4th Cir.: Roberts v. Carter-Young- Fair Credit Reporting Act – Reasonable Investigation – Legal vs. Factual Disputes

Summary:

The Fourth Circuit vacated and remanded the dismissal of Shelby Roberts’ Fair Credit Reporting Act (“FCRA”) claim against a debt collector, holding that the district court erred in concluding that disputes involving legal issues are categorically outside the scope of the FCRA’s investigation requirements.

Roberts disputed a $791 charge from her former landlord, which she alleged stemmed from retaliatory and fabricated damages after she refused to vacate her apartment early. The debt was referred to Carter-Young, Inc., a collection agency, which reported the debt to the credit bureaus. After receiving notice from the credit reporting agencies of Roberts' disputes, Carter-Young conducted no independent investigation and instead simply recertified the debt based on the landlord’s affirmation.

Roberts sued under 15 U.S.C. § 1681s-2(b), alleging Carter-Young negligently and willfully failed to conduct a “reasonable investigation.” The district court dismissed her complaint, finding that the dispute was legal in nature—centered on claims of fraud and lease interpretation—and thus not subject to FCRA enforcement. On appeal, the Fourth Circuit rejected this rigid factual/legal dichotomy.

Instead, the Court adopted a more nuanced standard, aligning with the Second and Eleventh Circuits: A furnisher’s duty to investigate under the FCRA extends to disputes that allege inaccuracies which are “objectively and readily verifiable,” regardless of whether they stem from legal or factual contentions. The Court explained that furnishers are not required to resolve complex legal disputes or make credibility determinations, but they must investigate when the inaccuracies can be reasonably verified without functioning as a tribunal.

Because the district court applied the wrong legal standard in dismissing Roberts’ claim, the case was remanded for further proceedings under the “objectively and readily verifiable” standard.

Commentary:

This decision is a significant win for consumer advocates and provides an important clarification in the murky intersection of legal disputes and credit reporting obligations under the FCRA. While many debt disputes—particularly in landlord-tenant relationships—involve contractual and legal elements, this ruling ensures that consumers are not left without recourse simply because the underlying facts implicate legal theories.

The Court rightly emphasized that debt collectors and furnishers, like Carter-Young, cannot escape their statutory duty to investigate simply by labeling a dispute as “legal.” The key question is whether the claimed inaccuracy can be objectively verified—such as whether a charge was actually incurred, whether a debt was paid, or whether an item was actually replaced (as Roberts disputed about a stove).

Furnishers and credit agencies often dismiss discharge disputes by arguing they involve legal determinations—e.g., whether a debt was “actually” discharged in a bankruptcy.  Here the Fourth Circuit has explicitly rejected the legal-vs-factual distinction as a bar to liability. The Court held that even legal disputes can give rise to FCRA claims so long as the underlying facts are objectively and readily verifiable—which is frequently the case with bankruptcy discharges, as the discharge order and schedules are public record and clearly show which debts were included.

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