Home - Blank Rome LLP

Register to receive insights and analyses on breaking news and trends across varying industries.
<a class="link-primary mt-4" href="/subscribe">Subscribe</a>

Philadelphia, PA

New York, NY

Wilmington, DE

Cincinnati, OH

Princeton, NJ

Los Angeles, CA

Houston, TX

Tampa, FL

Shanghai

South Florida

Pittsburgh, PA

Washington, D.C.

Chicago, IL

Orange County, CA

Dallas, TX

Boston, MA

Financial institutions, credit furnishers, debt collectors and other businesses reporting consumer information to credit reporting agencies should take note that the <a href="https://www.law360.com/agencies/u-s-court-of-appeals-for-the-fourth-circuit">U.S. Court of Appeals for the Fourth Circuit</a> refused to impose a bright-line rule that only factual inaccuracies, as opposed to legal inaccuracies, are actionable under the Fair Credit Reporting Act.

core/paragraph

In Roberts v. Carter-Young Inc., a case of first impression, the Fourth Circuit <a href="https://www.law360.com/articles/2311039/4th-circ-revives-tenant-s-fcra-suit-over-disputed-debt">held</a> on March 14 that an actionable inaccuracy under the FCRA is an inaccuracy that is "objectively and readily verifiable" — whether the inaccuracy is "legal, factual, or a mix of both." Based on this rule, the Fourth Circuit vacated the dismissal of the plaintiff's claims and remanded the case for further proceedings. The Fourth Circuit's decision deepens an existing circuit split, as it joins two other circuits in adopting the broader view of what constitutes an actionable inaccuracy under the FCRA. Thus, as discussed further below, furnishers of consumer information should review their investigation and verification procedures to account for potential legal disputes.

Summary of Facts and Background

core/heading

Shelby Roberts' initial lease term at Ansley at Roberts Lake Apartments in North Carolina came to an end in September 2020. Thereafter, "Roberts and Ansley entered into a 60-day lease agreement," which provided that "after the 60 days ended, Roberts could lease the apartment month-to-month, but either party could terminate the lease by giving 30 days' written notice," the Fourth Circuit's decision says. Ansley tried to lease Roberts' apartment to another tenant beginning in December 2020 without providing the required 30-day written notice to Roberts, according to court documents. Roberts "informed Ansley that, under their agreement, her lease continued through" Jan. 10, 2021, the decision states. As a result, Ansley had to breach its agreement with the other tenant. On Jan. 10, 2021, Roberts vacated the apartment. Ansley retained Roberts' security deposit and sent her a $791.14 invoice for additional damages, including a new stove and other unspecified damages. Believing these additional charges were fabricated, "Roberts refused to pay the invoice," and Ansley thereafter "referred its claim against Roberts to Carter-Young Inc.," a debt collection agency, according to the decision. Carter-Young then reported the debt to <a href="https://www.law360.com/companies/experian-plc">Experian</a>, <a href="https://www.law360.com/companies/equifax-inc">Equifax</a> and <a href="https://www.law360.com/companies/transunion-llc">TransUnion</a> but noted it was "disputed." Roberts disputed the debt with the credit reporting agencies, or CRAs, which notified Carter-Young of the same. In response, Carter-Young merely asked Ansley, its client, to recertify the validity of the debt, without conducting any further investigation of Roberts' claims. After Ansley recertified the debt, Carter-Young recertified the same to the CRAs, which continued to report it. Roberts continued to dispute the debt with the CRAs, which notified Carter-Young of these continued disputes, leading to additional perfunctory recertifications by Ansley and certifications to the CRAs. Roberts then commenced an action in the U.S. District Court for the Middle District of North Carolina against Carter-Young, alleging willful and negligent violations of Title 15 of the U.S. Code, Section 1681s-2(b)(1), based on its failure to conduct a reasonable investigation of her disputes of the debt. "Roberts alleged that Ansley never actually replaced the stove ... and did not need to make repairs that cost more than her security deposit," according to the decision, and "that Ansley falsely invoiced her for costs that it never incurred or that were exaggerated in retaliation for remaining in the apartment." The decision says "Roberts also alleged that Carter-Young never investigated her dispute" and instead merely asked Ansley to recertify the debt. Carter-Young moved to dismiss Roberts' complaint, arguing that Roberts had failed to state a claim for failure to conduct a reasonable investigation under the FCRA because her dispute was legal, not factual. Specifically, Carter-Young argued that Roberts' characterization of the debt as fraudulent and retaliatory required it to make legal conclusions that Ansley retaliated against Roberts or committed fraud and that the FCRA does not require furnishers to investigate legal disputes. A magistrate judge issued a report and recommendation agreeing with Carter-Young, finding that the FCRA does not require Carter-Young to "resolve legal questions," and the district court fully adopted the report and recommendation granting Carter-Young's motion to dismiss. Roberts then appealed to the Fourth Circuit.

The Fair Credit Reporting Act

As a matter of first impression, the Fourth Circuit held that there are three essential elements of an FCRA claim for failure to reasonably investigate: "(1) the plaintiff submitted a dispute over the accuracy of information on a credit report to a [CRA]; (2) the [CRA] notified the furnisher of that dispute; and (3) the furnisher failed to conduct a reasonable investigation to determine whether the disputed information can be verified." Section 1681s-2(b) provides that after a furnisher receives notice of a dispute regarding the completeness or accuracy of any information provided by a person to a CRA, a furnisher must conduct an investigation with respect to the disputed information. The FCRA does not define the terms "completeness" or "accuracy."

The Fourth Circuit's Decision

On appeal, Roberts asserted that furnishers are required to investigate both factual and legal disputes, and any purported legal dispute exception did not preclude her FCRA claim because her dispute "contested 'the entire factual underpinning'" of the debt — its existence and amount. Instead of alleging that Roberts' dispute was legal, not factual, as it did before the district court, Carter-Young questioned whether the term "accuracy" as used in Section 1681s-2(b) of the FCRA requires that disputes "be 'objectively and readily' verifiable to trigger a furnisher's obligation to conduct an investigation of the dispute," and "whether Roberts sufficiently alleged that she disputed the 'accuracy' of the information" reported. In vacating the district court's decision, the Fourth Circuit rejected the distinction between factual and legal disputes for reasonable investigations. Specifically, the Fourth Circuit held that inaccuracies — whether legal, factual or a mix of both — are actionable under Section 1681s-2(b) if the plaintiff pleads an objectively and readily verifiable inaccuracy. Notably, the Fourth Circuit explained that the following are not objectively and readily verifiable: disputes involving "complex fact-gathering and in-depth legal analysis of the sort that courts would typically perform"; "claims of tortious conduct that require[] a furnisher to evaluate the subjective nature of the parties' actions — such as claims of fraud or retaliation"; unsettled questions of law; credibility determinations; or quasi-discovery. However, the Fourth Circuit also indicated that the scope of an investigation into objectively and readily verifiable information is not limited to merely "confirming accurate transcription of a debt's amount or the name of the debtor." Thus, the Fourth Circuit held that to state a claim against a furnisher for violating its duty to reasonably investigate under Section 1681s-2(b) of the FCRA, a consumer must allege facts that — if true — indicate inaccurate or incomplete information in her credit report that is objectively and readily verifiable. The Fourth Circuit found that in dismissing Roberts' complaint, the district court applied a different rule to determine if Roberts alleged an actionable inaccuracy, which was purely based on the distinction between a factual and legal dispute. As a result, the Fourth Circuit vacated the district court's dismissal of Roberts' claims and remanded the case for further proceedings. Specifically, in doing so, the Fourth Circuit declined to decide, and directed the district court to determine, if Roberts alleged an objectively and readily verifiable inaccuracy in her credit report, and the reasonableness of Carter-Young's investigation. In remanding the case to the district court, the Fourth Circuit stated that the district court will have the opportunity to address reasonableness when it conducts its analysis of the inaccuracy element of an FCRA failure to reasonably investigate a claim, applying the Fourth Circuit's new rule.

This decision is significant, as it deepens the circuit split regarding what constitutes an actionable inaccuracy sufficient to state a claim under the FCRA. Prior to Roberts, the circuits were evenly split on the applicable standard for an actionable inaccuracy. Now, three circuits have taken the broader view that an actionable inaccuracy can include a legal dispute. Specifically, the Fourth Circuit analyzed conflicting case law regarding actionable inaccuracies and joined the U.S. Courts of Appeals for the Second and Eleventh Circuits' view that an actionable inaccuracy under the FCRA can be based on a legal or factual dispute, or a mix of both, as long as it is objectively and readily verifiable. Further, the Fourth Circuit disagreed with the district court's adoption of the U.S. Courts of Appeals for the First and Tenth Circuits' bright-line rule distinguishing between an actionable factual inaccuracy versus a legal inaccuracy or dispute. Given the deepening split in authority, it is likely only a matter of time before the <a href="https://www.law360.com/agencies/u-s-supreme-court">U.S. Supreme Court</a> ultimately resolves what constitutes an actionable inaccuracy under the FCRA. If the Supreme Court were to adopt the broader view, which includes legal disputes that are objectively and readily verifiable, it would be more onerous for furnishers to investigate disputes from CRAs. On the other hand, if the Supreme Court were to adopt a bright-line rule that legal inaccuracies or legal disputes are not actionable under the FCRA, it would be a loss for the consumers bar, who would no longer be able to bring lawsuits premised on a legal dispute. In the interim, furnishers should review their investigation and verification procedures to determine if such procedures sufficiently account for disputes involving alleged legal inaccuracies and/or a mix of legal and factual inaccuracies. It would be prudent to take this more conservative approach, instead of simply accounting for purely factual disputes, given the developing case law and current circuit split, where more circuits have adopted the broader view. For instance, do the investigation and verification procedures include the investigation of a consumer's bankruptcy to determine if a disputed debt was discharged and/or if the consumer may have entered a bankruptcy plan and, therefore, is not delinquent as reported? These types of alleged inaccuracies are examples of straightforward legal disputes that are objectively and readily verifiable. Moreover, furnishers should review the scope of their investigation into objectively and readily verifiable information. Based on the guidance in Roberts, merely "confirming accurate transcription of a debt's amount or the name of the debtor" is insufficient and unreasonable. Finally, although the Fourth Circuit declined to adjudicate Carter-Young's motion to dismiss, its commentary that inaccuracies that are objectively and readily verifiable do not include claims requiring a furnisher to "evaluate the subjective nature of the parties' actions — such as claims of fraud or retaliation" hint at how the Fourth Circuit might have ruled. Thus, although the district court will need to apply the Fourth Circuit's new rule to determine if Roberts alleged an actionable inaccuracy under the FCRA, the ultimate outcome may be the same. In short, the district court may find that since Roberts alleges the debt was the result of Ansley falsely invoicing her for costs that it never incurred or that were exaggerated in retaliation for her remaining in the apartment, Roberts' legal dispute involves alleged inaccuracies that are not objectively and readily verifiable and, therefore, dismiss the action.

"4th Circ. 'Actionable Inaccuracy' Finding Deepens FCRA Split," by Diana M. Eng and Namrata Loomba, was published in <a href="https://www.law360.com/articles/2339627">Law360</a> on May 14, 2025.

4th Circ. 'Actionable Inaccuracy' Finding Deepens FCRA Circuit Split

Offices

Stay Connected

Slide Menu

Slide Search

4th Circ. 'Actionable Inaccuracy' Finding Deepens FCRA Circuit Split

Offices

Stay Connected