Florida Federal Court Emphasizes Legal Disputes Do Not Give Rise to a Private Right of Action Against Furnishers

The Middle District of Florida rounded out 2022 by ruling in conformance with Eleventh Circuit precedent that plaintiffs must have a factual, rather than legal, dispute to bring suit against a credit furnisher under §1681s-2b of the Fair Credit Reporting Act (FCRA).

In Belair v. Holiday Inn Club Vacations Inc., the plaintiffs contracted to purchase a timeshare from the defendant, Holiday Inn Club Vacations Inc. (Holiday Inn), with a promissory note requiring monthly installment payments secured by a deed of trust. The plaintiffs later requested rescission of the contract, cancellation of the loan, and tradeline deletion so the loan would not appear on their consumer reports. The plaintiffs’ requests for rescission, cancellation, and tradeline deletion were denied and the timeshare’s special warranty deed was recorded.

Later, when the plaintiffs stopped making payments on the loan, Holiday Inn allegedly reported the delinquency to a consumer reporting agency (CRA). The plaintiffs disputed this information with the CRA, but the dispute did not result in a change in how the loan was reported. The plaintiffs sued for violations of the Florida Consumer Collection Practices Act (FCCPA) and the FCRA.

In its summary judgment opinion, the court addressed only the FCRA claim, holding the plaintiffs’ dispute was inherently a legal one that was not actionable under section 1681s-2(b).

The court rejected the plaintiffs’ contention that their credit dispute involved a factual issue based on an unpublished Eleventh Circuit decision, which stands for the position that “[a] plaintiff must show a factual inaccuracy rather than the existence of disputed legal questions to bring suit against a furnisher under § 1681s-2(b) [of the FCRA].” The court was not persuaded by nonbinding, out-of-circuit authority and amicus briefs cited by the plaintiffs which were submitted by the Consumer Financial Protection Bureau and Federal Trade Commission to the Second and Ninth Circuit Courts of Appeals in separate litigation involving this issue. 

The court declined the opportunity to contradict the Eleventh Circuit’s unpublished precedent ruling that a furnisher’s duty to investigate under the FCRA does not apply to legal disputes. The court explained that because the plaintiffs had stopped making payments on the loan and Holiday Inn could verify the plaintiffs’ missed payments, the accuracy of Holiday Inn’s reporting and reasonableness of its investigation of the disputed information, traditionally factual issues, were not at issue. Therefore, all that was left for the court to resolve was the legality and enforceability of the loan contract. But these issues are not actionable under a FCRA claim analysis.

The court also provided its views on how to decipher whether future claims under section 1681s-2(b) involve legal versus factual issues. In this court’s view, if there is formal confirmation of the validity of an underlying debt, such as a determination that the debt was discharged in bankruptcy, then the debt may present a factual issue for courts to consider, such as whether a furnisher’s credit investigation was reasonable, and plaintiffs may be able to bring a suit against a furnisher. However, at least in the Eleventh Circuit, when both parties and courts disagree over the legal precedent and analysis of how a debt is characterized and whether it remains valid, the issue will likely be considered legal in nature and cannot provide a basis for a FCRA claim.

Read the Opinion here.