FDCPA Violation Claims Supported Only by Material Disputes
Tomio Narita
When a consumer disputes their debt, an accepted and conservative practice is for the data furnisher to promptly report the dispute to the consumer reporting agencies. But under what circumstances will the failure to report a dispute give rise to a violation of section 1692e(8) of the Fair Debt Collection Practices Act (FDCPA)?
For example, what if a consumer or their attorney simply calls or writes and states, “I dispute this,” without providing the collector with any substantive information regarding the basis for the dispute? Does the collector violate section 1692e(8) if it fails to report that “dispute” to the consumer reporting agencies? The answer must be “no.”
Where a consumer has not identified any legitimate basis for disputing their responsibility for the debt as reported by the collector, a blanket statement that they “dispute” the debt, without more, is not sufficient to support a section 1692e(8) claim.
The FDCPA is sometimes referred to as a strict liability statute, but this is not entirely true. There are a number of provisions of the Act – and section 1692e(8) is one of them – which require a consumer to provide evidence of knowledge or intent by the collector.
Section 1692e(8) prohibits a collector from communicating or threatening to communicate false credit information to any person, but only where the collector knows or should know that the credit information is false. See 15 U.S.C. § 1692e(8) (prohibits the collector from: “Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.”).
The knowing failure to communicate that a “disputed” debt is disputed is a violation of section 1692e(8). Id; see also Brady v. The Credit Recovery Co., 160 F.3d 64, 67 (1st Cir. 1998) (section 1692e(8) “requires a debt collector who knows or should know that a given debt is disputed to disclose its disputed status to persons inquiring about a consumer’s credit history.”) (emphasis added); Sunga v. Rees Broome, 2010 WL 1138319, *4 (E.D. Va. Mar.18, 2010) (dismissing section 1692e(8) claim: “Under the express terms of § 1692e(8), Plaintiff must allege sufficient factual allegations supporting the finding that Defendant knew or should have known that the debt amount as stated in the demand letter was false.”).
Thus, if the collector knows that the debt is subject to a true “dispute” it may not knowingly transmit “false” credit information about the debt to consumer reporting agencies. But what exactly would make the credit information “false” within the meaning of the FDCPA?
I am not a fan of the opinion of this article. I understand that in a technical sense, a dispute needs to have merit, and that an agency can “win” a lawsuit if there was nothing “material” received, but a lawsuit in and of itself, is not a “win.”
Whether right or wrong, if an agency is sued, it immediately costs money. The defense of a lawsuit, can be very costly. Also, even though there have been decisions recently that have awarded costs to “winning” agencies, it hasn’t been the norm.
My opinion, would be to take a dispute and mark the credit bureau accordingly, so as not to invite a lawsuit. I believe that is even what the ACA’s FDCPA test tells us to do.
Great article and thank you for bringing clarity to a murky area !
If the data furnisher has knowledge of the dispute and fails to correct his trade line, he is liable for action under the FCRA.
A violation of the FCRA would be an automatic violation of the FDCPA for taking action not legally entitled to take.
It would require that the consumer dispute with the credit reporting agency, but after that, it’s all down hill for the collector.
Some sage advise: If you have reported, and the consumer disputes for whatever reason, update the report to reflect the account accurately.
Don’t be stupid and leave yourself open for a law suit when you can easily avoid it.
If you have reported a tradeline and the debtor later disputes it, there is no obligation under the FCRA or FDCPA to update the tradeline to reflect “disputed,” so long as you do not re-report the tradeline again in the future. However, if you are re-reporting the tradeline at any point after the debtor disputed it, than it most certainly is an FDCPA violation to fail to report it as “disputed.”
If a debtor disputes the account to a CRA, for example, as “no knowledge of account” (e-OSCAR code 001) than it would have to be reported as “disputed” afterward, because there is no way a debtor can disprove a negative — saying s/he has “no knowledge” of an account really can’t be accompanied by any additional information. The dispute speaks for itself.
All CRA disputes that are returned as verified should be reported as “disputed.” It takes virtually no time and, contrary to what one court seems to be saying, just because a collection reports as “disputed” doesn’t mean it’s not factored into the FICO credit score, or any other consumer scoring model I’m aware of.
Also, new requirements for FHA-backed home mortgages require that collections over $500 reported as “disputed” be resolved prior to the granting of a home loan, so it’s greatly in the agency’s favor to report it this way, if applicable.
It takes virtually no time or effort and doesn’t cost anything, and I can’t imagine why any agency would do something where there’s no upside and certainly a downside.
If there is any question as to whether or not a communication from a debtor is a dispute or not, It should be treated as a dispute.
This reminds me of a true story of a man teaching his daughter to drive. After a close call at an intersection the daughter told her father that if she had hit the other car it was ok since she had the right of way.