Third Circuit Adopts New “Reasonable Reader” Standard and Holds Reporting Consumers’ Pay Status as Past Due with $0 Balance after Transfer Did Not Violate the FCRA

Diana M. Eng and Andrea M. Roberts 

In Bibbs v. TransUnion LLC, 2022 WL 3149216 (3d Circ. Aug. 8, 2022), the Third Circuit Court of Appeals (“Third Circuit”) affirmed the United States District Court for the District of Pennsylvania’s (“District Court”) orders granting TransUnion’s motions for judgment on the pleadings and dismissing the Complaints in three separate actions by Appellants Marissa Bibbs, Michael Parke, and Fatoumata Samoura (collectively, “Appellants”) for violations of the Fair Credit Reporting Act (“FCRA”). Specifically, the Third Circuit held that TransUnion’s credit reporting of Appellants’ accounts, which reflected a Pay Status of more than 120 days past due, a $0 balance, and closing of their accounts due to transfer, when read in their entirety, were accurate and not misleading under the “reasonable reader” standard.

Summary of Facts and Background

Appellants admittedly defaulted under their respective student loans.[1] After the defaults, Navient and Fedloan closed and transferred Appellants’ accounts. As such, Navient and Fedloan reported to the credit reporting agencies, including appellee TransUnion, that the accounts were closed with a balance of zero and all of Appellants’ payment obligations were transferred. Further, the reporting reflected a Pay Status of more than 120 days past due.

After reviewing their credit reports, Appellants, through counsel, sent TransUnion a letter disputing the accuracy of the reports. Specifically, Appellants asserted that the reporting was erroneous because Appellants owed no money to Navient and Fedloan, the prior creditors, and thus, “it is impossible for their current status to be listed as late.”

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