As Matter of First Impression, Seventh Circuit Holds that FCRA (Fair Credit Reporting Act) Requires Consumer Reporting Agency to do More than Make Accurate Disclosures because Statute Requires that Disclosures also be “Clear”
Plaintiffs filed a putative class action against credit reporting agency Equifax Information Services alleging violations of the federal Fair Credit Reporting Act (FCRA). Gillespie v. Equifax Information Services, LLC, 484 F.3d 938, 939 (7th Cir. 2007). The class action complaint asserted that Equifax’s disclosures failed to comply with the FCRA; specifically, the class action complaint alleged that consumers could not properly calculate the date by which negative credit information must be removed from their reports. Id. Defense attorneys moved for summary judgment on the grounds that the information it provided to consumers was clear and accurate. The district court agreed and granted summary judgment in favor of the defense; based on this ruling, the court found it unnecessary to address plaintiffs’ motion to certify the lawsuit as a class action. The Seventh Circuit reversed.
Plaintiff Heather Gillespie opened a credit account with Direct Merchants Bank in 1999 and defaulted on the account in 2001; plaintiff Angela Cinson opened an account with Sears in 1993 and defaulted on the account in 1996 or 1997. Gillespie, at 939. The delinquent accounts were sold to a collection agency, and information on the delinquencies made it to the Equifax credit files of each plaintiff, id. In 2004, each plaintiff requested their credit file from Equifax and Equifax complied. Gillespie, at 939. Plaintiffs objected to the “Date of Last Activity” entry in their credit files. Id. The court explained at page 939 the manner in which the field is completed:
Equifax lists the date of the consumer’s last activity for the reported account in the date of Last Activity field. If the account is delinquent, with no subsequent activity, then the Date of Last Activity reflects the date of delinquency. If the consumer has been paying the account, the date of Last Activity reflects the last payment. In the case of a previously delinquent account in which the consumer has started to make subsequent payments, the last payment by the consumer replaces the delinquency date in the Date of Last Activity field.
Equifax informed consumers that information concerning accounts that had not been paid as agreed remained in the credit file for 7 years as measured from the Date of Last Activity. Gillespie, at 939-40. Plaintiffs allege that Equifax’s disclosures are not clear or accurate as required by 15 U.S.C. § 1681g(a)(1), making it difficult to properly calculate the FCRA’s 7½-year disclosure period under 15 U.S.C. § 1681c(a)(4). Id., at 940. The defense countered that a consumer need only add 7 years to the Date of Last Activity to determine the date on which negative credit information should be removed from their file. Id.
In reversing, the Seventh Circuit stated that this case of first impression presented the question of “whether Equifax’s procedure of using the ‘Date of Last Activity’ complies with § 1581g(a)(1)’s requirement to ‘clearly and accurately disclose…all information’ in the plaintiffs’ consumer file.” Gillespie, at 940. The Circuit Court explained that the primary purpose of that statute was “to allow consumers to identify inaccurate information in their credit files and correct this information via the grievance procedure established under § 1681i.” Id. The Court admitted that the information provided by Equifax was accurate, but concluded that it was “not necessarily clear.” Id., at 941. The Seventh Circuit concluded that providing accurate information in a consumer credit report is insufficient – the information also “must be made in a manner sufficient to allow the consumer to compare the disclosed information from the credit file against the consumer’s personal information in order to allow the consumer to determine the accuracy of the information set forth in her credit file.” Id. The Court reasoned that this holding was dictated by the Congressional requirement that disclosures be “clearly and accurately” made, id.
The Circuit Court concluded that the disclosures were unclear because “[t]he Date of Last Activity field is used for different purposes within Equifax’s file” because it discloses dates for current accounts, delinquent accounts, and delinquent accounts for which additional payments have been made but which are still in default. Gillespie, at 941-42. But the Court was more concerned with the fact that the manner in which the Date of Last Activity was calculated “could effectively allow Equifax the opportunity to keep delinquent accounts in the credit file past the seven and one-half year limitation” in the FCRA because any intervening payment by the consumer resets the last activity date. Id., at 942. The Seventh Circuit found this particularly troubling because Equifax had access to the “date the first major delinquency was reported” but failed to disclose that information to consumers. Id.
The Court stressed that it was not resolving the issue of liability or even suggesting that plaintiffs would prevail on a motion for summary judgment; rather, it simply held that a question of fact existed as to whether the disclosures from Equifax were clear. Gillespie, at 942.
NOTE: The district court summarized the general rules governing negative credit report information as follows: “The FCRA prohibits a consumer reporting agency from providing a consumer report containing ‘accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.’… The seven year period begins to run 180 days after the account is placed in collection or charged off by the creditor so the effective result is a seven and one-half year period from the original delinquency.’…” Gillespie, at 940 (citations and footnotes omitted).