "incomplete" information acquired by Trans Union and CSC against the burden on these credit reporting agencies to discover or provide additional clarifying data. We find that requiring Trans Union and CSC to have discovered the clerk's erroneous entry of judgment against Greg is overly burdensome under the balancing test. Credit reporting agencies should be able to rely on public records without extensive inquiries into the records' accuracy. Thus, we hold that Trans Union's and CSC's reporting of the recorded default judgment was not "inaccurate" under FCRA. Our finding does not suggest that "technical accuracy" will satisfy the requirement of FCRA in all cases.2 Instead, we adopt the balancing test of Koropoulos and hold that the balance in this case favors defendants Trans Union and CSC. Because the information in Trans Union's and CSC's reports was not inaccurate, the Hensons have failed to state a claim under FCRA and we grant Trans Union's and CSC's motions to dismiss.
The Hensons bring four claims against Cosco: 1) Cosco was negligent in not releasing the default judgment against Greg; 2) Cosco violated Ind.Code § 32-8-1-1 by not releasing the judgment against them; 3) Cosco's failure to release the default judgment against Greg and Mary invaded their privacy by casting a false light upon them; 4) Mary suffered as a result of the above claims.
We first address whether 15 U.S.C. § 1681h(e) preempts the Hensons' causes of action under state law. This section provides:
Except as provided in sections 1681n and 1681o of this title, no consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence with respect to the reporting of information against any consumer reporting agency, any user of information, or any person who furnishes information to a consumer reporting agency, based on information disclosed pursuant to section 1681g, 1681h, or 1681m of this title, except as to false information furnished with malice or willful intent to injure such consumer. (emphasis added).
Having ordered the parties to advise this Court regarding the applicability of this provision, this Court finds that the Hensons' state law claims are not preempted. Cosco has failed to show with particularity that it is a "person who furnishes information to a consumer reporting agency." In this case, the Superior Court furnished the information to CSC and Trans Union, not Cosco. Because Cosco is also not a "consumer reporting agency" or a "user of information," 15 U.S.C. § 1681h(e) does not apply even though the Hensons have alleged no facts suggesting any "malice or willful intent" on the part of Cosco in its alleged failure to rectify the erroneous default judgment.
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