## Facts

- The Marchisios settled a foreclosure dispute in 2009 by deeding their home to the servicer in lieu of foreclosure, extinguishing their debt on two mortgage loans.
- Despite the debt’s extinguishment, the servicer continued collection efforts and reported the loans as delinquent, leading to a first federal action that included FCRA claims.
- The first action settled: the servicer agreed to correct credit reporting (including reporting a zero balance on the second loan) and paid the Marchisios $125,000.
- After paying, the servicer failed to timely report the second loan as a zero balance and issued multiple reports continuing to show delinquent debt.
- Even after later reporting a zero balance, the servicer reported that a $34,985 balloon payment remained due in 2021.
- The Marchisios disputed the reporting with credit reporting agencies; after notice, the servicer investigated by checking internal databases that had not been updated to reflect the settlements and then confirmed the balloon payment as owed.
- The servicer also charged lender-placed insurance on the property after the Marchisios no longer owned it.
- The Marchisios filed a second federal action asserting FCRA violations, Florida Consumer Collection Practices Act (FCCPA) violations, and breach of the settlement agreement.

## Issues

1. Whether the servicer violated 15 U.S.C. § 1681s-2(b) by failing to conduct a reasonable investigation after receiving dispute notices from credit reporting agencies.
2. Whether the servicer’s conduct supported a finding of willfulness under the FCRA.
3. Whether summary judgment was proper on FCRA emotional distress damages and on punitive damages (including where punitive damages were resolved sua sponte).
4. Whether summary judgment was proper on the FCCPA claim, including the servicer’s bona fide error defense and disputed questions of agency involving an insurance vendor.
5. Whether the servicer breached the settlement agreement by failing to correct reporting “as soon as reasonably possible,” and whether that issue could be decided as a matter of law.

## Decision

- The Eleventh Circuit affirmed the FCRA liability determination and the finding that the servicer’s investigation was unreasonable under § 1681s-2(b).
- The court affirmed that the record supported a finding of willfulness (reckless disregard) under the FCRA and left intact the statutory damages award of $3,000, plus attorney’s fees and costs.
- The court reversed summary judgment denying FCRA emotional distress damages, holding a jury could find the repeated misreporting and renewed collection-related conduct worsened the Marchisios’ distress.
- The court reversed the ruling rejecting punitive damages, holding the district court erred by granting summary judgment to the servicer sua sponte and that egregiousness for punitive damages presented fact questions.
- The court reversed summary judgment for the servicer on the FCCPA claim, holding fact disputes existed as to the bona fide error defense and whether the insurance vendor acted as the servicer’s agent.
- The court reversed summary judgment for the servicer on the breach-of-contract claim, holding compliance with “as soon as reasonably possible” turned on disputed facts.
- The case was remanded for further proceedings on damages and the reversed state-law and contract claims.

## Legal Principles

- Under 15 U.S.C. § 1681s-2(b), once a furnisher receives notice of a consumer dispute from a credit reporting agency, the furnisher must conduct a reasonable investigation; reasonableness depends on the circumstances.
- A furnisher’s investigation may be unreasonable as a matter of law when it merely confirms disputed information by consulting internal records that are known or should be known to be inaccurate in light of prior settlements or other definitive information.
- Willfulness under the FCRA includes reckless disregard of statutory duties and can support statutory damages and potential punitive damages.
- Emotional distress damages under the FCRA may be recoverable without proof of out-of-pocket loss and commonly present jury questions when supported by evidence that unlawful reporting and related conduct aggravated distress.
- Punitive damages under the FCRA are fact-intensive and generally require willfulness plus conduct a factfinder could deem sufficiently egregious; sua sponte summary judgment without adequate notice and opportunity to respond is improper.
- Under the FCCPA, the bona fide error defense requires proof the violation was unintentional and occurred despite procedures reasonably adapted to avoid the error; disputes about procedures and implementation can preclude summary judgment.
- Under Florida law, whether a vendor acted as a party’s agent can be a fact question, affecting liability for collection-related conduct.
- Contract terms requiring performance “as soon as reasonably possible” typically involve a reasonableness assessment that may not be resolved on summary judgment where timelines and efforts are disputed.

## Conclusion

The Eleventh Circuit held that a servicer that repeatedly re-verified a settled, extinguished debt based on unchanged internal records could be liable for a willful, unreasonable FCRA investigation, and it required trial-level proceedings on emotional distress and punitive damages as well as on disputed FCCPA, agency, and contract questions.


Marchisio v. Carrington Mortg. Servs., LLC, 919 F.3d 1288 (11th Cir. 2019)