VIRGINIA WOMAN PREVAILS IN SUIT OVER CREDIT INVESTIGATION.

The Fourth U.S. Circuit Court of Appeals has upheld a jury verdict in favor of a Virginia woman who sued the giant credit-card company MBNA and the three major credit reporting agencies after her complaint under the Fair Credit Reporting Act was rejected.

"It would make little sense to conclude that, in creating a system intended to give consumers a means to dispute - and, ultimately, correct, inaccurate information on their credit reports, Congress used the term 'investigation' to include superficial, unreasonable inquiries by creditors," Chief Judge William W. Wilkins wrote for the three-judge panel in Johnson v. MBNA America Bank et al. (03-1235).

"We therefore hold that [the law] requires creditors, after receiving notice of a consumer dispute from a credit reporting agency, to conduct a reasonable investigation of their records to determine whether the disputed information can be verified."

The case arose from a dispute over an MBNA MasterCard account opened in 1987. One of the applicants was Edward N. Slater, who married Linda Johnson in 1991. MBNA said Johnson was a co-applicant with Slater, but Johnson said she was merely an authorized user of his card.

In December 2000, Slater filed for bankruptcy and MBNA removed his name from the account. It then told Johnson she was responsible for some $17,000 owed on the account.

After getting copies of her credit report from Experian, Equifax and Trans Union, Johnson disputed the MBNA obligation. The agencies passed along what she said to MBNA, which told them it had reviewed the information and determined it was correct.

Johnson sued under the FCRA, and a jury returned a verdict in her favor for $90,300 in actual damages.

MBNA appealed, arguing the law imposes only a minimal duty on creditors and contains no language allowing courts or juries to assess whether the investigation was reasonable. The Fourth Circuit rejected that argument.

MBNA further argued there was no evidence its investigation was unreasonable. It said it retains documents for only five years and no longer had the original application. The appellate panel rejected that argument, too.

"Even accepting this testimony, however, a jury could reasonably conclude that if the MBNA agents had investigated the matter further and determined that MBNA no longer had the application, they could have at least informed the credit reporting agencies that MBNA could not conclusively verify that Johnson was a co-obligor," Judge Wilkins wrote.

He noted that the law requires information that cannot be verified to be deleted or modified.

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