The United States Court of Appeals for the Fourth Circuit in Johnson v. MBNA America Bank, N.A., No. 03-1235, 2004 WL 243404 (Feb. 11, 2004) affirmed a $90,300 jury verdict for the plaintiff for MBNA’s failure to conduct a reasonable investigation of the plaintiff’s dispute concerning an MBNA MasterCard account appearing on her credit report, resulting in a finding that MBNA negligently failed to comply with the Fair Credit Reporting Act (FCRA). The account at issue was opened in November 1987 by Edward N. Slater, whom Johnson married in March 1991. MBNA apparently believed that Johnson was a co-applicant on the account, although Johnson claims that she was merely an authorized user. After Slater filed for bankruptcy in December 2000, MBNA removed his name from the account and informed Johnson that she was responsible for the $17,000 account balance. Johnson obtained copies of her credit report from the three major credit reporting agencies (CRAs) and disputed the account with all three agencies. Each CRA sent to MBNA an automated consumer dispute verification indicating that Johnson disputed (i) that she was a co-obligor and (ii) the account balance. MBNA reviewed its computerized records and notified the CRAs that it had verified that the disputed information was correct. The CRAs continued reporting the account on Johnson’s credit report.

As it existed at the time Johnson’s claim arose, Section 623(b) of the FCRA provided that after receiving notice of a dispute from a CRA, creditors must (i) conduct an investigation, (ii) review all relevant information provided by the CRA, (iii) report the results of the investigation to the CRA and (iv) if the investigation reveals any incomplete or inaccurate information, report those results to all other CRAs to which the creditor furnished the information. See 15 U.S.C. § 1681s-2(b)(1)(A)-(D). Subsequently, that section was amended by the Fair and Accurate Credit Transactions Act to require that if an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation, the creditor must promptly (i) modify, (ii) delete or (iii) permanently block the reporting of that item of information. See id. § 1681s-2(b)(1)(E), amended by 2003 Pub. L. 108-159 (Dec. 4, 2003).

Focusing on dictionary meaning of the term “investigation,” the Fourth Circuit construed the statute to require creditors, after receiving notice of a consumer dispute from a CRA, to conduct a reasonable investigation (“some degree of careful inquiry,” more than superficial) of their records to determine whether disputed information can be verified. The court rejected MBNA’s claims that (i) Section 1681s-2 imposes only a minimal duty on creditors to briefly review their records to determine whether the disputed information is correct, (ii) no evidence supported a jury determination that MBNA’s investigation was unreasonable, (iii) Johnson failed to establish that MBNA’s allegedly inadequate investigation was the proximate cause of her damages because there were no other records MBNA could have examined that would have changed the results of its investigation and (iv) several jury instructions were improper.

Notably, because MBNA destroyed records after five years, MBNA was unable to retrieve the original application or other record to prove Johnson’s status at the time the account was opened. Creditors should review their investigation policies and procedures and consider their record-keeping guidelines in light of this decision.

Mike Tomkies