Reporting Debt Under the FCRA: How an Amended Date May Lead to Liability
The Fair Credit Reporting Act (“FCRA”) permits consumers to dispute the details of their credit reports. Upon receipt of a dispute, the credit reporting agency (“agency”) must notify the party that furnished the disputed information, which then has a duty to investigate. 15 U.S.C. § 1681i(a)(2). The FCRA provides a private right of action to enforce those duties. A recent case illuminates what could happen when the date that a consumer’s debt is recorded as uncollectible is amended and reported to an agency.
In Johnson v. Us Bank Home Mortg., et al., No. 20-cv-3433, 2020 U.S. Dist. LEXIS 216894 (N.D. Ill. Nov. 19, 2020), the plaintiff filed suit when its mortgagor reported two different dates for when part of its mortgage debt was “deemed uncollectible.” Under the FCRA, once the party that furnished disputed information receives notice of a consumer dispute, a number of duties are triggered, which include:
An investigation of the disputed information;
Reviewing all relevant information provided by the consumer reporting agency;
Reporting the results of the investigation to the consumer reporting agency;
If the information is inaccurate, then reporting the inaccuracies to all other reporting agencies to which the person furnished the information; and
If the information proves inaccurate or unverified, either modifying, deleting, or permanently blocking the report of the information.
Id. § 1681s-2(b)(1).
The plaintiff received a mortgage loan from U.S. Bank. Once the plaintiff began to fall behind on her payments, U.S. Bank reported that the mortgage was partially “charged off” because some of the debt had been “deemed uncollectible.” The dispute arose regarding how U.S. Bank, as the furnisher of information concerning the plaintiff’s mortgage, allegedly furnished that information and failed to perform a reasonable investigation.
The plaintiff alleged that her “charged off” date was initially reported as August 2015. Later on, however, the plaintiff alleged that this date changed to June 2016. The plaintiff disputed the change with the agency, which forwarded the dispute to U.S. Bank. U.S. Bank, however, continued to report the new date.
The plaintiff then filed suit. The parties disagreed over how the date the plaintiff’s debt became “charged off” should be furnished to the credit reporting agency. The plaintiff took the position that the date should not change, while the defendant argued that the date may, under some circumstances, be changed. At the motion to dismiss stage, construing the pleadings in favor of the plaintiff, the court resolved the issue in favor of the plaintiff.
The court also found that the defendant’s conduct, at least as alleged by the plaintiff, willfully violated the FCRA. Under the FCRA, a “reckless disregard of statutory duty” might prove willfulness. Under that definition, the court stated that the defendant’s failure to investigate or fix the disputed date was alleged to be willful. Further, the court stated that the defendant could not argue that it reasonably believed that its conduct was legal, pointing to a Seventh Circuit opinion that cautioned against amending a “charged off” date because it can “cause significant confusion and uncertainty for the consumer.” Gillespie v. Equifax Info. Servs., L.L.C., 484 F.3d 938, 941 (7th Cir. 2007). The court also stated that moving the “charged off” date by ten months was a plausible pecuniary harm, referencing the FCRA’s restriction on reporting information greater than seven years old. Specifically, the court stated the plaintiff alleged “harm to her financial situation if it delayed the disappearance of the delinquent mortgage from her credit report.”