Fifth Circuit Establishes Post-Dispute Negligence Standard for FCRA Furnishers

Introduction

In Schultz v. HomeBridge Financial Services, Inc., No. 24-50193 (5th Cir. May 22, 2025), the Fifth Circuit addressed whether a mortgage servicer’s mishandling of duplicate payments and subsequent credit‐reporting errors gave rise to claims under the Fair Credit Reporting Act (FCRA) and the Texas Debt Collection Act (TDCA). Plaintiff Danielle Schultz alleged that HomeBridge misreported her payment history, leading to a credit‐report blemish that derailed her new home purchase and caused financial and emotional harm. The district court dismissed her willful‐violation and TDCA claims and found her negligent‐violation theory implausible. On appeal, the Fifth Circuit affirmed in part, reversed in part, and remanded for further proceedings on the negligent FCRA claim.

Summary of the Judgment

The court held that Schultz’s TDCA claims were time‐barred and did not relate back to her original complaint.
Schultz failed to plead facts sufficient to show a willful violation of FCRA § 1681s-2(b), which requires knowing or reckless disregard of statutory duties.
The court found that Schultz plausibly alleged a negligent violation of § 1681s-2(b) because HomeBridge, after receiving notice of her dispute on January 10, 2021, continued to report a “30‐day delinquency” through March 2021.
The negligent‐violation claim survives a Rule 12(b)(6) motion and must be remanded for further factual development.

Analysis

Precedents Cited

Warren v. Chesapeake Expl., L.L.C. (759 F.3d 413): Standard for plausibility under Rule 12(b)(6).
Hammer v. Equifax Info. Servs., L.L.C. (974 F.3d 564): Purpose of the FCRA and furnisher duties under § 1681s-2(b).
Stevenson v. TRW Inc. (987 F.2d 288): Definition of willful misrepresentation.
Cousin v. Trans Union Corp. (246 F.3d 359): Knowledge or intent for willful violations.
Safeco Ins. Co. of Am. v. Burr (551 U.S. 47): Reckless‐disregard standard for willful violations.
Smith v. Santander Consumer USA, Inc. (703 F.3d 316): Distinction between negligent and willful liability and available damages.
Morris v. Trans Union LLC (224 F. App'x 415): Causal‐link requirement for actual damages in negligence claims.
Holmes v. Greyhound Lines, Inc. (757 F.2d 1563): Relation-back doctrine under Rule 15(c).
Clark v. Deutsche Bank Nat’l Trust Co. (719 F. App'x 341): Statute of limitations for TDCA claims.

Legal Reasoning

Under 15 U.S.C. § 1681s-2(b), furnishers owe no investigatory duty until a credit reporting agency notifies them of a consumer dispute. Schultz’s initial payment errors (August–October 2020) did not trigger FCRA liability. Her written dispute on January 10, 2021, set in motion HomeBridge’s duty to investigate and correct inaccuracies. The court concluded that continuing to report a “30‐day delinquency” after that date, despite assurances and refund checks, could support a negligent‐violation claim if it proximately caused her higher interest rate or loan denial.

By contrast, willful violations require evidence of knowing or reckless disregard—“substantially greater risk of harm” than mere negligence. Schultz’s allegations of slow investigation and failure to verify refund check negotiation did not meet the heightened willfulness standard established in Safeco.

In rejecting the TDCA claims, the court applied the two-year limitations period and the relation-back test of Rule 15(c). Since the original complaint focused exclusively on credit reporting and did not allege deceptive debt‐collection practices, the amended TDCA counts introduced new theories and facts that could not relate back.

Impact on Future Cases

This decision clarifies that negligent‐violation claims under § 1681s-2(b) can proceed when furnisher duties are triggered by a written dispute, even if initial inaccuracies predate the dispute.
Willful violations demand proof of conscious or reckless disregard—routine investigation lapses are insufficient.
Consumers and counsel must promptly submit written disputes to credit reporting agencies to activate furnisher obligations.
Amended pleadings introducing new statutory claims must satisfy relation-back requirements or face time‐bar dismissal.

Complex Concepts Simplified

Furnisher: An entity that provides consumer credit data to credit reporting agencies.
Willful Violation: A deliberate or reckless breach of FCRA duties, entitling consumers to statutory and punitive damages.
Negligent Violation: Failure to exercise reasonable care after a dispute is received, entitling consumers to actual damages.
Relation-Back Doctrine: Allows an amendment to “relate back” to the original filing date if it arises from the same conduct and the defendant had timely notice.

Conclusion

Schultz v. HomeBridge clarifies that furnisher liability under the FCRA bifurcates into pre-dispute errors (non-actionable until notice) and post-dispute duties (actionable if negligent). The decision underscores the rigorous proof required for willful violations and the necessity of timely statutory-notice disputes. It also reaffirms strict adherence to limitations periods and relation-back rules for amended claims. Going forward, consumers should file disputes promptly, and furnishers must implement robust post-dispute processes to mitigate negligence exposure.