New Jersey District Court Denies Furnisher’s Attempt To Dismiss FCRA Claim At The Outset Of Case

In Fumelus v. Experian Information Solutions, Inc., 2019 WL 1509140 (D.N.J. Apr. 5, 2019), the plaintiffs alleged that defendant Diamond Resorts (“Diamond”) violated the FCRA by furnishing false information about their account. They alleged that Diamond erred in reporting: (i) the debt was owed to Diamond, instead of Tempus Palms; (ii) the tradeline was “open,” when it had already been charged off; and (iii) the outstanding balance on the debt was greater than it actually was.                 

Diamond moved to dismiss the plaintiffs’ claims on two grounds. First, Diamond asserted that the plaintiffs’ complaint failed to plead that Diamond received notice of the dispute from co-defendant Experian, which they asserted was an essential element of an FCRA claim against a furnisher like Diamond. Second, it argued that the information it furnished was accurate and submitted a certification from a corporate representative in support of this contention. The court rejected both of these contentions and denied Diamond’s motion.

While the court recognized that Diamond could only be held liable to the plaintiffs if it received notice from Experian, rather than receiving a dispute directly from the plaintiffs, the court found that “it does not necessarily follow … that Plaintiffs must explicitly plead that Experian notified Diamond Resorts of Plaintiffs’ disputes.” The court held that since Experian has a statutory duty to notify Diamond of any disputes from the plaintiffs, the plaintiffs’ allegations that they disputed the alleged inaccuracies to Experian was sufficient to state a claim for relief. The court further found that at the motion to dismiss stage, the plaintiffs were entitled to all inferences that could be derived from the allegations in the Complaint and noted that several other courts have similarly concluded that a plaintiff need not specifically allege that a furnisher received notice from the credit reporting agency.

The court also rejected Diamond’s attempt to challenge the accuracy of the report at the pleadings stage, holding that it was premature to assess the accuracy of the plaintiffs’ claims of falsity because the plaintiffs had sufficiently pleaded facts supporting a conclusion that Diamond furnished incomplete or inaccurate information to Experian. The court specifically noted that the plaintiffs alleged Diamond reported the account as “open,” when it was actually “charged off,” and further reported a balance of $10,883.00, when it was really only $8,037.97. The court also rejected the certification from Diamond, which asserted that the debt was indeed owed to Diamond because Tempus Palms was a wholly owned subsidiary of Diamond. The court held that it could not rule on that issue at the motion to dismiss stage.

Given the continued onslaught of FCRA claims, furnishers will continue to explore ways to dismiss these claims at the outset of litigation. However, to date, there are limited bases for a furnisher to move to dismiss a FCRA claim. We will continue to monitor and report on new defense strategies and key developments in this area. Please contact Ryan DiClemente, Esq. for more information on FCRA compliance and litigation strategies.