Chapter 1

Fair Credit Reporting Act Furnisher Liability Briefs

Richard J. Rubin is a private attorney in Santa Fe, New Mexico, whose federal appellate practice is limited to representing consumers in both federal consumer credit protection, including credit reporting and debt collection abuse litigation, and to consulting for other consumer rights specialists around the country. He and his solo practice were the subject of a profile published in the January 1993 ABA Journal. Mr. Rubin has taught consumer law at the University of New Mexico School of Law, is a regular contributor to the Consumer Credit and Sales Legal Practice Series manuals published by NCLC, and presents continuing legal education and attorney-training programs nationally in the areas of consumer credit, warranty law, and debt collection abuse. The United States Court of Appeals for the Seventh Circuit has acknowledged Mr. Rubin as a nationally known consumer-rights attorney (Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 1997 U.S. App. LEXIS 41397, *5 (June 6, 1997). Mr. Rubin is the past chair of the National Association of Consumer Advocates (NACA) and in 2000 was the recipient of the Vern Countryman Award. Section 1.1 is the consumers successful brief in Johnson v. MBNA America Bank, NA in the Fourth Circuit of the U.S. Court of Appeals..1 Johnson argued that MBNA failed to investigate her statement that she had taken no steps to assume any liability on a credit card issued to and used solely by her ex-husband and which MBNA reported on her credit report as having a delinquent balance of $18,000.00, which her ex-husband had discharged in bankruptcy. MBNA was required by the Fair Credit Reporting Act to investigate disputed information.2 It asserted that it need only keep verifying the erroneous information in its computer database and did not need to check the credit application or correspondence related to the credit card. The court held:
The key term at issue here, investigation, is defined as [a] detailed inquiry or systematic examination. Am. Heritage Dictionary 920 (4th ed.2000); see Websters Third New Intl Dictionary 1189 (1981) (defining investigation as a searching inquiry). Thus, the plain meaning of investigation clearly requires some degree of careful inquiry by creditors. Further, 1681s-2(b)(1)(A) uses the term investigation in the context of articulating a creditors duties in the consumer dispute process outlined by the FCRA. It would make little sense to conclude that, in creating a system intended to give consumers a means to disputeand, ultimately, correctinaccurate information on their credit reports, Congress used the term investigation to include superficial, un reasonable inquiries by creditors. Cf. Cahlin v. Gen. Motors Acceptance Corp., 936 F.2d 1151, 1160 (11th Cir.1991) (interpreting analogous statute governing reinvestigations of consumer disputes by credit reporting agencies to require reasonable investigations); Pinner v. Schmidt, 805 F.2d 1258, 1262 (5th Cir.1986) (same). We therefore hold that 1681s-2(b)(1) requires creditors, after receiving notice of a consumer dispute from a credit reporting agency, to conduct a reasonable investigation of their records to determine whether the disputed information can be verified.3

1 2 3

See in Johnson v. MBNA America Bank, NA, 357 F.3d 426 (4th Cir. 2004). See National Consumer Law Center, Fair Credit Reporting Act 7.3.4 (5th ed. 2002 and Supp.). Johnson v. MBNA America Bank, NA, 357 F.3d 426, 430 - 431 (4th Cir. 2004).

Sections 1.2 and 1.3 are the consumers brief and reply brief in another appeal under the Fair Credit Reporting Act. In this case the bank misapplied a payment by the consumer but argued that consumers FCRA claim was time barred because the statute of limitations ran from the time the consumer first pointed the error out to the bank rather than from the date the consumer requested the credit reporting agency and the bank to reinvestigate the banks error. While the bank admitted the error, the error had not been corrected even after suit. The Ninth Circuit in an unpublished opinion held that the claim was not time barred.4

Bishop v. U.S. Bancorp, 91 Fed. Appx. 583, 2004 WL 557299 (9th Cir. 2004).

1.1 Brief, Failure to Investigate

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT JANE SMITH, Plaintiff-Appellee, v. MBNA AMERICA BANK, N.A., Defendant-Appellant, and EXPERIAN INFORMATION SOLUTIONS, INC., et al, Defendants. BRIEF OF PLAINTIFF-APPELLEE ORAL ARGUMENT REQUESTED TABLE OF AUTHORITIES Cases Adams v. Dole, 927 F.2d 771 (4th Cir. 1991) Barber v. Kimbrell's, Inc., 577 F.2d 216 (4th Cir. 1978) Betts v. Equifax Credit Information Services, Inc., 245 F.Supp.2d 1130 (W.D.Wash. 2003) Brady v. Credit Recovery Company, Inc., 160 F.3d 64 (1st Cir. 1998) Bruce v. First U.S.A. Bank, N.A., 103 F.Supp.2d 1135 (E.D.Mo. 2000) Bryant v. TRW, Inc., 689 F.2d 72 (6th Cir. 1982) Burnstein v. Saks Fifth Avenue & Co., 208 F.Supp.2d 765 (E.D.Mich. 2002)

Cahlin v. General Motors Acceptance Corp., 936 F.2d 1151 (11th Cir. 1991) Curtis v. Trans Union, LLC, 2002 WL 31748838 (N.D. Ill. December 9, 2002) Cushman v. Trans Union Corp., 115 F.3d 220 (3rd. Cir. 1997) Dalton v. Capital Associated Industries, Inc., 257 F.3d 409 (4th Cir. 2001) Dennis v. Columbia Colleton Medical Center, Inc., 290 F.3d 639 (4th Cir. 2002) Ditty v. CheckRite, Ltd., Inc., 973 F.Supp. 1320 (D.Utah 1997) Estate of Cowart v. Nichols Drilling Co., 505 U.S. 469 (1992) Fischl v. General Motors Acceptance Corp., 708 F.2d 143 (5th Cir. 1983) Grenier v. Equifax Credit Information Services, 892 F.Supp. 57 (D.Conn. 1995) In re Hance, 181 B.R. 184 (Bankr.M.D.Pa. 1993) Hardin v. Ski Venture, Inc., 50 F.3d 1291 (4th Cir. 1995) Henson v. CSC Credit Services, 29 F.3d 280 (7th Cir. 1994) Igen International, Inc. v. Roche Diagnostics GMBH, __ F.3d __, 2003 WL 21542340 (4th Cir. July 9, 2003) Kolibash v. Committee on Legal Ethics of the West Virginia Bar, 872 F.2d 571 (4th Cir. 1989) Lane v. United States, 286 F.3d 723 (4th Cir. 2002)

Mallard v. United States District Court, 490 U.S. 296 (1989) Matter of Sommersdorf, 139 B.R. 700 (Bankr.S.D.Ohio 1991) Mourning v. Family Publication Service, Inc., 411 U.S. 356 (1973) Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057 (9th Cir. 2002) Nigh v. Koons Buick Pontiac GMC, Inc., 319 F.3d 119 (4th Cir. 2003) Ollestad v. Kelley, 573 F.2d 1109 (9th Cir. 1978) Olwell v. Medical Information Bureau, 2003 WL 79035 (D.Minn. January 7, 2003) Pinner v. Schmidt, 805 F.2d 1258 (5th Cir. 1986) Price v. City of Charlotte, 93 F.3d 1241 (4th Cir. 1996) Rivera v. Bank One, 145 F.R.D. 614 (D.P.R. 1995) Rosmer v. Pfizer, 263 F.3d 110 (4th Cir. 2001) Sayers v. General Motors Acceptance Corp., 522 F.Supp. 835 (W.D.Mo. 1981) Scott v. United States, 328 F.3d 132 (4th Cir. 2003) Smith v. Fidelity Consumer Discount Co., 898 F.2d 896 (3rd Cir. 1990)

Smith Drug, Inc. v. F.T.C., 741 F.2d 1146 (9th Cir. 1984) South Atlantic Ltd. Partnership v. Riese, 284 F.3d 518 (4th Cir. 2001) Sterling Drug, Inc. v. F.T.C., 741 F.2d 1146 (9th Cir. 1984) Stevenson v. TRW Inc., 987 F.2d 288 (5th Cir. 1993) Stilner v. Beretta U.S.A. Corp., 74 F.3d 1473 (4th Cir. 1996) (en banc) Swoager v. Credit Bureau of Greater St. Petersburg, 608 F.Supp. 972 (M.D.Fla. 1985) TRW Inc. v. Andrews, 534 U.S. 19 (2001) Trans Union Corp. v. Federal Trade Commission, 245 F.3d 809 (D.C. Cir. 2001) United States v. Srnsky, 271 F.3d 595 (4th Cir. 2001) Vasquez-Garcia v. Trans Union de Puerto Rico, 222 F.Supp.2d 150 (D.P.R. 2002) Yelder v. Credit Bureau of Montgomery, L.L.C., 131 F.Supp.2d 1275 (M.D.Ala. 2001) Young v. Equifax Credit Information Services, Inc., 294 F.3d 631 (5th Cir. 2002) Federal Statutes Consumer Credit Protection Act, 15 U.S.C. 1601-1693r Consumer Credit Reporting Reform Act of 1996, Title II, Subtitle D, Ch. 1, of the Omnibus Consolidated Appropriations Act for Fiscal Year 1997 (P.L. 104-208) (Sept. 30, 1996)

Equal Credit Opportunity Act, 15 U.S.C. 1691-1691f Fair Credit Billing Act, 15 U.S.C. 1666(a)(3)(B)(ii) Fair Credit Reporting Act, 15 U.S.C. 1681-1681u ) Federal Trade Commission Act, 15 U.S.C. 45 Truth in Lending Act, 15 U.S.C. 1601-1667e Federal Regulatory and Congressional Material 16 C.F.R. Part 600 116 Cong. Rec. 36570 (1970) Federal Reserve Board Official Staff Commentary on Regulation Z, 12 C.F.R. Part 226, Supp. I Federal Reserve Board Regulation Z, 12 C.F.R. Part 226, 226.01 et seq. Federal Reserve Board Regulation B, 12 C.F.R. Part 202, 202.01 et seq. S. Rep. 103-209, 103d Cong., 1st Sess. (1993) S. Rep. 104-185, 104th Cong., 1st Sess. 49 (1995) Miscellaneous Restatement of Torts (Second), 529, 551 Anthony Rodriguez, Fair Credit Reporting, 3.9, p. 74 (5th ed. 2002) Webster's New Universal Unabridged Dictionary (2d ed. 1983)

ISSUES PRESENTED FOR REVIEW 1. Whether the plain language of the Fair Credit Reporting Act (FCRA) that a furnisher of credit information shall conduct an investigation with respect to the disputed information requires a meaningful inquiry into the validity of the dispute. 2. Whether a furnisher of credit information that reports that it verified the disputed information, yet only makes a superficial inquiry into the validity of the dispute, violates the FCRA requirement to report the results of the investigation to the consumer reporting agency. STATEMENT OF THE CASE Plaintiff-Appellee Jane Smith, f/k/a Jane Jones (hereinafter Ms. Smith) sued Defendant-Appellant MBNA America Bank (hereinafter the Bank) in three suits filed against the three national consumer reporting agencies (CRAs). (J.A. 18-73). She alleged that the defendants willfully or negligently failed to comply with the FCRA when they persisted in erroneously reporting Ms. Smiths husbands delinquent credit card account as her own. (J.A. 18-73). The claims against the CRAs were settled, and the three suits were consolidated. (J.A. 107, 110). The case proceeded to jury trial against the Bank for its failure to comply with its statutory duties as a furnisher of credit information under 1681s-2(b) to investigate the disputed information and to report the results of that investigation to the CRAs. (J.A. 763). The jury found that the Bank negligently failed to comply with the FCRA and awarded actual damages. (J.A. 784). It ruled for the Bank on the claim of willful noncompliance. (J.A. 784). The Bank moved for judgment as a matter of law pursuant to Fed.R.Civ.P. 50. (J.A. 787). The district court denied the Banks motion (J.A. 1008) with an oral explanation of its reasoning from the Bench. (J.A. 1001-06). The Bank timely filed its notices of appeal. (J.A. 966, 1009). Any award of costs, expenses, and attorneys fees are deferred to the conclusion of post-trial motions and this appeal. (J.A. 964). STATEMENT OF FACTS JANE SMITH MARRIES JOHN JONES Ms. Smith married John Jones on March 2, 1991. (J.A. 603). Both had been married previously. (J.A. 603). Mr. Jones and Ms. Smith never shared a bank account or a credit card account. (J.A. 604). Ms. Smith was never aware of any credit cards that Mr. Jones had. (J.A. 605). After just over one year of marriage, under circumstances when others might have abandoned the relationship entirely, they moved to separate bedrooms in their home and became roommates. (J.A. 604). From then until May 18, 2001, when Ms. Smith moved from their home, they maintained separate finances, their own separate businesses, and separate lives. (J.A. 605). Ms. Smith changed her name to Jane Jones when she married Mr. Jones. (J.A. 623). Once she divorced Mr. Jones on September 12, 2002, she returned to using her maiden name, Jane Smith. (J.A. 112, 604).

Ms. Smith had her own Fleet and Discover credit cards that she regularly used. (J.A. 606). Mr. Jones had his own post office box both before and during their marriage, and neither of them bother[ed] with each others mail. (J.A. 607-08). THE BANK DUNS MS. SMITH FOR PAYMENT OF MR. JONESS DEBT Ms. Smiths first contact with the Bank occurred in December 2000 when she received a collection call from a Bank representative who claimed that she was late on her payments. (J.A. 608). Ms. Smith explained to the Bank employee that she did not have an account with the Bank, never used a credit card from the Bank, and did not owe the Bank any money. (J.A. 608). The caller asked her if she knew Mr. Jones, and Ms. Smith answered that she did. (J.A. 609). The caller then informed Ms. Smith that Mr. Jones had filed personal bankruptcy and that because your name was on this account, you are now responsible for $17,000. (J.A. 609). Ms. Smith never had or used a credit card with the Bank. (J.A. 606, 614, 617). She never signed a credit application or any documents with the Bank. (J.A. 617). Not a single document produced by the Bank contained her signature. (J.A. 619). She also never saw or received any statements from the Bank. (J.A. 607). On January 16, 2001, the Banks collector called Ms. Smith a second time. (J.A. 298-99, 610-11). She again explained that the debt was not hers, that she was not responsible for it, and that she would not pay it. (J.A. 610). She did, however, give the collector all the personal information that the collector requested, including her business mailing address, trusting that by cooperating it would all be straightened out. (J.A. 610-11). MS. SMITH CONFRONTS MR. JONES The December 2000 collection call from the Bank was the first time that Ms. Smith became aware of this credit card. (J.A. 610). This call was also when she first learned that Mr. Jones had filed bankruptcy. (J.A. 610). Ms. Smith confronted Mr. Jones immediately after the first collection call with what she had been told about the credit card account and his bankruptcy; as a result of that conversation, she decided to move from their home. (J.A. 609). However, the Banks insertion of Mr. Joness bad credit card debt on her credit reports prevented her from getting financing for a condominium that she located to buy. (J.A. 611). It even prevented her from renting an apartment, since landlords also check credit reports. (J.A. 616). MS. SMITH HIRES A LAWYER AND DISPUTES THE DEBT Ms. Smith then requested her three credit reports. (J.A. 612). The Bank was reporting the credit card debt as her own individual account with a delinquent balance of just over $18,000. (J.A. 253, 270). As a result, she sought an attorney and retained Mr. James Carter to represent her. (J.A. 612, 643). On February 27, 2001, when Ms. Smith and Mr. Carter met at his office, the attorney telephoned the Bank and spoke with a representative. (J.A. 299-301, 612, 644-45). Mr. Carter informed the representative that Ms. Smith needed to clear up her credit report because she otherwise had perfect credit and the Banks listing of the delinquent credit card account as hers was preventing her from getting financing for a new residence. (J.A. 301, 647). Mr. Carter

explained that Ms. Smith had never seen or used the Banks credit card, that she had never received a statement, and that she was not responsible for the disputed account. (J.A. 645). Mr. Carter asked whether the Bank had an application or any other documentation indicating that Ms. Smith had ever wanted to avail herself of an account with the Bank. (J.A. 645). He also asked whether the Bank had any documentation indicating that she had ever used the account or had any information linking Ms. Smith to its account. (J.A. 645). Mr. Carter testified that the representative did not provide any of the requested documentation or information and that the Bank had still not done so nearly two years later by the time of trial. (J.A. 646). When Mr. Carter spoke to the Bank again on April 11, 2001, he was told that the Bank did not have a credit application on this account or other documentation. (J.A. 648). He was then amazed to be informed that it was therefore the Banks position that Ms. Smith had the impossible burden to prove the negative that she did not owe the debt. (J.A. 648). The Bank representatives notes of that conversation confirmed Mr. Carters memory, stating IT WLD BE UP TO CH TO PRVE MBNA WS REPRTNG WRNG NT MBNA PRVNG RGHT. [It would be up to the cardholder to prove MBNA was reporting wrong, not MBNA proving right.] (J.A. 302). Mr. Carter then wrote to Mr. Frank Lee, the owner of the mortgage company where Ms. Smiths financing of her condominium purchase was stalled because of the Banks negative credit report entry. (J.A. 239, 650, 654). The letter summarized in detail Ms. Smiths dispute and the events since she was first contacted by the Bank. (J.A. 239). Mr. Carter also stated in the letter that because Ms. Smith had never applied for the credit, had never used the credit card, and had never signed any document subjecting herself to be financially responsible for the account, and because the Bank could produce no contract obligating Ms. Smith to pay the account, the Bank could not survive a motion to dismiss if it ever filed suit to collect. (J.A. 239). Mr. Carter further requested Mr. Lee to forward this dispute to the CRAs for verification and expressed his confidence that the Bank and the CRAs will be forced to abandon their claim once apprised of the absence of any basis for holding Ms. Smith liable. (J.A. 239). THE BANK PROCESSES THE DISPUTE Michael Lee, the son of the mortgage company owner and the mortgage broker who was assisting Ms. Smith, did indeed mail the dispute letter to the CRAs. (J.A. 239). The CRAs received the letter and initiated the FCRA dispute verification process with the Bank. (J.A. 275279, 280-283). Specifically, the CRAs sent to the Bank a CDV form, the Consumer Dispute Verification form that is the standardized and accepted procedure within the consumer credit reporting industry for investigating and verifying consumers disputes. (J.A. 276). The CDVs summarized Ms. Smiths dispute for the Bank alternatively as CONSUMER STATES BELONGS TO HUSBAND ONLY, NOT HIS/HERS, and WAS NEVER A SIGNER ON ACCOUNT. WAS AN AUTHORIZED USER. (J.A. 278, 283). The Bank personnel who process the account disputes transmitted by CRAs are called credit reporting specialists. (J.A. 662). These employees handle approximately 250 such disputes per day. (J.A. 664, 671, 672). The Bank employs 12 credit reporting specialists. (J.A. 667). The Bank maintains its computer records and notes of each account on what it calls the CIS (Customer Information System or Screen). (J.A. 115, 683). In performing their duties, the credit reporting specialists are limited to viewing only the CIS itself. (J.A. 664, 671). This

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process is called the desk top procedures. (J.A. 665, 672). These employees do not look beyond this CIS desk top screen and therefore never pull documents like old billing statements, canceled check payments, or credit card applications. (J.A. 664, 671). The three credit reporting specialists who received the CDVs acknowledged that they fully understood the substance of Ms. Smiths dispute. (J.A. 666, 668, 671, 673). Nevertheless, in accordance with the desk top procedure, the credit reporting specialist who responded to the Equifax CDV testified that she only verified the balance and also provided additional derogatory information on this account. (J.A. 663). The credit reporting specialist who responded to the Experian CDV testified that she verified to Experian [the] identity of this account because the CIS records showed [Ms. Smith] was the only person listed on the account. (J.A. 671). Accordingly, the CDV returned to Experian stated its response from the Bank in full as VERIFIED AS REPORTED. (J.A. 278). Similarly, the credit reporting specialist replying to the Trans Union CDV confirmed that [Ms. Smith] was an individual on this account by verifying that the name and address being reported to the CRA were the same as the name and address on the CIS records for this account. (J.A. 673). Accordingly, the CDV that the Bank returned to Trans Union stated in full VERIFIED AS REPORTED. (J.A. 281, 283). After receiving the CDVs back from the Bank, the CRAs each rejected Ms. Smiths dispute and continued reporting the credit card account as Ms. Smiths own individual delinquency on her credit reports. (J.A. 251, 269-70, 281). Indeed, by the time of trial, the account was still a blemish on her credit reports. (J.A. 616, 621, 622, 656). Ms. Smith continued to be unable to get conventional financing to buy her condominium and was forced into a nonconforming loan that added several percentage points to the interest and cost her $225 more each month. (J.A. 654-58). Paying the higher interest, she finally purchased her new residence and moved from the house with Mr. Jones. (J.A. 604-05, 621). Ms. Smith also described how the experience with the Bank made it impossible for her to get on with my life and caused her such distress that she would find herself crying during work. (J.A. 615-16). MS. SMITH WAS NOT OBLIGATED TO PAY MR. JONESS DEBT The account was opened on December 20, 1987, in the name of John Jones. (J.A. 115, 124). The CIS records showed that the account was an individual one without a co-applicant: the credit reporting specialist who personally handled Ms. Smiths Trans Union dispute stated that the account was an individual one based on the code N in the appropriate field on the first page of the CIS and that if the account had two co-applicants, that field would be labeled Y. (J.A. 673-74). The credit reporting specialist who handled the Experian CDV confirmed that there was an N, the letter N, in the CIS field for credit report indicator. (J.A. 671-72). This specialist, a fifteen year employee of the Bank, testified that she did not know who at MBNA has the authority to change this indicator. (J.A. 672). The Bank could not produce any application for the account. (J.A. 597, 648, 695-97). The CIS has no entry for Ms. Smiths social security number and date of birth. (J.A. 115). This personal information constitutes two of the four items that the Banks desk top procedures designate as relevant to confirm the identity of a card holder. (J.A. 665). The Banks collection manager tried to explain the omission of the social security number on the basis that it might have been illegible on the application (that Ms. Smith testified that she never submitted and that

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the Bank did not have). (J.A. 704). Mr. Joness social security number is the only social security number in the CIS. (J.A. 709). As noted above, Ms. Smith testified that she was unaware of the credit account until dunned for payment, had never used the credit card, and had never signed an application or any other document. (J.A. 606, 610, 614, 617, 619). The Bank produced from microfilm during discovery (Plaintiffs Exhibit 11) all of the available checks and the MBNA access checks used to pay the monthly statements. (J.A. 307-431). These payments were made regularly until Mr. Jones filed for bankruptcy. (J.A. 721). Every payment check was signed by Mr. Jones; each check was written on his own personal account or the account of his company, Jones Mfg. & Sales, Inc.; the name Jane Jones appeared printed only on the nine access checks that were created in conjunction with the disputed account and that Mr. Jones used to pay when he did not write a personal or business check; each access check also was signed by Mr. Jones; and Ms. Smith did not sign a single payment. (J.A. 307-431). Over the years when the account was active, the comments on the CIS reflect various conversations with the cardholder; every one until Mr. Jones filed bankruptcy refers to the caller as Mr. Jones by name or he or h, an abbreviation that the collection manager testified means that the caller was male. (J.A. 116, 117, 123, 124, 708). THE BANKS CO-APPLICANT CLAIM, REJECTED IN ANY EVENT BY THE JURY, WAS BUILT ON A SINGLE DATA ENTRY AND WAS INCONSISTENT WITH THE ACCOUNT CODE To support its claim that Ms. Smith must have been contractually obligated as a coapplicant on the account, the Bank relied exclusively on the CIS, which states that on June 10, 1991, the last name of the already existing secondary name on the account was changed due to marriage. (J.A. 116, 683-84, 686). This June 10, 1991, entry was the initial evidence on the CIS that the Bank claimed linked Ms. Smith to the account. (J.A. 597-98). This reference to a name change was based on a telephone call. (J.A. 598, 705-07). Ms. Smith testified that she did not make that change, not only because she was unaware of the account, but also because when she notified creditors of her name change after her marriage, she did so in writing. (J.A. 623). The Bank contended that it was Mr. Jonesthe primary person on the credit cardwho made that call. (J.A. 598). The collection manager agreed. (J.A. 706). In providing the defense testimony to explain the history of the CIS and its significance, the collection manager referred to the events that flow from the June 10, 1991 name-change entry to further support the Banks contention: the monthly statements that then were issued in both Mr. Joness and Ms. Smiths names and the addition of Ms. Smith as the primary when Mr. Joness name was deleted on December 12, 2000, upon his filing for bankruptcy. (J.A. 687-88, 708). When asked what safeguards, if any, the Bank maintained to catch a mistake if the critical input of Ms. Smiths name had been initially entered erroneously, the collection manager conceded that he knew of none: he first stated, I would assume that there is some safeguard in place not to confuse it (J.A. 708-09); when pressed by the district judge for an answer, he stated, I am not familiar with what the safeguard is, no, Your Honor. (J.A. 709). Neither the collection manager or any other witness for the Bank ever attempted to explain why, if Ms. Smith were indeed a co-applicant, the CIS Y code for an account with coapplicants was not present here and instead the CIS clearly showed an N code for an individual account. (J.A. 671-72, 673-74).

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THE DISTRICT COURT INSTRUCTS THE JURY The following is the district courts entire jury charge on the substantive claim presented on appeal: The plaintiff, Jane Smith, is suing the defendant, MBNA America Bank, N.A., for damages alleging that the defendant negligently and willfully violated the Fair Credit Reporting Act, 15 U.S.C. section 1681. The plaintiff claims that the defendant violated the Fair Credit Reporting Act because she claims that after receiving notice from three credit reporting agencies that the plaintiff was disputing the identity and balance of an MBNA account[, t]he defendant failed to review all of the information provided by the credit reporting agencies, failed to investigate the plaintiff's disputes, and failed to report back to the agencies the result its investigation. The defendant denies that it violated any provision of the Fair Credit Reporting Act. The defendant claims that it reviewed all of the information provided by the credit reporting agencies, investigated the plaintiff's disputes, and reported back to the these agencies the results of an investigation. The plaintiff claims first, that the defendant negligently failed to comply with the Fair Credit Reporting Act in failing to review all of the information provided by Experian, Equifax and TransUnion; failing to conduct a reasonable investigation of her disputes, and failing to accurately report back to these agencies the result of its investigation. To establish her claim that the defendant negligently failed to comply with the Fair Credit Reporting Act the plaintiff must establish the following elements by a preponderance of the evidence: One, that the defendant negligently failed to, A, conduct an investigation with respect to the disputed information B, review all relevant information provided by the consumer reporting agencies; or C, report the results of the investigation to the consumer reporting agencies; and two, that the plaintiff was damaged; and three, that the negligence of the defendant proximately caused the damage suffered by the plaintiff. Your verdict will be for the defendant if you find that the plaintiff fails to establish any one of the three elements. Negligence as used in these instructions means the failure to do something which a reasonably prudent person would do, or the doing of something which a reasonably prudent person would not do under the circumstances which you find existed in this case. It is for you to decide what a reasonably prudent person would do or not do under the circumstances as they existed in this case. In other words, you must determine whether the defendant's investigation of the disputed information was reasonable. The term "proximate cause" as used in these instructions means that there must be a connection between the conduct of the defendant that the plaintiff claims was negligent and the damage complained of by the plaintiff, and that the act that is

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claimed to have produced the damage was a natural and probable result of the negligent conduct of the defendant. **** The Fair Credit Reporting Act is not required, does not require that credit card account records, including original applications, be kept in any particular form; however, the law does prohibit MBNA from maintaining its record in such manner as to consciously avoid knowing that information it is reporting is accurate. A corporation may act only through natural persons as its agents or employees, and in general any agent or employee of a corporation may bind the corporation by his acts and declarations made while acting within the scope of his authority delegated to him by the corporation, or within the scope of his duties as an employee of the corporation. If a corporation has established a standard of procedure for the accomplishment of an act, it is relevant to proving that it acted in a specific instance in conformance with that standard of procedure. And here again, you have heard evidence that everybody is getting electronic now days, and it is up to you to decide whether that is a reasonable way to conduct your business or not. (J.A. 763-65, 770-71). The jury agreed that the Bank negligently failed to comply with the FCRA and awarded Ms. Smith actual damages. (J.A. 784). The jury ruled for the Bank on the claim of willful noncompliance. (J.A. 784). SUMMARY OF ARGUMENT CONGRESS AMENDED THE FCRA IN 1996 TO COMPEL THE BANKS MEANINGFUL PARTICIPATION IN THE FCRA DISPUTE RESOLUTION PROCESS Congress amended the FCRA in 1996 to require that those who furnish credit information to CRAs actively participate in the formal FCRA dispute resolution process. Specifically, Congress mandated that as part of the response to a consumers dispute challenging the completeness or accuracy of any item of information in a consumers file, the furnisher shall conduct an investigation with respect to the disputed information and shall report the results of the investigation to the consumer reporting agency. THE BANK FAILED TO INVESTIGATE THE DISPUTED INFORMATION As the trial amply demonstrated, the Bank did virtually nothing, and certainly nothing of substance, in response to Ms. Smiths dispute here. Consistent with its argument to the district court that there is no qualitative component in the operative statutory language, the Bank candidly admits that its response to Ms. Smiths dispute was limited and minimal. Indeed, the Bank did precisely what every relevant authority has admonished is insufficient to meet the

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statutory command to investigate disputed information: it declined to look into the merits of the question and instead simply confirmed that the very information that the consumer was challenging was being faithfully repeated, computer to computer, to the CRA as the Bank was erroneously maintaining it. The Bank continues to claim that this mere parroting of the information in the computer record that itself is the subject of the dispute meets the Congressional standard that it shall conduct an investigation with respect to the disputed information. To achieve this alchemy, the Bank breached the cardinal rule of statutory interpretation: not once in its Brief does it examine the ordinary, common meaning of what is an investigation. An investigation is a careful search; detailed examination; systemic inquiry. An investigation is not a minimal or limited inquiry but one of substance. Accordingly, the Bank did not conduct an investigation as the FCRA requires. The reason for this failure is that the Banks desk top procedures, the relevant institutional protocols, affirmatively prevented its employees from performing any such inquiry. In accordance with established Circuit jurisprudence, no further examination of Congressional intent is appropriate where, as here, the meaning of the statutory language is plain and unambiguous. Nevertheless, the Bank attempts to establish ambiguity where none exists based on a professed dichotomy between a CRAs admittedly qualitative duty to perform a reasonable investigation and the putative minimal furnisher investigative duty. The purported distinction does not exist. The Bank bases this argument on two other sections of the FCRA that do not address the FCRAs investigation procedure. An accurate comparison of the parallel investigation sections of the statute reinforces the plain language analysis and contradicts the Banks claim. THE BANK FALSELY REPORTED TO THE CRAS THE RESULTS OF ITS EFFORTS Even if the Bank were correct that Congresss mandate that it shall conduct an investigation with respect to the disputed information permitted simply a limited and minimal confirmation of the disputed information itself, it still would not meet its burden to nullify the jury verdict. The jury also found that the Bank breached its obligation to report the results of the investigation to the consumer reporting agency. The Bank reported back to the CRAs that it had verified as reported the disputed information. The Banks thesis is that it was not obligated to undertake a qualitative inquiry into the truth of Ms. Smiths dispute and therefore did not do so. Therefore, the Bank cannot credibly deny that its report that it had in fact verified the disputed information was necessarily false. The Banks contradictory position was apparent to the jury and is obstructive of Congresss decision in 1996 that furnishers must assist CRAs in resolving consumers disputes. If the Bank truly believed that it was free to avoid making a substantive inquiry into the merits of Ms. Smiths dispute, then at a minimum its reply to the CRAs must explain the results of the investigation in a manner that does not affirmatively misstate the scope and results of its minimal inquiry. The Bank could have reported truthfully, and consistent with its own professed view of its role under the FCRA, that its investigation revealed that its computer was faithfully reporting the challenged information to the CRAs and that otherwise it had no records to sustain or contradict the consumers dispute. In that event, it would have complied at least with the

15

FCRA mandate to report the results of the investigation. In addition, that truthful report would not have misled the CRAs to believe that the Bank had undertaken a qualitative process and had made a qualitative decision. Then, the CRAs could have evaluated Ms. Smiths dispute and taken appropriate action as required by the FCRA: if the disputed information is found to be inaccurate or incomplete or cannot be verified, the CRA shall promptly delete or modify the consumer report. The only information that the CRAs had when they disallowed Ms. Smiths dispute was the misinformation provided to them by the Bank. If the Bank had complied with the FCRAs requirement that it report the results of the investigation, the CRAs would have been compelled to delete the erroneous report. Ms. Smith then would have received her mortgage loan at the favorable rate that she had earned as a result of her own responsible and positive credit history. The financial institution for whose loan she otherwise qualified would have been able to keep a good customer, and the free market economy based on the flow of accurate and reliable information would have performed as Congress intended to foster by enacting the FCRA. Instead, the Banks misconduct here thwarted the proper functioning of the credit reporting system, to the detriment of all concerned. ARGUMENT OF LAW I. STANDARD OF REVIEW This Court reviews the denial of the Banks motion for judgment as a matter of law de novo follow[ing] the same standards as a Rule 56 motion for summary judgment. Dennis v. Columbia Colleton Medical Center, Inc., 290 F.3d 639, 644-45 (4th Cir. 2002). The Banks challenge to the jury instructions is reviewed for abuse of discretion. South Atlantic Ltd. Partnership v. Riese, 284 F.3d 518, 530 (4th Cir. 2002).

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II. INTRODUCTION A. Congress Enacted the FCRA as One Component of its Overall Plan to Strengthen the Free Market Economy By Insuring the Flow and Availability of Accurate Credit Information Congress enacted the FCRA in 1970 as Title VI of the Consumer Credit Protection Act, 15 U.S.C. 1601-1693r (CCPA), the plenary regulation of the national consumer credit industry. Consumer credit has expanded nearly three hundred fold in the last sixty years and is now one of the largest sectors of the national economy. Growing from six billion dollars at the end of World War II, outstanding consumer credit debt rose to 116 billion dollars in 1970 when Congress enacted the FCRA and by 1993 reached over 700 billion dollars. S. Rep. 103-209, 103d Cong., 1st Sess. 2-3 (1993). The Federal Reserve Board now reports that this figure has reached 1.759 trillion dollars.5 To support this phenomenal level of activity, the consumer reporting industry in 1993 maintained 450 million credit files on more than 110 million individuals and processed almost 2 billion pieces of data per month. Id., at 3. Most recently, statistics from just one of the three major CRAs show that it maintains reports on 190 million Americans, virtually the entire adult population of the country, and processes between 1.4 and 1.6 billion items of information each month. Trans Union Corp. v. Federal Trade Commission, 245 F.3d 809, 812 (D.C. Cir. 2001). In view of the demonstrated potential for error in operating this informational maze, Congress adopted the FCRA with the explicit recognition that the health of the consumer banking system is dependent upon fair and accurate credit reporting and that [i]naccurate credit reports directly impair the efficiency of the banking system. 15 U.S.C. 1681(a)(1). A recurring theme at the heart of the CCPA is that the dissemination of accurate credit information is essential to maintain the vitality of the credit granting system for the benefit of creditors and consumers alike. Just as Congress enacted the FCRA with the express purpose that credit grantors be in the best position to make reliable credit granting decisions, the Truth in Lending Act, 15 U.S.C. 1601-1667e, Title I of the CCPA (TILA), establishes the corresponding principle through its disclosure requirements that consumers are best served through their own informed use of credit. 15 U.S.C. 1601(a). In addition to the FCRA and TILA, Congress has included a further self-help checking mechanism within the CCPA as Title VII, the Equal Credit Opportunity Act, 15 U.S.C. 1691-1691f (ECOA), providing yet another information sharing standard through its core requirement that creditors disclose, and consumers receive, the specific reasons for any adverse action taken, such as credit denial. 15 U.S.C. 1691d. The Supreme Court succinctly stated this guiding principle of this Congressional philosophy thirty years ago in its initial and seminal teaching under the CCPA: [B]lind economic activity is inconsistent with the efficient functioning of a free economic system such as ours. Mourning v. Family Publication Service, Inc., 411 U.S. 356, 364 (1973). The 1996 amendments to the FCRA were adopted with the recognition that credit decisions made in ignorance or without the benefit of accurate information, whether made by credit grantors or consumers, undermine the vitality of the consumer economy.

See http://www.federalreserve.gov/releases/g19/Current/ (May 2003).

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B. Congress Adopted The 1996 FCRA Amendments With The Express Purpose To Improve The Accuracy of Credit Reporting By Bringing Furnishers Of Information Within The Statute Unfortunately, despite the intent and best efforts of Congress in adopting the FCRA, accurate information was not being consistently provided by the consumer reporting system to its credit granting clientele. In the deliberations that culminated with enacting the 1996 amendments, Congress was presented with the staggering statistic that nearly half of all consumer reports (48%) maintained by the three major CRAs contain inaccurate information. S. Rep. 103-209, supra, at 3. By 1996, Congress was poised to reform and strengthen the credit reporting system that it had left essentially untouched for twenty-five years. Id. at 2. Before 1996 furnishers of information to consumer reporting agencies were outside the scope of the FCRA. Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057, 1060 (9th Cir. 2002). Despite the central role that these entities played as the primary source of the data which the CRAs collected and disseminated, furnishers were essentially immune from federal oversight. The 1996 amendments eliminated that privileged status. Before 1996 furnishers were under no federal duty to report accurate information to the CRAs, to respond to or investigate a consumer's dispute, or to assist the CRAs in their duty to investigate the completeness or accuracy of the information which the furnisher itself provided. Vasquez-Garcia v. Trans Union de Puerto Rico, 222 F.Supp.2d 150, 154 (D.P.R. 2002). This omission was significant and frustrating since the reporting agencies themselves were bound to maintain the accuracy of their reports [ 1681e(b), which remains unaltered] and investigate a consumers dispute that the information is incomplete or inaccurate. 1681i (West 1982). Consistent with the absence of furnisher obligations, the FCRA permitted consumers to file civil actions only against a consumer reporting agency or user of information which violated the Act. 1681n and 1681o, historical and statutory notes; Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d at 1060. In addition to this federal immunity, the Act pre-empted, and continues to pre-empt, certain state law tort claims against furnishers absent malice or willful intent to injure. 1681h(e). In 1996 Congress amended the FCRA. Consumer Credit Reporting Reform Act of 1996, Title II, Subtitle D, Ch. 1, of the Omnibus Consolidated Appropriations Act for Fiscal Year 1997 (P.L. 104-208) (Sept. 30, 1996). Among the changes made to the FCRA are two which are relevant here. First, Congress enacted an entirely new section, codified in 1681s-2, imposing on furnishers of information detailed and specific responsibilities, including those in subsection (b) which the jury found the Bank violated here. Second, Congress expanded and revamped the consumer dispute resolution process of 1681i, including enacting 1681i(a)(2), which compels the CRA to promptly notify the furnisher of disputed information and triggers the furnishers corresponding duties under 1681s-2(b). The Senate Report accompanying the legislation confirms this limited FCRA coverage before 1996 and the effect of the amendments on furnishers: Currently, the FCRA contains no requirements applying to those entities which furnish information to consumer reporting agencies. Section 413 imposes certain obligations upon those furnishers of information to consumer reporting agencies. The Committee believes that bringing furnishers of information under the provisions of the FCRA is an essential step in ensuring the accuracy of consumer report information.

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S. Rep. 104-185, 104th Cong., 1st Sess. 49 (1995) (emphasis added). III. THE BANK DID NOT CONDUCT AN INVESTIGATION WITH RESPECT TO THE DISPUTED INFORMATION A. The Ordinary and Common Meaning of the Statutory Language Establishes the Substantive Component of the Banks Duty to Investigate Congress established the Banks duty to investigate Ms. Smiths dispute and defined the question presented by this case using the following language in 1681s-2(b)(1): After receiving notice pursuant to section 1681i(a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall (A) conduct an investigation with respect to the disputed information;. The Bank departed from the established canons of statutory interpretation when it argued the meaning of the operative term of the statute without examining the actual language that Congress adopted. Mallard v. United States District Court, 490 U.S. 296, 300 (1989) (Interpretation of a statute must begin with the statute's language). No principle is more firmly enshrined in the methodology of statutory analysis than where the language employed by Congress is clear, the text controls and no further inquiry is permitted. Estate of Cowart v. Nichols Drilling Co., 505 U.S. 469, 475 (1992). This Court recently reaffirmed these principles, while also identifying the specific flaw in the Banks approach: When examining statutory language, we generally give words their ordinary, contemporary, and common meaning. Scott v. United States, 328 F.3d 132, 139 (4th Cir. 2003) (Citations omitted). In accordance with its ordinary, contemporary, and common meaning, an investigation is a careful search; detailed examination; systemic inquiry. Websters New Universal Unabridged Dictionary, p. 966 (2d ed. 1983). By its own admission, and consistent with the jurys verdict, the Bank conducted no such substantive examination of the disputed information. Instead, its employees followed their instructions to confine their examination of the disputed information to the desk top procedures. As shown above, these desk top procedures permit the credit reporting specialists to view only the CIS and prohibit them from looking beyond their CIS computer screen. Therefore, the credit reporting specialists simply confirmed that the CIS contained the information that the Bank was reporting to the CRAs. This procedure consciously ignored the merits of Ms. Smiths complaint and merely begs the question of the validity of the dispute. Unremarkably and predictably, the desk top procedures resulted in the Bank validating nothing of substance and proved only that the challenged information was being reported to the CRAs as the Bank was erroneously maintaining it. As stated by the district court, the Banks behavior removes all meaning from the word investigate. (J.A. 1003). B. The Plain Meaning of Investigation Demonstrates That Congress Rejected The Banks Contention That Its 1681s-2(b) Duties Are Limited and Minimal

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The Bank does not defend its misconduct or challenge the jurys verdict on the basis of an examination of the ordinary and common meaning of operative term investigation. It does not claim that the desk top procedures permit, or that it performed, a careful search, a detailed examination, or a systemic inquiry with respect to the disputed information. The Bank has ignored this conventional method of ascertaining Congressional intent, and as a result its conclusion is naturally groundless. The linchpin of the Banks argument instead is its single unexamined and conclusory proposition that the duty established by 1681s-2(b)(1)(A) to conduct an investigation with respect to the disputed information is minimal and very limited with no qualitative element. (Brief of Appellant, pp. 9, 15, 23, 28). To craft this proposition, the Bank recites in the first section of its Argument of Law the text of 1681s-2(b)(1) and then states that the duties that Congress thereby created are limited. (Brief of Appellant, p. 23). The Bank supports this statement with no analysis of the meaning of the language and instead substitutes the required critique of the definition of the words used with the statement that its conclusion is clearly the case. Id. If Congress so clearly intended that its use of the phrase conduct an investigation with respect to the disputed information meant a minimal and limited examination with no qualitative element, then the Bank at least would have presented an accepted definition that equated an investigation with the perfunctory and superficial inquiry consciously avoiding the merits of the dispute that it performed here. It has not done so. The Banks bare assertion, with this critical omission of any discussion of the meaning of the plain language, is not simply a failure of persuasion but also a violation of this Courts prevailing tenets of statutory analysis. The Banks avoidance of the plain meaning of an investigation is patent. In a striking summary of its view of the elements of 1681s-2(b), the Bank states: Congress required that furnishers, upon receiving notice of a dispute from a consumer reporting agency, conduct an investigation, whereby it [sic] must simply review all relevant information that was provided by the agency and report back the results of its [sic] investigation, notifying all other agencies to whom the furnisher provided information and that compile credit files on a nationwide basis about any information found to be incomplete or inaccurate. (Brief of Appellant, p. 30). This synopsis unabashedly eliminates any utility for 1681s-2(b)(1)(A)s stated duty to investigate. Instead, the Bank reduces the separate duty to investigate to simply a duty to review and verify the contents of the CRAs transmittal. Thus, the Banks view of 1681s-2(b) is that 1681s-2(b)(1)(A), with its separately stated duty to investigate, has no role or import and therefore is a functional nullity. If the Banks failure to examine the plain meaning of the statutory term were not sufficient evidence of the insubstantiality of its argument, its rendering of the section under scrutiny superfluous, with no effect whatsoever, surely eliminates any credibility that might remain. TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (It is a cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant) (citations and internal quotes omitted); Lane v. United States, 286 F.3d 723, 731 (4th Cir. 2002).

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C. The Banks Misplaced Reliance on Other Sections of the FCRA Cannot Nullify the Plain Language of 1681s-2(b)(1) The Bank tries to create ambiguity where none exists and then wishes to resolve this phantom confusion contrary to the statutes plain language. Its circular tautology fails at each level of inspection. First, it is axiomatic, as presented above, that when the plain language analysis reveals an unambiguous result, a courts inquiry is at an end. Rosmer v. Pfizer, 263 F.3d 110, 117 (4th Cir. 2001). Here, the Bank would use a tertiary interpretative aid to create the alleged ambiguity that then would justify its premature resort to that tertiary aid, without even first consulting the secondary source of legislative history. Adams v. Dole, 927 F.2d 771, 774 (4th Cir. 1991) (if ambiguous statutory language is not first clarified by resort to the legislative history, then traditional tools of statutory construction are employed). This maneuver eviscerates the primacy of the plain language doctrine. This Court reached this same conclusion in the similar context where it disallowed a litigants attempted use of the secondary aid of legislative history to create the initial ambiguity: Statutory analysis cannot operate as a post-hoc justification for permitting legislative history to trump the plain meaning of the text. Rosmer, 263 F.3d at 118. Second, as articulated in Adams, even if the Bank had presented any basis for finding ambiguity in the statutory language itself, one would first be obliged to consult the legislative history. That history, summarized in Section II above, leaves no doubt that Congress intended its amendments in 1996 to bring[] furnishers of information under the provisions of the FCRA [as] an essential step in ensuring the accuracy of consumer report information. S. Rep. 104-185, supra, at 49. The legislative history refutes the Banks contention that 1681s-2(b)(1) has no substantive ingredient; as the district court observed in denying the Rule 50 motion: There would be no point in having the statute, and the requirement of an investigation, if there was no qualitative component to the investigation. (J.A. 1002). Third, the provisions where the Bank finds the supposed conflict are not parallel, and indeed are unrelated to the provision under scrutiny. To be sure, the use of the same words in different parts of same statute does evince a Congressional intent that the terms share the same meaning. Estate of Coward, 505 U.S. at 479. The doctrine of in pari materia also favors the comparison that the Bank misdirects here. Kolibash v. Committee on Legal Ethics of the West Virginia Bar, 872 F.2d 571, 573 (4th Cir. 1989). The Bank does not actually apply these rules because their application to the parallel CRA investigation provision, as addressed in the next section, confirms the correctness of the ruling below. Rather than inspect 1681i(a)(1), the CRA investigation provision corresponding to the furnishers duty under 1681s-2(b)(1), the Bank focuses on 1681e(b), which imposes the duty on a CRA initially to follow reasonable procedures to assure maximum possible accuracy of the information in any report that it prepares. The Bank argues that this provision demonstrates Congresss intent that the investigation that CRAs conductadmittedly containing a qualitative componentshould be different from a furnishers investigation which should contain no qualitative element of reasonableness. (Brief of Appellant, p. 24). The Bank does not explain why this standard of care for a CRA when initially preparing a report should be exported to the investigation process. The federal courts have reached the opposite conclusion and explicitly do not permit this exportation: the 1681e(b) reasonable procedures to assure maximum possible accuracy standard does not inform the CRAs duty to investigate under 1681i(a)(1). The Third Circuit and the district courts that have expressed an

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opinion have refused to engraft the 1681e(b) initial report standard onto the 1681i(a) investigation provision because to do so would render the two sections largely duplicative of each other in violation of the rule that to avoid any result that would render statutory language superfluous, meaningless, or irrelevant. Cushman v. Trans Union Corp., 115 F.3d 220, 225 (3rd Cir. 1997); accord, Swoager v. Credit Bureau of Greater St. Petersburg, 608 F.Supp. 972, 97475 (M.D.Fla. 1985); Grenier v. Equifax Credit Information Services, 892 F.Supp. 57, 59 (D.Conn. 1995); Yelder v. Credit Bureau of Montgomery, L.L.C., 131 F.Supp.2d 1275, 1281 (M.D.Ala. 2001). The Banks argument illustrates the wisdom of not accepting an invitation to compromise the integrity of the statute as Congress wrote it in order to accommodate the narrow, immediate needs of an individual litigant. One unintended consequence of accepting the Banks argument for a substantive link between 1681e(b) and 1681i(a) is to disrupt an otherwise settled body of law and thereby create uncertainty for the CRAs. The other section to which the Bank refers is even more attenuated. The Bank claims that the provision in 1681i(a)(5)(C) requiring CRAs to maintain reasonable procedures designed to prevent the reappearance of previously deleted information also shows that the element of reasonableness is absent from 1681s-2(b)(1). As with its reference to 1681e(b), there is in fact no logical linkage. These two provisions represent important prophylactic measures that Congress established to protect consumers and the credit industry from deficiencies that can be readily anticipated and prevented. They have no hidden meaning, and there is no basis whatsoever to support the Banks position that they signal an oblique Congressional message waiting to be discovered to alter the plain meaning of the remainder of the statute. To suggest, as the Bank does, that the use of the word reasonable in these sections portends that Congress intended no reasonable standard of conduct in any other provision of the law where that term is absent is impertinent. The Banks logic would inflict upon the remaining sections of this law a standard of unreasonable conduct. Indeed, this logic militates in favor of the adoption of an unreasonable investigation standard to test compliance with 1681s-2(b)(1). The Bank clearly disapproves of the lower courts explanation (J.A. 1002-03) that one rationale to conclude than an element of reasonableness is a component of 1681s-2(b)(1) is that 1681o predicates liability on negligent noncompliance, a standard based on the reasonably prudent person; however, the Bank does not explain its basis for that disapproval other than repeating its discredited linkage theory. (Brief of Appellant, p. 37). Perhaps the explanation for the Banks omission of a cogent critique of the lower courts impeccable reasoning is that the Bank itself embraced the same standard, and foreclosed any objection, when it proffered its own jury instruction conceding the reasonably prudent person language. (J.A. 465).

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D. Federal Jurisprudence Applying the Parallel CRA Duty to Investigate Unanimously Confirms the Error of The Banks Position Section 1681i(a)(1) establishes the duty of CRAs to investigate a consumers dispute using virtually the identical operative terms as 1681s-2(b)(1): If the completeness or accuracy of any item of information contained in a consumers file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly of such dispute, the agency shall reinvestigate free of charge and record the current status of the disputed information. The Bank summarily dismisses the extensive body of law which interprets 1681i(a) and on which the district court also relied because, according to the Bank, Section 1681i(a) simply does not apply to furnishers. (Brief of Appellant, p. 34). Section 1681i(a) of course does not apply to furnishers, but that difference cannot operate as a self-fulfilling nullification of the doctrine of in pari materia and the rule that the same words in a statute are interpreted the same. Congress drafted 1681i(a)(1) and 1681s-2(b)(1) in the same statute imposing on CRAs and furnishers the same duty to investigate the same consumer dispute of the completeness or accuracy of reported information. The link between the two sections is unequivocal not simply because of Congresss use of the same language. See, e.g., United States v. Srnsky, 271 F.3d 595, 602 (4th Cir. 2001) (applying rule to nearly identical language). When Congress amended the FCRA in 1996 to add the furnishers duty to investigate, it amended former 1681i(a) (West 1983) to add current 1681i(a)(2)(A). Section 1681i(a)(2)(A) now requires a CRA to provide to the furnisher notification of the dispute that then triggers the furnishers duty to investigate, as expressly referenced in the first clause of 1681s-2(b)(1). Sections 1681i(a) and 1681s-2(b) do not merely employ the same language and are not even simply in pari materia; they are inextricably joined as a result of the 1996 amendments by textual cross reference creating one as a condition precedent to the other. Young v. Equifax Credit Information Services, Inc., 294 F.3d 631, 639-40 (5th Cir. 2002); see, Anthony Rodriguez, Fair Credit Reporting, 3.9, p. 74, notes 157-59 and accompanying text (5th ed. 2002). The Banks summary dismissal of the parallel 1681i(a) jurisprudence is baseless. That case law confirms the absence of any basis for the Banks current position. Every federal court, including the four Circuit Courts that have opined on the question, has rejected the Banks instant contention that an investigation is not substantive. Specifically, this federal jurisprudence holds that an FCRA investigation cannot ignore delving into the merits of the dispute, may not simply confirm that the very information that the consumer is challenging is being faithfully repeated to the CRA, and instead must consult primary or outside sources as necessary to reach a substantive determination. Cushman, 115 F.3d at 224-26 (investigation insufficient when merely parroting information); Henson v. CSC Credit Services, 29 F.3d 280, 286-87 (7th Cir. 1994) (explaining when an investigation must verify the accuracy of the initial source of information); Stevenson v. TRW Inc., 987 F.2d 288, 293 (5th Cir. 1993) (same); Cahlin v. General Motors Acceptance Corp., 936 F.2d 1151, 1160 (11th Cir. 1991) (need for uncovering additional facts that provide a more accurate representation about a particular

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entry); Pinner v. Schmidt, 805 F.2d 1258, 1262 (5th Cir. 1986) (appropriate to interview multiple witnesses).6 E. Congress Focused the Furnishers Investigation on the Substantive Standard of Completeness and Accuracy of the Disputed Information If there were any basis to reject the ordinary meaning of the statutory language and to conclude that the phrase conduct an investigation with respect to the disputed information is sufficiently ambiguous to encompass a minimal and very limited review with no qualitative element, then further analysis would be appropriate. Stilner v. Beretta U.S.A. Corp., 74 F.3d 1473, 1482 (4th Cir. 1996) (en banc). Since there is no such basis, the remaining indicia of Congressional intent simply confirm the initial conclusion. The Bank asserts that in contrast to 1681s-2(a), 1681s-2(b) contains no element of accuracy. (Brief of Appellant, p. 37). Not only is the Bank in error because the text of 1681s2(b)(1) includes an accuracy component, but Congress actually established the focus of the 1681s-2(b)(1)(A) investigation on whether the furnisher finds that the information is incomplete or inaccurate. The fourth and final duty that 1681s-2(b)(1) mandates is as follows: (D) if the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis. The text of 1681s-2(b) unambiguously includes an accuracy requirement. In addition, Congress emphasized with this language that the ultimate objective of the furnishers investigation is to determine whether the consumers dispute is valid. Section 1681s-2(b)(1) begins with its reference to the CRAs notice to the furnisher of the substance of the consumers dispute under 1681i(a)(2)(A) (all relevant information) and concludes with the mandate that the furnisher provide a report of the results to each CRA, using the identical language (completeness and accuracy) that is the starting point for the dispute process under 1681i(a). Determining the substance and validity of the consumers dispute is the sole function and purpose of the furnishers investigation. In the short history of 1681s-2(b) litigation, each district court, in addition to the court below, that has been presented with the Banks proposition that a furnisher need only parrot the disputed information and need not inquire into primary or outside sources has rejected it. Each court has held that the furnishers 1681s-2(b)(1)(A) duty requires a substantive inquiry in order to ascertain the validity of the consumers dispute under this statutory standard of completeness and accuracy. Bruce v. First U.S.A. Bank, N.A., 103 F.Supp.2d 1135, 1143-44 (E.D.Mo. 2000); Betts v. Equifax Credit Information Services, Inc., 245 F.Supp.2d 1130, 1135-36 (W.D.Wash. 2003); Olwell v. Medical Information Bureau, 2003 WL 79035, *5 (D.Minn. January 7, 2003); Curtis v. Trans Union, LLC, 2002 WL 31748838, *4-6 (N.D. Ill. December 9, 2002).
Also probative of the meaning of 1681s-2(b)(1) is that Congress required a credit card issuer as the Bank to conduct[] an investigation of a consumers dispute under parallel provisions of TILAs Fair Credit Billing Act. 15 U.S.C. 1666(a)(3)(B)(ii). This identical language creates the same reasonable investigation standard as the lower court applied here. Federal Reserve Board Regulation Z, 12 C.F.R. 226.13(f) and note 31; see, Burnstein v. Saks Fifth Avenue & Co., 208 F.Supp.2d 765, 772-73 (E.D.Mich. 2002).
6

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F. The Federal Trade Commission Agrees That Merely Verifying Information in the Computerized File Does Not Constitute an Investigation Under 1681s-2(b) Congress has entrusted the Federal Trade Commission (FTC) with primary responsibility for governmental enforcement of the FCRA. 1681s. Any violation of the FCRA shall constitute an unfair or deceptive act or practice in commerce in violation of section 5(a) of the Federal Trade Commission Act [15 U.S.C. 45(a)] and shall be subject to enforcement by the Federal Trade Commission under section 5(b) thereof [15 U.S.C. 45(b)]. 1681s(a)(1). The FTC regularly brings enforcement actions pursuant to that authority and has issued interpretive guidance regarding various aspects of the statutes requirements. 16 C.F.R. Part 600. In light of the its key role administering the FCRA, courts have found it appropriate to defer to the FTCs analysis of the statutes provisions. See, e.g. Ollestad v. Kelley, 573 F.2d 1109, 1111 (9th Cir. 1978). The Bank attempts to bolster its position by relying on an FTC publication. (Brief of Appellant, pp. 23, 28). That publication merely recites the statutory language. It adds nothing to the Banks lack of analysis and failure to parse the statutory terms. Nevertheless, the Bank thereby acknowledges the FTCs central role in administering the FCRA and the importance of the Commissions views. Therefore it is significant in confirming the plain meaning of 1681s-2(b)(1)(A) that the FTC has taken the enforcement position that merely verifying information in the computerized [furnisher] file does not constitute an investigation for purposes of 1681s-2(b). In its most important furnisher compliance litigation to date, the FTC filed suit against and entered into a Consent Decree with Performance Capital Management, Inc. (PCM), a furnisher of credit information subject to 1681s-2. (Complaint, 7).7 Among the FTCs allegations was that upon receiving a CDV form from a CRA, it is the practice of PCM to compare the name, address, and information in PCMs computer database with the information provided on each consumer dispute verification form. Where the two match, PCM reports that is has verified as accurate the information in its file. (Complaint, 12). The Complaint continues that verifying information in the computerized PCM file does not constitute an investigation for purposes of Section 623(b) [ 1681s-2(b)]. (Complaint, 13). The Consent Decree remedied this noncompliance with 1681s-2(b) with entry of the following injunction enjoining PCM from: B. failing to properly investigate consumer disputes, as required by Section 623(b) of the Fair Credit Reporting Act, 15 U.S.C. 1681s-2(b), when consumer reporting agencies refer disputes to the defendant pursuant to Section 611(a)(2), 15 U.S.C. 1681i(a)(2). In order to comply with Section 623(b) when a consumer disputes the accuracy of information reported by the defendant to a consumer reporting agency, defendant shall either verify the information with the original account records within the time period set forth in the Fair Credit Reporting Act or take all necessary steps to delete the information from the files of all consumer reporting agencies to which the information was reported. In any situation where the defendant either knows that no original records exist, or is
7

The Complaint and Consent Decree in United States of America v. Performance Capital Management are reproduced in the Addendum hereto.

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informed by the original creditor that no records exist, the defendant shall, within five business days after receiving the consumer dispute, notify all consumer reporting agencies to which the information has been provided that the information is to be deleted from the file of the consumer who has disputed the account;. Consent Decree, Order, Section II.8 This FTC enforcement action is significant for reasons in addition to dramatically illustrating under identical facts as presented here the governments interpretation of the sole substantive issue that the Bank is raising. The FTC Complaint alleges that PCMs credit reporting is part of its collection activity on the underlying debts. (Complaint, 7). Others agree. Rivera v. Bank One, 145 F.R.D. 614, 623 (D.P.R. 1993) (a creditors report of a credit card debt to a CRA is a powerful tool designed, in part, to wrench compliance with payment terms from its cardholder); Matter of Sommersdorf, 139 B.R. 700, 701 (Bankr.S.D.Ohio 1991); Ditty v. CheckRite, Ltd., Inc., 973 F.Supp. 1320, 1331 (D.Utah 1997). Other consumers might have paid the non-existent debt under the pressure of the inaccurate credit report obstructing Ms. Smiths mortgage loan and condominium purchase. Ms. Smith might have done so herself had the debt been more modest. The salient point is that the Banks misconduct here not only compromises the integrity of the national credit reporting system but also can be seen as a violation of applicable standards of conduct in the collection of disputed debts. Compare, e.g., Brady v. Credit Recovery Company, Inc., 160 F.3d 64 (1st Cir. 1998). IV. ASCERTAINING WHETHER THE BANK DID CONDUCT AN INVESTIGATION WITH RESPECT TO THE DISPUTED INFORMATION RESOLVES ALL OTHER ISSUES PRESENTED If the Bank is correct that 1681s-2(b)(1)(A)s mandate that a furnisher conduct an investigation with respect to the disputed information means a minimal and limited examination with no qualitative element, then the district courts ruling to the contrary on the Rule 50 motion would be an error of law. In that event, however, as shown in the succeeding section, the judgment still should be affirmed on the basis of the jurys verdict that the Bank breached its obligation pursuant to 1681s-2(b)(1)(C) to report the results of the investigation to the consumer reporting agency. If the Bank is incorrect with regard to this central question of the meaning of a 1681s2(b)(1)(A) investigation with respect to the disputed information, then the Banks other arguments necessarily are also without merit. These purportedly separate arguments merely rephrase this primary issue or are otherwise dependent on its resolution. In every case, the arguments are therefore either redundant or insubstantial, or both. The Banks claim that the jury was not empowered to judge the reasonableness of its investigation is foreclosed by the answer to the primary question. The Bank builds its position
The Bank complains about the potential for conflicting industry standards if a jury is allowed to perform its function here. (Brief of Appellant, p. 38). The need for uniform enforcement of the law is a concept that all can embrace. The Banks refusal to conform to the FTCs established standard of conduct raises serious concerns in this area, including for the competitive disadvantage that law-abiding financial services providers suffer as a result of the Banks insistence on maintaining protocols at odds with the industry norm.
8

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solely on the stated premise that as established above, there is clearly no qualitative element for investigations. (Brief of Appellant, p. 28). The Bank offers no other perspective than that already discussed. The Bank criticizes the trial courts adoption of a tort approach but does not appear to assign error separate from its central contention. (Brief of Appellant, 35-36). The Banks proffer of its own reasonably prudent person instruction in any event limits the scope of its criticism. See section II(C), supra. More important, this Court years ago confirmed the district courts statutory tort analogue (J.A. 985) in Barber v. Kimbrells, Inc., 577 F.2d 216, 225 (4th Cir. 1978). Barber reached its conclusion in the context of TILA, which imposes strict liability without the FCRAs explicit 1681o negligence standard. Smith v. Fidelity Consumer Discount Co., 898 F.2d 896, 898 (3rd Cir. 1990). A fortiori, application of tort principles to the FCRA is irreproachable. Accordingly, the district courts rejection of the Banks invitation to comment to the jury on specific evidence or give informational instructions, and its adaptation of the FCRA to the standard negligence charge, are unimpeachable. Hardin v. Ski Venture, Inc., 50 F.3d 1291, 1294-96 (4th Cir. 1995). The Banks final assertion addressing federal record keeping requirements (Brief of Appellant, pp. 38-40) also begs the central question of the scope and meaning of a furnishers investigation duty. So long as an investigation entails more than a rubber stamping, as the district court held (J.A. 990), by employees who, as the evidence below showed, spend less than two minutes per review [compare, Cushman, 115 F.3d at 222 (six minutes per review)], the Banks position regarding record keeping is mooted by the myriad of evidence that supported Ms. Smiths position and that the Bank refused to consider. Even the Banks reference to the federal minimum two-year record rule and TILA Regulation Z (J.A. 33) is in error. Regulation Z, 12 C.F.R. 226.25(a), addresses retention of records showing evidence of compliance with TILA, that is, the records dealing with laws disclosure, credit card dispute, and similar Regulation Z requirements. Federal Reserve Board Official Staff Commentary on Regulation Z, 12 C.F.R. Part 226, Supp. I, 226.25(a)(1) (TILA Commentary). Perhaps the Bank intended to refer to the ECOAs minimum 25 month record retention requirement for credit applications [Regulation B, 12 C.F.R. 202.12(b)], which is tied to the ECOAs two year statute of limitations. 15 U.S.C. 1691e(f). Nonetheless, the Bank has not explained how a federal minimum record retention regulation of any duration could serve as a cap on its own record keeping policy. The only reference to this claim is in the heading of its brief; otherwise the Bank presents no supporting argument. (Brief of Appellant, p. 38). Accordingly, Ms. Smith has nothing to which to respond. The Bank has also failed to identify any legal error. It insisted below on both an instruction and evidence to inform the jury of the two-year retention rule. (J.A. 534, 725, 729, 730). The district court accepted the collection managers testimony but refused to also read a jury instruction to that same effect. (J.A. 696, 730). The trial courts decision to avoid unnecessary comment and unwarranted emphasis was neither error nor an abuse of discretion. Hardin, 50 F.3d at 1294-95. And having not argued the point in its brief, the Bank has abandoned the issue. Igen International, Inc. v. Roche Diagnostics GMBH, __ F.3d __, __, 2003 WL 21542340, *3 (4th Cir. July 9, 2003). The district court itself drafted and charged the jury, without objection (J.A. 725-31), with the following instruction: The Fair Credit Reporting Actdoes not require that credit card account records, including original applications, be kept in any particular form; however, the law

27

does prohibit MBNA from maintaining its record in such manner as to consciously avoid knowing that information it is reporting is accurate. (J.A. 770). The Banks complaint about record keeping and the accuracy of the CIS is inconsistent both with the jury verdict and with this instruction that is now the law of this case. If the Bank intends a different assignment of error from the record retention issue by its reference to proximate causation, it is asserting a sufficiency of the evidence claim despite the overwhelming evidentiary support for the jurys verdict that the account was not Ms. Smiths. The Bank cannot meet that hefty burden. Price v. City of Charlotte, 93 F.3d 1241, 1249-50 (4th Cir. 1996). The only evidence that supported the Banks claim that Ms. Smith was a co-applicant liable for Mr. Joness debt flowed from the computer entry on June 10, 1991. The jury was entitled to disbelieve that evidence for several reasons. One reason is the absence on the CIS of a Y code for co-applicants and instead the presence of the N code for an individual account. This code is all the evidence that is necessary to support the jurys conclusion. Even the credit reporting specialists did not know how to change these codes or who could do so, showing that the account was Mr. Joness alone since 1987. The CIS further suggested that the Bank employee who took Mr. Joness telephone call on June 10, 1991, made a mistake. If Mr. Jones asked the Bank to add Ms. Smith as an authorized credit card user (not contractually liable), the entry designating Ms. Smith as a responsible party was in error. On this point, the Bank presented no evidence of any safeguards protecting against such an error and was forced to admit that it had none. In the absence of any other evidence, the Bank expected the jury to believe that Ms. Smith had a joint credit card with Mr. Jones before they were married (and apparently before they had met) when the uncontroverted evidence showed that they scrupulously maintained separate credit cards after they were married. No jury needs to accept such nonsense, and certainly the failure to do so does not meet the hefty burden that the Bank now carries. Once the June 10, 1991, entry was impeached, the subsequent evidence, all of which flowed automatically from the changes made at that time, fell like the proverbial house of cards that it was. The monthly statements and the access checks naturally contained Ms. Smiths name printed on them. These computer-generated documents showed only that the computer was acting in conformity with the information already in the computer. They are probative of nothing other than the initial erroneous entry. Further demonstrating how the contents of a telephone call can be misinterpreted are the Banks entries from the two conversations with Ms. Smith in December 2000 and January 2001. Ms. Smith gave the collector personal information trusting that by cooperating it would all be straightened out. The Bank sought an inference that the presence of Ms. Smiths personal information on the CIS and the fact that Ms. Smith wanted to straighten the matter out meant apparently that she acknowledged that she had been a co-applicant years earlier. The right of the jury to reject that inference is patent under these facts. The CIS shows that in December 2000 the collector did not even bother to enter that there had been a conversation with Ms. Smith, noting instead only the information gained through that contact. (J.A. 124-27). The Bank asks what documents it could have reviewed to learn the truth. (Brief of Appellant, p. 39). The question itself underscores the Banks refusal to recognize that an investigation is not limited to documents and could have included interviewing Ms. Smith. Pinner, 805 F.2d at 1262; J.A. 989-90.

28

Nevertheless, one answer to the question is the Bank could have reviewed the payment checks that it produced in discovery and helped confirm Ms. Smiths claim. Another set of documents are the signed credit card receipts or sales slips that the Bank never produced. Those receipts, if signed by Ms. Smith, would have been strong evidence supporting the Bank. Indeed, such signed receipts could have substituted for a signed credit application to establish her liability for the account. The Bank could have used any such signed receipts in this dispute and in the collection case that it should have brought when it learned that Ms. Smith would not pay a debt she denied and it determined nevertheless to continue pursuing her. See, e.g., In re Hance, 181 B.R. 184, 186-87 (Bankr.M.D.Pa. 1993) (signed sales slips substitute for missing original signed security agreement). Indeed, the access checkshad she signed themwould have served that purpose since they are the credit document and therefore the functional equivalent of a sales slip or credit card receipt in an open-ended, credit card account as here. See, TILA Commentary 226.8-(1-3) and 226.8(a)(2) and (3). Once they were produced, the access checks only confirmed that Ms. Smith never used the account. V. THE BANK FALSELY REPORTED TO THE CRAS THE RESULTS OF THE INVESTIGATION Regardless of whether the Bank violated 1681s-2(b)(1)(A) when it failed to conduct an investigation with respect to the disputed information, the jury also found that the Bank violated 1681s-2(b)(1)(C). That provision establishes the furnishers third duty to report the results of the investigation to the CRA. Here, the Bank reported that it had verified as reported the disputed information. That statement was false, both objectively and by the Banks own acknowledgment of its procedures, and therefore violated 1681s-2(b)(1)(C). To report is to give an account of. Websters New Universal Unabridged Dictionary, supra, p. 1534. The noun result in the singular means consequence; outcome. Id., p. 1545. Verify means to prove to be true by demonstration, evidence, or testimony. Id., p. 2030. Since the Bank asserted that its 1681s-2(b)(1)(A) investigation has no qualitative component and set up its desk top procedures in accordance with that minimalist claim, it could not give a qualitative accounting of the consequences of that investigation. The Bank admittedly did not do a substantive review of Ms. Smiths dispute. It had no basis therefore to state the outcome in a substantive manner. The Bank had a number of alternatives to accurately report the results of the investigation. It might have stated that its computer was faithfully reporting the challenged information to the CRAs and that otherwise it had no records to sustain or contradict the consumers dispute. It might have stated that it believed that it was under no duty to conduct a qualitative investigation and therefore could not declare whether the disputed information was complete or accurate. Significantly, Congress used the plural results to describe what it commanded the Bank to report. Accordingly, the Bank should have provided these details that are both truthful and materially complete. As used throughout the FCRA and specifically in the provisions here dealing with consumers disputes, the standard for compliance is both accuracy and completeness. This standard for accuracy under the FCRA is not sui generis. Omitting a material fact, as the Bank at a minimum did when it reported to the CRAs, also constitutes, for example, misrepresentation under common law (Restatement of Torts (Second), 529, 551) and deception under the Federal Trade Commission Act. Sterling Drug, Inc. v. F.T.C., 741 F.2d 1146, 1154 (9th Cir. 1984) (failure to

29

disclose material information may cause an advertisement to be deceptive, even if it does not state false facts). This Courts most recent FCRA decision also confirms this standard. In Dalton v. Capital Associated Industries, Inc., 257 F.3d 409 (4th Cir. 2001), an employment report summarized the employees criminal record as having been charged with a felony, followed by guilty and a recitation of the sentence; in fact, the person actually had pled guilty to a misdemeanor. This Court rejected the argument that the report was accurate because it does not explicitly state that [the employee] was guilty of a felony and held that these facts create[d] a triable issue on the accuracy of the report. 257 F.3d at 515-16.9 Meaningfully accurate information is the hallmark of Congresss design of the CCPA. TILA is founded on the disclosure of accurate information. See, e.g., Nigh v. Koons Buick Pontiac GMC, Inc., 319 F.3d 119, 124-25 (4th Cir. 2003); Barber, 577 F.2d at 225. Substance, not form, is determinative. Mourning, 411 U.S. at 366-68 (burying hidden finances charges). Similarly, the efficacy of the ECOA is dependent on its disclosures being based on fact, not the creditors subjective belief. Sayers v. General Motors Acceptance Corp., 522 F.Supp. 835, 840 (W.D.Mo. 1981); see also, Fischl v. General Motors Acceptance Corp., 708 F.2d 143, 14548 (5th Cir. 1983) (requiring accuracy and specificity). The ultimate context within which to evaluate the Banks compliance with 1681s2(b)(1)(C) is the function for which Congress intended the report to the CRAs to be used. The CRA is obligated, once it receives the furnishers report, to determine not only whether the disputed information is inaccurate or incomplete but also whether it cannot be verified. 1681i(a)(5)(A). This provision shows the importance of furnishers reporting accurately to the CRAs. The FCRAs recognition of the possibility that the information is no longer verifiable explains why the Banks report here was deficient and why Congress employed the plural in its use of the term results to implement its goal in 1996 to require a meaningful and effective role for furnishers in the dispute resolution process. The Bank not only failed Ms. Smith, but it failed the CRAs as well. None of the CRAs had any independent basis to resolve this dispute. All three therefore relied on the Banks misrepresentation that it has verified the disputed information when they did not delete the tradeline from Ms. Smiths report as should have been done if the Bank had reported accurately the results of the investigation. This case emphasizes that the concerns expressed in adopting the FCRA were both well founded and unfortunately clairvoyant: [W]ith the trend toward computerization of billings and the establishment of all sorts of computerized data banks, the individual is in great danger of having his life and character reduced to impersonal blips and key-punch holes in a stolid and unthinking machine which can literally ruin his reputation without cause, and make him unemployable or uninsurable, as well as deny him the opportunity to obtain a mortgage to buy a home. We are not nearly as much concerned over the possible mistaken turn-down of a consumer for a luxury item as we are over the possible destruction of his good name without his knowledge and without reason.

Dalton was decided under a separate section that deals specifically with public record information for employment purposes and contains its own requirement of completeness. 1681k(2).

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The loss of a credit card can, of course, be expensive, but, as Shakespeare said, the loss of one's good name is beyond price and makes one poor indeed. Bryant v. TRW, Inc., 689 F.2d 72, 79 (6th Cir. 1982) (quoting 116 Cong. Rec. 36570 (1970)). At every stage of this matter, the Bank breached its duties to Ms. Smith and to the CRAs. Now it presents woefully insubstantial arguments to this Court in an attempt to escape the consequences of its misconduct. Its protestation that it is not attempting to shirk any duties to Smith or to the public at large (Brief of Appellant, p. 40) rings hollow in the face of the plain language and purposes of the FCRA. The Bank did not apply the plain language of the FCRA to determine its duties. It now asserts its unsupported desire as to how it wished Congress had drafted the law. If the Bank were not attempting to shirk its public duties, it would have changed its desk top procedures long ago and certainly once the district court had denied its motion for summary judgment and once it learned that the even FTC condemns its practices. And if it believed in the role of Congress in balancing the competing interests of all concerned (Brief of Appellant, p. 29), it would not accept the benefits of the 1996 amendmentsincluding immunity from virtually all state laws in accordance with 1681t(b)(1)(F)and still attempt to escape any responsibility to perform the modest and reasonable role that Congress has assigned to it in maintaining the health of the free market. CONCLUSION For the foregoing reasons, the judgment below should be affirmed, with costs of appeal awarded to Ms. Smith, and this matter remanded for the trial court to complete its award of costs and reasonable attorneys fees arising from the district court litigation and now from this appeal. Respectfully submitted,

___________________________ Attorneys for Plaintiff-Appellee Jane Smith

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1.2 Brief, Statute of Limitations

I. STATEMENT OF SUBJECT MATTER AND APPELLATE JURISDICTION Plaintiff-Appellant [Consumer] (hereafter [Consumer]) appeals from a final decision that disposes of all parties claims in an action brought pursuant to the Fair Credit Reporting Act, 15 U.S.C. 1681-1681u (hereafter the FCRA or the Act). Jurisdiction in the United States District Court for the District of Nevada was conferred by the FCRA, 15 U.S.C. 1681p, and 28 U.S.C. 1331. On August 7, 2002, the District Court entered its Judgment in a Civil Case, dismissing [Consumer]s claims and entering judgment for Defendant-Appellee U.S. Bancorp (hereinafter the Bank or USB). (ER 68). On August 14, 2002, [Consumer] filed his F.R.Civ.P. 59(e) motion to reconsider and alter the judgment. (ER 69). On December 16, 2002, the district court denied that motion. (ER 106). [Consumer] timely filed his notice of appeal on December 23, 2002. (ER 109). Jurisdiction in this Court is conferred by 28 U.S.C. 1291. II. STATEMENT OF ISSUE PRESENTED FOR REVIEW Whether the FCRA statute of limitations begins to run when the consumer discovers inaccurate information in a credit report even when the consumer has not yet disputed the inaccurate information with a consumer reporting agency and therefore before the consumer has a cause of action. III. STATEMENT OF THE CASE A. NATURE OF THE CASE [Consumer] filed suit on February 1, 2002, alleging that the Bank willfully or negligently failed to comply with its reinvestigation duties as a furnisher of credit information under 1681s-2(b) of the FCRA. (ER 1). The Bank moved to dismiss the Complaint with prejudice pursuant to F.R.Civ.P. 12(b)(6), contending that the claims were barred by the FCRAs statute of limitations. (ER 30). The district court granted the Banks motion and accordingly dismissed the Complaint. (ER 68). The lower court adhered to its decision upon Mr. Nelsons motion for reconsideration. (ER 106). Therefore, the sole issue decided below is whether [Consumer] commenced his action within the FCRAs two year statute of limitations. B. STATEMENT OF FACTS The Complaint and its exhibits allege with particularity [Consumer]s protracted and unsuccessful attempts to have the Bank properly credit a payment that it misapplied on his loan account. (ER 1). In view of the narrow legal issue presented, it is not necessary to recite the details of the history of his ordeal. Instead, [Consumer] repeats the District Courts summary that the Banks conduct is egregious and disturbing. (ER 66).

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Two salient events inform the statute of limitations issue now presented. First is the preliminary dialogue that occurred between the Bank and [Consumer] before his invocation of the FCRA dispute process. In the words of the District Court: In October 1999, [Consumer] learned that [the Bank] had erroneously reported the account as having a negative credit history. Despite numerous attempts by [Consumer] to have the error corrected by [the Bank], and [the Banks] admission that an error had been made, the negative credit history remains and [Consumer] suffered adverse credit consequences as a result. (ER 65). Second are the crucial core allegations that, beginning a year later, [Consumer] repeatedly disputed the USB account with Equifax, the national consumer reporting agency (CRA) that prepared [Consumer]s credit report containing the erroneous USB account information. Specifically, [Consumer] began his unsuccessful FCRA disputes with Equifax initially during October, 2000, to which Equifax responded on October 31, 2000 that it contacted each source directly and our investigation is now complete. (ER 1, para. 14 and Ex. 3). [Consumer] then disputed the USB entry with Equifax three more times over the next eight months, first in December 2000 (Id., para. 15 and Ex. 4), again in April-May 2001 (Id., paras. 19 and 20 and Exs. 8 and 9), and finally in May-June 2001 (Id., paras. 21 and 22 and Exs. 10 and 11). All his attempts to correct the USB error on [Consumer]s Equifax credit report were futile. [Consumer] then filed this action on February 1, 2002. This filing date is more than two years after [Consumer] first learned in October 1999 of the Banks credit reporting error but less than two years after he first invoked the FCRA dispute process with Equifax in October 2000. The single count Complaint alleged that the Bank breached its investigation duties imposed by 1681s-2(b) once Equifax notified it of [Consumer]s dispute. (ER 4). The lower court held that the FCRA limitations period is triggered by the date of discovery in cases where a defendant willfully misrepresents material information. (ER 65-66). Notwithstanding that [Consumer] had not initiated the CRA/furnisher dispute process until October 2000, and instead merely because [Consumer] admittedly knew of the erroneous information on his credit report in October 1999, the District Court dismissed the action as untimely. IV. ARGUMENT OF LAW A. SUMMARY OF ARGUMENT This case is controlled by two FCRA cases decided by this Court and by the United States Supreme Court. These two decisions constitute binding precedent that answers the only substantive questions that this case raises. The FCRA provides in 1681p that an action to enforce any liability under this subchapter may be brought within two years from the date on which the liability arises This Court held in Nelson v. Chase Manhattan Mortgage Corp. that, in a furnisher liability case as presented here, such liability arises only when a consumer initiates the formal dispute resolution procedure with a CRA and the furnisher breaches its duties to reinvestigate. Congress

33

interposed this formal dispute process, denominated by this Court as a filtering mechanism, to provide an opportunity for the furnisher to save itself from liability by taking the steps required by the Act to resolve the dispute. Binding Circuit precedent therefore holds that furnisher liability cannot arise until the consumer activates the dispute process with a CRA. The CRA then notifies the furnisher of the consumers dispute. [Consumer] initiated this process sixteen (16) months before he filed this action. He alleged the dispute initiation date with Equifax and the Banks liability for its breach of its resulting reinvestigation duties, all occurring less than two years before filing. This action accordingly is not time barred. The decision below ignores the Circuit authority conditioning furnisher liability on the initiation of the formal FCRA dispute procedure. The lower court never acknowledged Nelson, let alone implemented its express teaching that a furnisher is never liable to a consumer merely for an initial, pre-CRA dispute misreporting of credit information, even information known by the furnisher to be inaccurate. Instead, the District Court calculated the statute of limitations from the time when [Consumer] learned that the Bank reported the erroneous information to Equifax. This Court held in Nelson that this initial report to a CRA does not give rise to liability. Instead of analyzing the statutory language in particular or the concept of when liability arises in general, the District Court stated that the limitations period is triggered by the date of discovery in cases where a defendant willfully misrepresents material information, as is alleged here. In TRW Inc. v. Andrews, the Supreme ruled precisely to the contrary: We hold that a discovery rule does not govern 1681p. Section 1681p does contain a narrow and limited misrepresentation exception that tolls the statute of limitations until two years after discovery of the misrepresentation of any information required under this subchapter to be disclosed to an individual by a defendant. The Supreme Court in Andrews concluded that this exception covers willful misrepresentation of any information required by the Act to be disclosed to the plaintiff. This statutory discovery rule by its terms can never apply to 1681s-2(b) furnisher liability. [Consumer] did not allege any such misrepresentation to him. More important, the only FCRA requirements which mandate disclosures to a consumer (and therefore to which the willful misrepresentation exception can refer) are placed on CRAs and credit report users, not furnishers. In addition, this statutory discovery rule, as any other discovery rule, is available only to toll a statute of limitations governing a cause of action that otherwise has accrued. Pursuant to Nelson there was no cause of action to toll until [Consumer] initiated the formal FCRA dispute procedure. The decision below is plainly erroneous and must be reversed. B. STANDARD OF REVIEW The lower courts ruling on a motion to dismiss for failure to state a claim for relief is a question of law subject to de novo review by this Court. Gonzalez v. Metropolitan Transportation Authority, 174 F.3d 1016, 1018 (9th Cir. 1999). C. [CONSUMER] BROUGHT THIS ACTION WELL WITHIN THE FCRAS TWOYEAR STATUTE OF LIMITATIONS

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1. The plain language of the act provides that consumers must file suit within two years after liability arises
The court below departed from established canons of statutory construction when it interpreted the meaning of the FCRA without examining the language of the Act. Mallard v. United States District Court, 490 U.S. 296, 300 (1989) (Interpretation of a statute must begin with the statutes language). No principle is more firmly enshrined in the methodology of statutory analysis than where the language employed by Congress is clear, the text controls and no further inquiry is permitted. Estate of Cowart v. Nichols Drilling Co., 505 U.S. 469, 475 (1992). This Court recently reaffirmed these principles: Statutory interpretation begins with the plain language of the statute. See Consumer Prod. Safety Commn v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S. Ct. 2051, 64 L. Ed. 2d 766 (1980). If the language of the statute is clear, we need look no further than that language in determining the statutes meaning. See United States v. Lewis, 67 F.3d 225, 228 (9th Cir. 1995). United States v. Hanousek, 176 F.3d 1116, 1121 (9th Cir. 1999). The single provision of the Act governing resolution of this case is 1681p, which states in full as follows: An action to enforce any liability created under this subchapter may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within two years from the date on which the liability arises, except that where a defendant has materially and willfully misrepresented any information required under this subchapter to be disclosed to an individual and the information so misrepresented is material to the establishment of the defendants liability to that individual under this subchapter, the action may be brought at any time within two years after discovery by the individual of the misrepresentation. (Emphasis added). As shown by the emphasized language, Congress granted consumers two years to file suit, measured from the date on which the liability arises. The District Courts decision is at odds with the plain language of the Act. 2. Binding circuit precedent establishes that the earliest date when furnisher liability arises is after the consumer initiates the dispute process with a CRA In 2002 this Court gave plenary consideration to the dispositive issue presented by the plain language of the Act and determined the earliest date when such liability arises. Nelson v. Chase Manhattan Mortgage, 282 F.3d 1057 (9th Cir. 2002). In Nelson this Court concluded that the earliest date that liability arises is when the consumer lodges a dispute with a CRA, which then notifies the furnisher of that dispute. The Complaint here alleges that [Consumer] initiated this FCRA dispute procedure sixteen (16) months before filing suit. Therefore the decision below, dismissing this action on the basis of the two year statute of limitations, is without foundation.

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In this seminal decision establishing the 1681s-2(b) furnisher liability on which this case is founded, this Court held that Congress imposed a filtering mechanism as a prior condition to establishing furnisher liability. 282 F.3d at 1060. This filtering mechanism is the formal FCRA dispute resolution procedure contained in 1681i that first requires that the disputatious consumer notify a CRA of the dispute. Id. The CRA then informs the furnisher of the disputed information of the consumers dispute, thereby providing an opportunity for the furnisher to save itself from liability by taking the steps required by the Act to resolve the dispute. Id. It is the duty to take those steps to investigate disputes conveyed by a CRA, and only those steps, that [Consumer] alleges that the Bank breached here. (ER 4, para. 26). Nelson excludes any liability based on a furnishers misconduct which occurs before initiation of the formal dispute process, as does the plain language of the FCRA. Specifically, this Court in Nelson expressly rejected any notion that a furnisher is liable to the aggrieved consumer simply for misreporting credit information, even information known by the furnisher to be inaccurate. 282 F.3d at 1060. Binding precedent in this Circuit therefore holds that a furnisher has no FCRA liability for any conduct occurring before the consumer initiates the CRA dispute process and before the CRA formally notifies the furnisher of that dispute. This Court held that Congress did not want furnishers exposed to suit by any and every consumer dissatisfied with the credit information furnished. Id. If the furnisher takes advantage of the FCRAs safe harbor and complies with its 1681s-2(b) duties, the furnisher has no FCRA liability whatsoever; but if it breaches those duties, as alleged here, then, and only then, can the furnishers liability arise. The Complaint alleges that [Consumer] initiated the FCRA dispute process with Equifax in October 2000, sixteen months before he commenced this action, well within the FCRAs two year statute of limitations. Pursuant to Nelson, the Bank had no liability until [Consumer] began that process. The plain language of the statute and binding precedent of this Court therefore establish that this action is timely.10 D. CONGRESS CREATED NO APPLICABLE EXCEPTION TO THE FCRAS GENERAL TWO-YEAR STATUTE OF LIMITATIONS 1. Requiring consumers to file suit within two years after liability arises is consistent with the standard rule In 1997 the Supreme Court summarized federal statute of limitations jurisprudence in Bay Area Laundry and Dry Cleaning Pension Trust Fund v. Ferbar Corporation of California, 522 U.S. 192 (1997). In the Multiemployer Pension Plan
10

The rule announced by this Court in Nelson is the linchpin of the two lower federal court decisions that have applied the statute of limitations to furnishers. Both cases recognize that the sole FCRA duty of furnishers subject to private enforcement is to investigate consumer disputes conveyed through a CRA; and both cases calculate the limitations period from the time of the violation, i.e. date of the breach of that investigation duty. Dornhecker v. Ameritech Corp., 99 F.Supp.2d 918, 927-28 (N.D.Ill. 2000)(Plaintiffs filed their Complaint on January 3, 2000, within two years of Ameritechs alleged August 1998 failure to comply with its duty to investigate disputed information.); Sullivan v. Equifax, Inc., 2002 WL 799856, *4 (E.D.Pa. 2002)( the alleged violations occurred within the limitations period.) 36

Amendments Act of 1980 (MPPAA) [29 U.S.C. 1451(f)(1)], Congress used virtually identical language (the date on which the cause of action arose) as it used in the FCRA. The Supreme Court held that this provision incorporates the standard rule that the limitations period commences when the plaintiff has a complete and present cause of action: By its terms, the MPPAAs six-year statute of limitations runs from the date on which the cause of action arose. 29 U.S.C. 1451(f)(1). This language, as we comprehend it, incorporates the standard rule that the limitations period commences when the plaintiff has a complete and present cause of action. Rawlings v. Ray, 312 U.S., at 98, 61 S. Ct., at 474; see also Clark v. Iowa City, 20 Wall. 583, 589, 22 L. Ed. 427 (1875) (All statutes of limitation begin to run when the right of action is complete....). Unless Congress has told us otherwise in the legislation at issue, a cause of action does not become complete and present for limitations purposes until the plaintiff can file suit and obtain relief. See Reiter v. Cooper, 507 U.S. 258, 267, 113 S. Ct. 1213, 1220, 122 L. Ed. 2d 604 (1993) ( While it is theoretically possible for a statute to create a cause of action that accrues at one time for the purpose of calculating when the statute of limitations begins to run, but at another time for the purpose of bringing suit, we will not infer such an odd result in the absence of any such indication in the statute.). The MPPAA contains no indication that Congress intended to depart from the general rule. 522 U.S. at 201. The Supreme Courts general rule for calculating the statute of limitations is consistent with the formulation adopted by recognized American legal treatises: The test to determine when a cause of action arises or accrues is when the plaintiff has suffered a legal injury, that is, when he or she has the right to maintain an action or first may maintain an action to a successful conclusion, or when the action can be brought without being subject to dismissal for failure to state a claim. 51 Am Jur 2d, Limitations of Actions, 148, p. 546 (footnotes omitted). Whether stated as in 1681p as the date when liability arises, as summarized by the Supreme Court as the time when [Consumer] had a complete and present cause of action and therefore could file suit and obtain relief, or in unadorned practical terms as once he could sue and not be subject to dismissal for failure to state a claim, the Nelson decision establishes the identical accrual date. Consumers may not sue for mere inaccurate furnisher reporting. Until and unless the consumer initiates the formal dispute process and the CRA conveys the dispute to the furnisher, there is no right of action. 282 F.3d at 1060; accord, Young v. Equifax Credit Information Services, Inc. 294 F.3d 631, 639-40 (5th Cir. 2002) (Thus, any private right of action [the consumer] may have under 1681s-2(b) would require proof that a consumer reporting agency, like Equifax or CBLC, had notified [the furnisher] pursuant to 1681i(a)(2) (emphasis in original)); Washington v. CSC Credit Services, Inc., 199 F.3d 263, 269 n.5 (5th Cir. 2000) (only

37

governmental entities may enforce 1681s-2(a) for initial furnisher reporting errors); Aklagi v. NationsCredit Financial Services Corp., 196 F. Supp. 2d 1186, 1192-94 (D. Kan. 2002) (no private right of action to enforce 1681s-2(a); condition of 1681s-2(b) liability is furnishers receipt of consumers dispute from a CRA); DiMezza v. First USA Bank, Inc., 103 F. Supp. 2d 1296, 1299-1301 (D.N.M. 2000) (same). 2. The FCRAs statutory discovery exception cannot apply to furnisher liability Last term the Supreme Court in TRW Inc. v. Andrews, 534 U.S. 19 (2001), considered 1681p in a non-furnisher liability context. The Supreme Court did not directly address the question presented by this appeal. Nevertheless, it did authoritatively resolve matters that are material to this case. Andrews directly eliminates one issue from this case, with an explanation that excludes another: We hold that a discovery rule does not govern 1681p. That section explicitly delineates the exceptional case in which discovery triggers the two-year limitation. We are not at liberty to make Congress explicit exception the general rule as well. 534 U.S. at 23. The final portion of 1681p contains this statutory discovery exception: [W]here a defendant has materially and willfully misrepresented any information required under this subchapter to be disclosed to an individual and the information so misrepresented is material to the establishment of the defendants liability to that individual under this subchapter, the action may be brought at any time within two years after discovery by the individual of the misrepresentation. Andrews concisely states that this exception covers willful misrepresentation of any information required by the Act to be disclosed to the plaintiff. 534 U.S. at 22 (internal quotes and ellipsis omitted).11 The Supreme Courts preliminary rejection of this exception to the Andrews facts applies equally here: Section 1681ps exception is not involved in this case; the complaint does not allege misrepresentation of information that the FCRA require[s] to be disclosed to [the plaintiff]. Id. [Consumer] similarly alleges no misrepresentation of any information that the FCRA requires to be disclosed to him. The Complaint and its exhibits show a series of willful misrepresentations made by the Bank to both [Consumer] and Equifax, but none meets 1681ps precise language. The Banks misrepresentations to Equifax were not made to [Consumer], and its misrepresentations to him are not information required by the Act to be disclosed to him. As in Andrews, 1681ps exception has no application here. Apart from the absence of any qualifying misrepresentations alleged in the Complaint is the fact that the FCRA imposes no requirement on furnishers to disclose any information to consumers. The sole section of the FCRA imposing any duties on furnishers is
11

The usage in 1681p of an individual means the affected consumer in accordance with 1681a(c).

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1681s-2. All information required to be disclosed under 1681s-2 is between CRAs and furnishers. Indeed, the absence of any direct obligations from furnishers to consumers formed the essence of the furnishers losing argument in Nelson. 282 F.3d at 1059.12 E. THE DISTRICT COURTS PUTATIVE DISCOVERY RULE HAS NO BASIS IN FEDERAL JURISPRUDENCE The District Courts sole explanation of its substantive ruling is the following sentence, citing TRW Inc. v. Andrews: This limitations period is triggered by the date of discovery in cases where a defendant willfully misrepresents material information, as is alleged here. (ER 65-66). Significantly, the court did not specify what precise facts or information to which its discovery rule relates. Nevertheless, no facts or information that were extant in October 1999, one year before [Consumer] initiated the dispute procedure with Equifax, could trigger the FCRA limitations period here. The most natural reading of the decision below is that the event that activated the District Courts discovery rule is the one recited in the paragraph immediately before its quoted explanation: In October 1999, [Consumer] learned that [the Bank] had erroneously reported the account as having a negative credit history. (ER 65). However, if that reference to the Banks pre-consumer dispute reporting to a CRA animated the lower courts discovery rule, the court committed clear error. Since this Court in Nelson held that merely furnishing inaccurate information to a CRA gives rise to no liability, discovery of the elements of this phantom cause of action has no bearing on the limitations period for that nonexistent claim. A fortiori, discovery of that information is immaterial regarding the statute of limitations for the actual cause of action that [Consumer] is asserting and that only accrued one year later. A discovery rule is available only to toll a statute of limitations governing a cause of action that otherwise has accrued. See, e.g. Yazzie v. Olney, Levy, Kaplan & Tenner, 593 F.2d 100, 102-03 (9th Cir. 1979). The claim must already exist. 54 C.J.S. Limitations of Actions, 87, p. 124. Since this Court in Nelson rejected any cause of action on the facts that were extant at the time that the District Court found critical, the District Courts discovery rule is anomalous: rather than commencing a statute of limitations when an action has accrued, it purports to create a cause of action that does not exist. Under the guise of an imprecise discovery rule, the lower court extinguished a claim that Congress created through the 1996 FCRA amendments that added 1681s-2, expanded the civil liability provisions of 1681n and 1681o, and for the first time imposed duties on furnishers of credit reporting information. This judicial repeal of Congresss handiwork occurred because [Consumer] attempted to work out his differences with the Bank informally before resorting to the FCRAs formal procedure a year later. The lower courts ruling penalizes consumers for first dealing directly with their own creditors, as anyone would naturally do, and discourages consumers from resolving their disputes
12

In contrast to the absence of any information required to be disclosed to consumers by furnishers, the FCRA contains several such requirements which are placed on CRAs and on credit report users and to which 1681p may refer. 1681b(e)(5) and (6) (disclosure of CRA nationwide opt out system from pre-screening lists); 1681d (special disclosure requirements on users of investigative consumer reports); 1681g and 1681h(a) and (b) (core CRA disclosures to consumers); 1681i (CRA disclosure requirements in connection with the formal dispute process); 1681k(1) (CRA disclosure of public record information in employment reports); and 1681m (user adverse action notice requirements).

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expeditiously and informally where possible. It accordingly forces consumers to forego such efforts and instead immediately resort to the formal FCRA CRA dispute procedure. It unnecessarily compels consumers to abandon even that formal process earlier than they might otherwise in the mistaken belief that Congress did not give them two full years to exhaust their administrative CRA remedies. Thus, the lower courts ruling burdens the federal courts with suits that could have been avoided, contrary to any due regard for judicial economy, and does so in a manner which this Court in Nelson expressly admonished: The statute has been drawn with extreme care, reflecting the tug of the competing interests of consumers, CRAs, furnishers of credit information, and users of credit information. It is not for a court to remake the balance struck by Congress, or to introduce limitations on an express right of action where no limitation has been written by the legislature. 282 F.3d at 1060. V. CONCLUSION

For the foregoing reasons, the judgment below should be reversed, with costs of appeal awarded to [Consumer], and this matter remanded for proceedings on the merits. Respectfully submitted,

________________________ Attorneys for Plaintiff-Appellant [Consumer]

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1.3 Reply Brief, Statute of Limitations

I. THE BANK HAS IGNORED THE CONTROLLING CIRCUIT AUTHORITY HOLDING THAT [CONSUMER] FILED SUIT WITHIN TWO YEARS AFTER LIABILITY ARISES [Consumer] explained in his opening brief the lower courts error in holding that the FCRAs statute of limitations had accrued before the Banks liability had arisen. The plain language of 1681p provides that an action to enforce any liability under this subchapter may be brought within two years from the date on which the liability arises This Court held in Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057 (9th Cir. 2002), that a furnisher liabilitys arises only after a consumer initiates the formal dispute resolution procedure with a CRA and the furnisher breaches its duties to reinvestigate. This binding Circuit precedent also establishes that a furnisher has no FCRA liability for any conduct occurring before the CRA formally notifies the furnisher of the consumers dispute, precisely the opposite of the ruling below. The Bank has not responded to this argument. Its choice to ignore this straightforward analysis of 1681p and of the Nelson precedent leaves [Consumer]s argument unopposed. II. THE BANKS RELIANCE ON THE FCRAS DISCOVERY EXCEPTION IS BASELESS Having effectively conceded that the ruling below cannot be defended on the basis of the dispositive proposition of when furnisher liability arises, the Bank relies instead on the statutory discovery rule contained within 1681p. [Consumer] refuted that argument on multiple grounds in his opening brief. Sections IV(D)(2) and (E), pp. 15-20. Primarily, he showed that the plain language of 1681p, as authoritatively interpreted by the Supreme Court in TRW Inc. v. Andrews, 534 U.S. 19, 22 (2001), precludes any basis for the ruling below since the willful misrepresentations that the Bank committed were not misrepresentations of information required to be disclosed by the FCRA, as required by the express language of 1681p. Indeed, only CRAs and users are subject to the FCRA requirements which mandate disclosures to a consumer. In the two pages constituting its entire argument on this point, the Bank affirmatively misrepresents the statutory language by omitting its reference to the specific type of misrepresentation to which 1681p is limited and consequently misstating that any willful misrepresentation is sufficient.13 Not once does the Bank attempt to connect the plain language of 1681p to the facts of this case. This failure to make a prima facie showing that the discovery exception in 1681p is applicable is understandable: there is no basis on which to do so.
13

The Banks omission of the qualifying condition that the willful misrepresentation be of information required to be disclosed by the FCRA is patent: [U]nder the plain language of 15 U.S.C. 1681p, if a party willfully misrepresents information to another, the statute of limitations begins to run from the date of discovery of the misrepresentation.[Consumers] theory of liability against the Bank is founded upon alleged willful misrepresentation by the Bank. Moreover, the District Court specifically concluded that [Consumer]s claims were premised on the alleged willful misrepresentations of the Bank. (Defendant-Appellees Response Brief, pp. 8-9.)

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Similarly, the Bank does not answer the argument that application of a discovery rule here would impermissibly create a cause of action before it exists. (Brief of Plaintiff-Appellant, pp. 18-19). [Consumer] therefore can add nothing further, other than note that in the intervening month, this Court issued its opinion in Meyer v. Ameriquest Mortgage Co., __ F.3d __ (9th Cir. June 9, 2003), which further illustrates the Banks misuse of its putative discovery rule to a cause of action that has not accrued. III. THE BANKS PURPORTED ABSURD RESULTS ARE INSTEAD THE SYSTEM THAT CONGRESS INTENTIONALLY ADOPTED A. THE SUPREME COURT AND THIS COURT HAVE ADMONISHED AGAINST ACCEPTING THE BANKS INVITATION TO ESCHEW CONGRESSS HANDIWORK In tacit recognition that the ruling below is contrary to the plain language of 1681p, the Bank resorts to arguing that this Court should ignore that plain language in order to avoid purported absurd results. What the Bank considers absurd results is in fact the very plan that Congress devised to insure the proper functioning of the national credit reporting system. In contrast to version of the FCRA that the Bank prefers but that Congress did not adopt, Congress deliberately chose to encourage consumers in [Consumer]s position to exhaust their informal efforts to resolve disputes with their creditors and thereby not to rush to the federal courts with premature litigation that might otherwise be avoided. [Consumer] explained the utility and wisdom of this Congressional design in his opening brief (pp. 19-20). Nevertheless, the Bank has also not commented on this explanation, even while attacking Congresss handiwork as an absurdity. The Supreme Court stated twenty-three years ago, in the context of the Consumer Credit Protection Act, that the federal judiciary is ill equipped to substitute its judgment through statutory interpretation for the legislative decisions made by Congress: [J]udges are not accredited to supersede Congress or the appropriate agency by embellishing upon the regulatory scheme. Ford Motor Credit Company v. Milhollin, 444 U.S. 555, 565 (1980). The potential danger of such judicial activism is illustrated by this case. Any departure from the statutory language and the canons of statutory construction to replace the judgment of Congress with the Banks view of how the FCRA should operate and which violations should be enforced would create havoc and remake the balance and organization of interdependent provisions. Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d at 1060. B. CONGRESS ACTUALLY ANTICIPATED AND PROVIDED FOR THE SERIATIM DISPUTES THAT THE BANK NOW CLAIMS WOULD BE AN UNINTENDED ABSURDITY The chief absurd result that the Bank identifies as a consequence of applying 1681p as Congress drafted and adopted it is that consumers could continuously request[ ] reinvestigation and renew[ ] the statute of limitations with serial disputes. (DefendantAppellees Response Brief, p. 10.) Congress, however, in fact anticipated and provided safeguards to prevent any abuse from this possibility. As discussed in greater detail in [Consumer]s opening brief (pp. 14-15), Congress established the CRAs as the gatekeepers to the credit reporting system. Part of that authority is the power to reject any consumer dispute as

42

frivolous or irrelevant [ 1681i(a)(3)], specifically including, as confirmed by the Federal Trade Commission (FTC), the Banks professed concern where the consumer merely reiterates a dispute about the same item of information. FTC Official Staff Commentary on the FCRA, 16 C.F.R. Part 600, 611, 11 (2003). The FCRA does permit the constant renewal of the statute of limitation with each new breach by a defendant of an FCRA duty. Hyde v. Hibernia National Bank, 861 F.2d 446, 450 (5th Cir. 1988). Congress was also aware of and therefore accounted for the possibility of frivolous serial disputes. Section 1681i(a)(3) is an effective administrative safeguard against frivolous or irrelevant disputes. In addition, if a litigious consumer unreasonably continued with a subsequent suit, Congress amended the FCRA in 1996 to add a fee-shifting provision in favor of defendants sued in bad faith or for purposes of harassment. 1681n(c) and 1681o(b). Congress exercised its judgment by providing protection in both the preliminary CRA dispute process and in any subsequent litigation that the unjustified consumer may persist in pursuing. What the Bank identifies without analysis as an absurd result is the reasoned accommodation that Congress has chosen. C. CONGRESS PURPOSEFULLY ALLOWED CONSUMERS TO DELAY INITIATING THE DISPUTE PROCESS The other absurd result that the Bank believes necessitates abandoning the plain language of the FCRA is that [Consumer] could have waited five years or even ten years to request a reinvestigation through a CRA and then have filed suit despite his long-standing knowledge of the Banks original error. (Defendant-Appellees Response Brief, p. 12.) Again, the Banks assertion only reveals its dissatisfaction with policy decisions made by Congress, particularly its determination to focus consumer and industry efforts on the investigation of the current status of the disputed information. Dynes v. TRW Credit Data, 652 F.2d 35, 36 (9th Cir. 1981) (Emphasis in original).14 If [Consumer] had decided to wait five or ten years to dispute a credit report entry, there almost certainly would be no occasion to reinvestigate, let alone sue. Congress mandated that CRAs remove such ancient information from credit reports through operation of 1681c(a). The CRAs have developed the ability to routinely meet their obligation to do so: expunging an old entry is a relatively simple automatic function performed by the CRAs computer systems since the age of the information is apparent on its face. McPhee v. Chilton Corp., 468 F. Supp. 494, 497 (D. Conn. 1978). The FCRA already provides that a consumers dispute of information that no longer appears on an extant credit report would die an instant death as frivolous or irrelevant under 1681i(a)(3) assuming that it even could be processed in view of 1681i(a)(1)(A)s current status standard. The Banks claim also reveals its misunderstanding of how reports actually are made. Furnishers such as the Bank regularly provide new information and update their reports, typically monthly. Rodriguez, Fair Credit Reporting, 3.3.1, p. 55, National Consumer Law Center (5th ed. 2002). Even if older information is not deleted as obsolete under 1681c(a), it is unlikely that it would remain on a credit report undisturbed for any number of years, as the Bank

14

The original operative language in 1681i(a) on which this Court relied in Dynes has been recodified with unrelated textual changes in 1681i(a)(1)(A).

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posits. A furnisher such as the Bank can, and often does moot any dispute before it arises through its natural monthly revision of data. Of course, the furnisher may subsequently repeat the original erroneous information. However, that fact underscores the wisdom of Congresss decision to allow consumers to wait as long as they wish to initiate the CRA dispute process in order to parallel the open-ended nature of the reporting system (as well as to permit the inaccurate information simply to fade away naturally without compelling preemptive, unnecessary disputes). This result is not absurd but instead is a measured balancing of the needs of all concerned serving the ultimate goal of economies of action. Despite all of the ways in which disputes over inaccurate information may dissipate over time, if after years the information still remains and the consumer then chooses to begin the formal CRA dispute process and files suit, as the Bank now complains is possible, the system that Congress adopted will still penalize unreasonable consumer delay without having to resort to the Banks unseemly invitation to ignore the plain language of the FCRA. As in any litigation, the defense of failure to mitigate damages is available under appropriate circumstances and has been expressly held to apply to delay occasioned by the FCRAs statute of limitations renewal phenomenon. Hyde v. Hibernia National Bank, 861 F.2d at 450 n. 26 and accompanying text. As so often happens when such claims are subjected to analysis, the Banks protestations of unintended absurd results are shown not to be absurd at all but the actual design of Congress. See e.g., Heintz v. Jenkins, 514 U.S. 291, 295 (1995)([Petitioner] argues that many of the Acts requirements, if applied to litigating activities, will create harmfully anomalous results that Congress simply could not have intended.Many of [Petitioners] anomalies are not particularly anomalous.) The FCRA evinces Congresss comprehensive regulation of a complex and critical component of the consumer financial services industry. This Courts admonition in Nelson (282 F.3d at 1060) is a particularly apt reply to the Banks instant invitation to depart from the statutory language: It is not for a court to remake the balance struck by Congress, or to introduce limitations on an express right of action where no limitation has been written by the legislature.15 CONCLUSION For the foregoing reasons, the judgment below should be reversed, with costs of appeal awarded to [Consumer], and this matter remanded for proceedings on the merits. Respectfully submitted,

________________________ Attorneys for Plaintiff-Appellant [Consumer]

15

The Bank concludes with a gratuitous defense of the lower courts exercise of discretion in denying the F.R.Civ.P. Rule 59 motion for reconsideration, even after correctly acknowledging that [Consumer] naturally has not argued that issue on appeal. (Defendant-Appellees Response Brief, p. 16). As the Bank readily admits that it understands, reference to that final order in the Notice of Appeal was made merely as a formality in conformity with F.R.App.P. Rule 4(a)(4)(v), and no further discussion is warranted.

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