May 19, 2019

Tenth Circuit: Credit Reporting Agency Need Not Resolve Legal Disputes Regarding Underlying Debt

The Tenth Circuit Court of Appeals issued its opinion in Wright v. Experian Information Solutions, Inc. on Tuesday, November 10, 2015.

Gary A. Wright is the manager, attorney, and registered agent for Attorneys Title Insurance Agency of Aspen LLC (ATA). In May 27, 2009, the IRS filed a notice of federal tax lien (NFTL) with the Pitkin County Recorder against Mr. Wright in his personal capacity for unpaid employment taxes from 2004. However, Mr. Wright had paid the taxes via a check to the IRS dated May 8, 2009. The Pitkin recorder listed the tax lien on its indexing website as against Mr. Wright in his personal capacity, and it was picked up by credit reporting agencies (CRAs) Experian and TransUnion, who received the information from LexisNexis, their contractor.

Mr. Wright discovered the lien on his personal credit report in 2011 and disputed it to Experian and TransUnion, asserting the IRS had withdrawn the lien because it had been paid in full and the NFTL inaccurately stated the lien was against him personally when it should have been listed as against ATA only. He included with his letters a copy of the NFTL, a copy of his letter to the IRS requesting withdrawal of the lien, and the IRS’s release of the lien. In response, the CRAs checked with LexisNexis and marked the lien released because it had been paid in full. The CRAs did not remove the lien from their credit reports because the IRS reported it as released instead of withdrawn. Mr. Wright requested reinvestigation, attaching the same documentation as before. Experian did not perform a second investigation. TransUnion requested documentation, and when LexisNexis reported the same result previously reached, TransUnion sent a summary of the investigation to Mr. Wright.

Mr. Wright sued the CRAs in federal district court, asserting negligent and willful violations of the federal Fair Credit Reporting Act (FCRA) and Colorado’s counterpart, the Colorado Consumer Credit Reporting Act (CCCRA). He asserted claims against the CRAs for failing to follow reasonable procedures to ensure maximum possible accuracy in preparing the credit report. He also asserted a claim for failure to reasonably reinvestigate his claim. The district court granted summary judgment to the CRAs, finding it was reasonable for them to interpret the NFTL as applying to Mr. Wright personally and that the IRS can issue a tax lien against a business entity and its member. Mr. Wright appealed.

The Tenth Circuit first evaluated Mr. Wright’s argument that the CRAs failed to use reasonable procedures in originally reporting the tax lien. The Tenth Circuit evaluated the legal requirements of the FCRA and CCCRA and found no error in the district court’s grant of summary judgment. The Tenth Circuit noted that, to prevail, a plaintiff must show that the CRA failed to follow reasonable procedures to ensure the accuracy of its reports, the report in question was inaccurate, the plaintiff suffered injury, and the CRAs caused the injury. The Tenth Circuit found that Mr. Wright failed to prove the first element because he could not prove the CRAs failed to follow reasonable procedures. The Tenth Circuit noted that to require the CRAs to employ tax professionals to evaluate every tax lien reported by a county recorder or court clerk is unduly burdensome. The Tenth Circuit affirmed the district court’s summary judgment grant to the CRAs.

Next, the Tenth Circuit considered whether the CRAs used reasonable procedures in reevaluating Mr. Wright’s dispute. The Tenth Circuit again found no error, rationalizing that Mr. Wright again failed to show that the CRAs failed to follow reasonable procedures in their reinvestigation. The Tenth Circuit noted that a reasonable reinvestigation does not require a CRA to resolve a legal dispute about the validity of the underlying debt. Judge Bacharach dissented with this portion of the opinion; he believes that the district court employed an incorrect procedure for evaluating the reasonableness of the CRAs investigation and noted that any ambiguity should have been resolved in the consumer’s favor.

The Tenth Circuit affirmed the district court’s grant of summary judgment to the CRAs. Judge Bacharach dissented only with the portion of the opinion concerning reinvestigation.

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