Tenth Circuit Raises the Bar for FCRA Investigation Claims

A recent ruling from the U.S. Court of Appeals for the Tenth Circuit could have significant implications for consumers disputing inaccurate credit reporting, particularly in cases involving identity theft. The decision overturned a $500,000 jury verdict in favor of a Colorado consumer and clarified that plaintiffs bringing certain claims under the Fair Credit Reporting Act (FCRA) must first establish that the disputed information is objectively inaccurate.

The case stems from a dispute involving Robbin Ward, whose identity was allegedly used to rent an apartment in Texas without his knowledge. Ward discovered the collection account while applying for a mortgage and challenged the debt, arguing that it resulted from identity theft. Although a federal jury found that debt collector National Credit Systems failed to conduct a reasonable investigation into his dispute, the appellate court reversed that verdict.

The ruling is expected to influence how FCRA disputes are evaluated throughout the Tenth Circuit, which includes Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming.

Court Requires Proof of Inaccuracy Before Investigation Claims Can Proceed

The central issue before the court was whether a consumer can pursue an FCRA claim for an unreasonable investigation without first demonstrating that the disputed information was inaccurate.

The Tenth Circuit concluded that a consumer must present evidence showing the reported information is “objectively and readily verifiable” as inaccurate before a furnisher or credit reporting agency can be held liable for failing to conduct a reasonable investigation.

That finding effectively raised the standard for consumers pursuing these claims, making proof of inaccuracy a threshold requirement rather than focusing solely on whether an investigation was conducted reasonably.

Identity Theft Victim’s Evidence Was Not Enough

According to court records, Ward argued he provided substantial evidence supporting his identity theft claim. He later pointed to IP-address evidence showing that the online application originated from his daughter’s workplace in Texas, but the court said that evidence had not been provided to National Credit Systems during the dispute process.

His attorney, consumer protection lawyer Matt Osborne, said Ward submitted an identity theft affidavit to the Federal Trade Commission under penalty of perjury. Osborne also pointed to internet protocol (IP) address information indicating the apartment application originated from Dallas, Texas, while records showed Ward was in Colorado when the application was submitted.

Despite that documentation, the disputed collection account remained on Ward’s credit report until litigation began.

Osborne criticized the appellate decision, arguing that it creates a new hurdle for identity theft victims seeking to correct inaccurate credit reporting.

“The Fair Credit Reporting Act says that a creditor shall investigate when people dispute. There are no exceptions in the statute,” Osborne said. “The 10th Circuit created an exception, which now says that they no longer have to investigate if they can say that they can’t verify what you’re saying.”

He also questioned the court’s new evidentiary standard, noting that the decision did not clearly define what qualifies as “objectively and readily verifiable” evidence.

Decision May Affect More Than Identity Theft Cases

Although Ward’s dispute involved alleged identity theft, Osborne believes the decision could extend well beyond fraud-related claims.

“This decision changes the landscape for anybody that’s a victim of fraud, and even more generally, the decision applies to any type of credit reporting dispute,” Osborne said. “It’s not necessarily limited to only identity theft.”

Credit reports play a critical role in numerous financial and employment decisions. Mortgage lenders, landlords, employers, and credit card issuers routinely rely on consumer credit reports when evaluating applications, making the accuracy of reported information particularly important.

Industry Maintains Limits Are Necessary

The debt collection industry has long argued that furnishers and collection agencies should not be expected to resolve complex factual disagreements between consumers and creditors during the dispute process.

ACA International, the trade association representing the accounts receivable management industry, has previously argued that companies investigating disputes should not be required to determine disputed factual issues that extend beyond the information they are responsible for reporting.

The Tenth Circuit’s decision aligns with that broader view by requiring consumers to first establish that the reported information is factually inaccurate before liability for an allegedly unreasonable investigation can arise.

Practical Guidance for Consumers

In light of the ruling, Osborne encouraged consumers disputing fraudulent accounts or inaccurate credit reporting to preserve as much supporting documentation as possible.

He recommended maintaining records that demonstrate where a consumer was when disputed accounts were opened, saving correspondence with creditors and credit reporting agencies, and retaining any documentation that supports an identity theft claim or other dispute.

Even with the court’s new standard, Osborne acknowledged that questions remain about how future courts will interpret and apply the decision.

“It remains to be seen how it will be applied,” Osborne said. “So that’s still kind of up in the air.”