Third Circuit Holds CRAs’ Compliance with the HEA Not Furnisher’s Concern

The Third Circuit recently considered for the first time the interplay between the Fair Credit Reporting Act (“FCRA”) and the Higher Education Act of 1965 (“HEA”), with respect to the responsibilities of an institution of higher education that furnishes information on student loan indebtedness to a consumer reporting agency (“CRA”).  In Seamans v. Temple University, Case No. 12-4298, plaintiff-debtor appealed an order of the United States District Court for the Eastern District of Pennsylvania, which granted summary judgment to defendant, Temple University, on plaintiff’s claims for negligent and willful violations of the FCRA.  In Seamans, the plaintiff argued that the defendant provided incomplete and misleading information to CRAs regarding an education loan when it never provided the CRAs with the collection history and date of delinquency of the loan.  The Third Circuit reversed the lower court’s decision, holding that furnishers of consumer credit data remain obligated to report fully and accurately under the FCRA regarding the collection history and date of delinquency for even an HEA-qualifying education loan. 

To protect consumersfrom having their credit forever impaired by aging debts, CRAs are precluded from reporting accounts which have been “placed for collection” or “charged to profit and loss” more than seven years prior to the report. See 15 U.S.C. § 1681c(a)(4).  When a furnisher provides information to a CRA regarding an account placed for collection or charged to profit or loss, the furnisher then has 90 days in which to notify the CRA of the account’s “date of delinquency,” which is defined as “the month and year of the commencement of the delinquency on the account that immediately preceded the action.”  See § 1681s-2(a)(5)(A).  The date of delinquency enables the CRA to calculate the seven-year window for “aging-off” purposes—without it, the CRA would be unable todetermine when the account had been placed for collection, rendering the “aging-off” date impossible to calculate.  The HEA, however, contains a provision that instructs CRAs to disregard the FCRA’s “aging-off” provisions when reporting data on certain federally backed education loans.  See 20 U.S.C. § 1087cc(c)(3). 

Defendant argued that by simply omitting from its report all facts that could trigger the “aging-off” provisions, it was helping the CRAs comply with the HEA and, in practice, furthering the congressional intent to prevent unpaid student loans from “aging off” credit reports.  The Third Circuit disagreed, finding that the question of whether a particular loan should or should not “age off” a credit report was the CRAs’ statutory concern, not an excuse for furnishers to report loan information in an incomplete or inaccurate manner. 

Although furnishers, such as the defendant in Seamans, are obligated to provide complete and accurate information to CRAs, the FCRA explicitly precludes private suits for failure to comply with that statutory duty and instead provides for enforcement of that provision by federal and state officials.  See 15 U.S.C. § 1681s-2(a), (c), (d).  Accordingly, the plaintiff’s claims in Seamans were limited to those which occurred after defendant was informed of plaintiff’s dispute of the information.

For more information on the Third Circuit decision or furnishers’ duties under the FCRA, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.