Credit Card Industry ExpertRecently, a motion to exclude an expert witness was heard by a judge in the Eastern District of Michigan in a dispute over credit reporting and credit card charge-off procedures.

Case Background

Plaintiff alleged violations of the Fair Credit Reporting Act and that Defendant Credit Card Company (“Creditor”) reported his delinquent credit card account to the Defendant Credit Reporting Agencies (CRAs). Plaintiff claimed the multiple charge-offs were inaccurate. Plaintiff noticed the multiple charge-offs in his credit file and filed a dispute with the CRAs. He said the CRAs forwarded his dispute to Creditor. Plaintiff claimed that after being informed of his dispute, Creditor negligently and willfully failed to conduct a proper investigation in violation of the FCRA and that it failed to review all relevant information, including what was provided by the CRAs, and that it failed to direct the CRAs to remove the multiple charge-offs. Plaintiff claimed that the consumer reports the CRAs prepared contained information about Plaintiff that was false, misleading, and inaccurate.

Plaintiff’s Credit Card Expert Witness

Plaintiffs retained a credit card industry expert to support his claims. The expert’s report stated that Creditor violated the FCRA by failing to conduct a proper investigation, and that the CRAs violated the Act by not following reasonable procedures to assure maximum possible accuracy of the information contained in Plaintiff’s credit reports.

Defendants asserted that the credit card expert’s opinions and testimony should be excluded because he lacked the requisite qualifications; his proposed testimony wouldn’t assist the trier of fact; his opinions and proposed testimony were speculative, based on insufficient facts, and unreliable; and his opinions and proposed testimony would confuse the issues and mislead the jury.

In response, Plaintiff relied heavily on non-binding case law to argue that the factors set forth in Daubert to determine the reliability of an expert’s scientific testimony were inapplicable to the credit card expert’s expert testimony because it was based on his specialized, not scientific, knowledge. Plaintiff asserted that the expert’s “credentials and experience provide the qualifications for him to testify as an expert witness in this case,” and that his “opinions and testimony would help the jury understand the reporting of multiple charge-off notations and their effect on users of consumer reports.”

  1. S. District Court Judge Mona K. Majzoub wrote in her opinion that while the Supreme Court held that the principles articulated in Daubert apply to “all expert testimony,” it also held that “the lower courts have flexibility in the application of the factors, because it may not make sense to apply some of the Daubert factors, such as the rate of error analysis, to non-scientific testimony.” Even so, Judge Majzoub found that Plaintiff’s reliance on non-binding decisions and his conclusory arguments didn’t assist him in meeting his burden of establishing the admissibility of the credit card expert’s opinions and testimony.

Defendants pointed out, the expert’s opinions were stated in the form of legal opinions on the ultimate issues in the case. They argued that because the expert didn’t have a law degree, he wasn’t qualified to testify competently on FCRA violations. The Court agreed.

Defendants also challenged the expert’s qualifications to express the factual opinions that he made in the supporting discussion of his legal opinions, as well as the relevancy and reliability of those factual opinions. The judge explained that the Sixth Circuit has held that, although this requirement is typically treated liberally, a witness isn’t an expert “simply because he claims to be.” The expert’s qualifications must provide a foundation for a witness to answer a specific question, rather than unsupported speculation.

Judge Majzoub noted that the committee notes to Rule 702 state that if the witness is relying solely or primarily on experience, to establish a sufficient foundation for expert testimony, “the witness must explain how that experience leads to the conclusion reached, why that experience is a sufficient basis for the opinion, and how that experience is reliably applied to the facts.”

The judge held that the expert’s non-legal opinions lacked a reliable foundation. In his report, the expert noted that he worked in the credit industry for over 13 years and that he had been a “Credit Expert Witness” for another seven. The expert asserted that because of his experience working for Defendant CSA and another credit organization, he was “well-versed on credit scoring, credit reporting, credit fraud, identity theft, scoring analysis and the use of credit scoring and credit models in the financial services industry.”

However, the expert acknowledged that he only recently learned of the specific multiple charge-off notation issues before his deposition in his role as a “Credit Consultant/Expert.” Admittedly, he didn’t deal with this issue while in the credit industry. As such, the judge found he had no real-world experience regarding how charged-off accounts should be reported or addressed when a dispute arises.

Additionally, the expert agreed that a certain guide provides the industry standards for credit reporting, and that it’s the format that the CRAs and data furnishers like Creditor follow to report items like charged-off accounts, but he testified that this guide hadn’t yet been implemented when he worked for a CRA. Nor had he studied the guide in his role as a credit expert. Critically, neither the credit card expert nor Plaintiff’s counsel explained how the expert’s consumer and sales experience in the credit industry led to the conclusions reached in his opinions. Further, they failed to explain why the expert’s experience was a sufficient basis for the opinions; and they didn’t describe how his qualifications or experience were reliably applied to the facts of the case.

In fact, Judge Majzoub found that in the expert’s opinion, the charge-off notation reported by Defendants in the payment history category of Plaintiff’s credit report being “inaccurate or materially misleading” was based on speculation. The judge noted that the Sixth Circuit has stated that “[w]here an expert’s testimony amounts to ‘mere guess or speculation,’ the court should exclude his testimony.”

With regard to the credit card expert’s opinion that Creditor failed to conduct a proper investigation into Plaintiff’s dispute, the expert admitted that he didn’t have and didn’t request any information on Creditor’s investigation, and didn’t know what Creditor did to investigate the dispute or what procedures it used or followed in conducting the investigation. Plus, he didn’t know how a credit grantor would generally perform its investigation. The credit card expert stated that his opinion regarding Creditor’s purported failure to conduct a proper investigation was based merely on the outcome of the investigation itself.

In deposition, he admitted that Creditor’s reporting of the charge-off notations was factually and technically accurate. His opinion on Creditor’s investigation was baseless, circular, internally inconsistent, and unreliable. The opinions were not based on his specialized knowledge or experience, or on sufficient facts or data as is required by Rule 702.

Plaintiff failed to establish that the credit card expert was qualified to render his stated opinions or that the opinions were relevant and reliable such that they would assist the trier of fact to understand the evidence or to determine a fact in issue. The opinions and testimony of the credit card expert were excluded.