On May 5, the U.S. District Court for the Central District of California granted in part and denied in part a motion to dismiss filed by the defendant, a consumer reporting agency, in a case brought by the CFPB in January (covered by InfoBytes here). The defendant sought dismissal on the grounds that the statute of limitations barred the CFPB’s claims and that the CFPB failed to plead a claim. The court agreed with the defendant that a “constructive discovery” rule should apply to the three-year limitations period that the CFPB has to bring a claim under the CFPA and concluded that the limitations period commences when the CFPB “either knows of a violation or, through reasonable diligence, would have discovered the violation.” Thus, regarding the CFPB’s claims of violations occurring between January 2018 and October 2021, the court granted dismissal based on untimeliness with leave to amend. However, the court denied the defendant’s motion to dismiss with respect to allegations of ongoing violations as “they are based on a continuing course of conduct, made in repeated transactions with consumers.”

The court also addressed the sufficiency of the CFPB’s allegations under the FCRA. The defendant argued the CFPB failed to establish an inaccuracy — a threshold requirement for the FCRA claims at issue. The court found the CFPB, as a public enforcement agency, is not required to plead an inaccuracy in the same manner as a private plaintiff is required to when litigating an individual case or seeking private remedies. Rather, the CFPB when bringing an enforcement action need only allege facts supporting allegations of the defendant’s FCRA violations. The court highlighted numerous factual allegations supporting the CFPB’s claims of FCRA violations, including failures to forward disputes to furnishers, failures to conduct reasonable reinvestigations, deleting tradelines without an investigation, failures to delete inaccurate, incomplete or unverified information, and failure to maintain reasonable procedures designed to prevent reinsertion and unlawful reinsertion of previously deleted information. Consequently, the court denied the defendant’s motion to dismiss the FCRA claims.

Regarding the CFPB’s claims of unfair practices under the CFPA, the court granted the motion to dismiss Counts X (alleging defendant’s failure to convey consumers’ disputes to furnishers fully and accurately) and XI (alleging defendant’s inadequate investigation by doing nothing more than sending an automated consumer dispute verification (ACDV) to a furnisher and implementing the furnisher’s response, ignoring additional, relevant information) citing a failure to plead substantial injury to consumers. The court found these counts merely speculated potential harm without demonstrating that the defendant’s practices led to inaccurate reporting or prevented furnishers from resolving disputes accurately.

However, the court denied the motion to dismiss Count XII, which alleged improper reinsertion of tradelines into consumers’ reports, stating the dissemination of inaccurate information in such reports “can itself constitute a concrete harm,” and thus the court ruled the CFPB adequately pleaded a substantial injury. The court also rejected the defendant’s argument that it lacked fair notice of the CFPA requirements, affirming the statute provides a sufficient standard for what constitutes unfair practices.