August 16, 2022

Third Circuit Affirms Application of "Reasonable Reader" Test Under FCRA

Holland & Knight Alert
Jonathan M. Marmo | Travis A. Sabalewski | Abraham Joshua Colman


  • The U.S. Court of Appeals for the Third Circuit recently decided on an issue common in cases against consumer reporting agencies addressing how to evaluate whether certain reporting is accurate and/or materially misleading.
  • In rendering its decision, the Court affirmed the application of an objective standard requiring consideration of how a "reasonable reader" would interpret information in a consumer report and that reports should be read as a whole.

The U.S. Court of Appeals for the Third Circuit recently rendered a decision on a common issue in cases against consumer reporting agencies (and furnishers) under the Fair Credit Reporting Act, 15 U.S.C. Section 1681 et seq. (FCRA): how to evaluate whether certain reporting is accurate and/or materially misleading. The Court affirmed application of an objective standard, requiring consideration how a "reasonable reader" of the consumer report would interpret the reporting.

In Bibbs, et. al., v. TransUnion, LLC, Case No. 21-1530 (3rd Cir. Aug. 2022), the Court heard consolidated appeal of three appellants: Marissa Bibbs (Bibbs), Michael Parke (Parke) and Fatoumata Samoura (Samoura) (collectively Appellants). In each matter, Trans Union prevailed on a motion for judgment on the pleadings. The appellants challenged the standard the district courts applied to review the accuracy of their credit reports, as well as the district courts' dismissal of the appellants' cases without ordering discovery. The Third Circuit affirmed.

The Court addressed three issues on appeal: 1) whether the district courts erred in applying the "reasonable creditor" standard for determining if the appellants' credit reports were misleading; 2) whether Trans Union's credit reports for Appellants are accurate or misleading under the "maximum possible accuracy" requirement of Section 1681e(b) of the FCRA; and 3) whether the district courts erred in dismissing the appellants' cases without ordering discovery.

In determining the proper standard of accuracy, the Court employed a "reasonable reader" standard, finding that the reports should be read as a whole (inclusive of all information such as the reported zero balance and "closed" notations). The Court rejected the "myopic" standard advocated by the appellants, who argued that less sophisticated creditors may be misled by the Pay Status reporting alone. The Court affirmed the district courts' holding that "Appellants' reports contain multiple conspicuous statements reflecting that the accounts are closed and Appellants have no financial obligations to their previous creditors. These statements are not in conflict with the Pay Status notations, because a reasonable interpretation of the reports in their entirety is that the Pay Status of a closed account is historical information." Importantly, the Court noted that, even if the reports could have been "even clearer" the reports "as is, are clear … the possibility of further clarity is not an indication of vagueness; just because a report could potentially be a bit clearer does not mean that it is not very clear at present."

Finally the Court held that the district courts did not err in dismissing the appellants' cases without ordering discovery. The appellants had argued that the discovery was necessary to determine whether the Pay Status notations would mislead a creditor and whether creditors are likely to make adverse decisions against the appellants based on the lower credit scores caused by the Pay Status entries. The Court noted that there is some split of authority as to whether or not discovery is necessary, but sided with the majority of case law holding that the reasonable reader standard is an objective standard and that discovery is not warranted.

Additional Clarification

The decision in Bibbs further clarifies that a credit report must be read as a whole when determining the accuracy of the reporting. The adoption by the Third Circuit of the "reasonable reader" standard provides an avenue to attack other FCRA liability theories at the 12(b)(6) stage. The plaintiffs' attorneys often make arguments that depend on taking a narrow view of what was reported. This standard provides a useful tool to combat these theories, and rightly so, because the creditors considering credit reports are reasonable readers. It is anticipated that this decision will rapidly become one of the most often cited in defense briefs both for consumer reporting agencies and also furnishers.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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