Judge Dismisses FDCPA Credit Bureau Reporting Case Against Collector

On March 27, 2016, a federal judge in Illinois dismissed a Fair Debt Collection Practices Act (FDCPA) claim involving a debt collector’s failure to report a dispute to a credit bureau where the collector learned of the dispute after initially reporting the debt to the credit bureau. The case is Gordon v. Syndicated Office Systems, LLC., (Case No. 16-4440, U.S. District Court, Northern District of Illinois, Eastern Division.)

A copy of the court’s Memorandum and Order can be found here.

Background

On April 19, 2016, Plaintiff, Crissandra Gordon filed suit under the FDCPA, 15 U.S.C. § 1692 et seq, against Defendant Syndicated Office Systems, LLC d/d/a Central Financial Control.

In her Complaint, Plaintiff alleged:

• That Defendant, a “debt collector” as the phrase is defined by the FDCPA, see 15 U.S.C. § 1692(a)(6), “began collection activities on an alleged consumer debt” attributed to Plaintiff.
  
  Editor’s Note: The Complaint did not allege any specific date when the Defendant “began collection activities”. Instead it states: “on a date better known to Defendant, Defendant began collection activities on an alleged consumer debt (the “Alleged Debt”) from the Plaintiff.”
  
  
• Defendant reported the debt to credit reporting agencies, and it appeared on Plaintiff’s credit report.
• On July 27, 2015, plaintiff sent a letter “directly” to defendant to dispute the debt.
• On October 2, 2015, plaintiff examined her credit report again and found that “Defendant had not removed the credit account nor marked it as ‘disputed by consumer.’”

Defendant moved to dismiss the case under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

Editor’s Note: Under Rule 12(b)(6), a complaint may be dismissed for “failure to state a claim upon which relief can be granted.” 

Defendant argued that Plaintiff failed to state a claim for violation of section 1692e(8) because “there is no affirmative obligation under the FDCPA for a debt collector, after becoming aware of a dispute, to update the information” that it may have already reported to a credit reporting agency. 

In a short Memorandum Opinion and Order the court agreed with the Defendant: 

“The vast weight of authority is on defendant’s side. See Wilhelm v. Credico, Inc., 519 F.3d 416, 418 (8th Cir. 2008); Rogers v. Overton, Russell, Doerr & Donovan, LLP, No. 1:16-CV-00784, 2017 WL 570811, at *2-3 (N.D.N.Y. Feb. 13, 2017) (“overwhelming weight of authority” rejects “affirmative post-reporting duty to communicate a dispute that arises after the debt has been reported”); Rogers v. Virtuoso Sourcing Grp., LLC, No. 1:12-CV-01511-JMS, 2013 WL 772865, at *2-3 (S.D. Ind. Feb. 28, 2013) (citing cases for same proposition); Wells v. Deca Fin. Servs., LLC, No. 1:12-CV-01514-JMS, 2013 WL 772870, at *3 (S.D. Ind. Feb. 28, 2013) (same). In Wilhelm, the leading federal appellate court case on this issue, the Eighth Circuit reasoned as follows: 

[Plaintiff] assert[s] that § 1692e(8) imposed an affirmative duty on [debt collectors] to disclose that he had disputed the debt. He cites no case supporting this contention, and we reject it. Section 1692e generally prohibits “false, deceptive, or misleading representation.” Subsection 1692e(8) applies to the “communicating” of “credit information.” “Communication” is defined as “the conveying of information regarding a debt directly or indirectly to any person through any medium.” § 1692a(2). Reading these provisions together, as we must, the relevance of the portion of § 1692e(8) on which Wilhelm relies—“including the failure to communicate that a disputed debt is disputed”—is rooted in the basic fraud law principle that, if a debt collector elects to communicate “credit information” about a consumer, it must not omit a piece of information that is always material, namely, that the consumer has disputed a particular debt. This interpretation is confirmed by the relevant part of the Federal Trade Commission’s December 1988 Staff Commentary on the Fair Debt Collection Practices Act: 

1. Disputed debt. If a debt collector knows that a debt is disputed by the consumer . . . and reports it to a credit bureau, he must report it as disputed.
2. Post-report dispute. When a debt collector learns of a dispute after reporting the debt to a credit bureau, the dispute need not also be reported. 

519 F.3d at 418 (citing FTC Staff Commentary, 53 Fed.Reg. 50097-02, 50106 (Dec. 13, 1988)). This reasoning is persuasive, and Plaintiff has provided no compelling reason to deviate from it. 

This Court finds no reason to depart from Wilhelm and the myriad other cases that have held that a debt collector has no “continuing duty . . . to advise consumer reporting agencies that a debt has been disputed, even when the dispute occurs after the debt collector reports the debt.” See Virtuoso Sourcing Grp., 2013 WL 772865, at *3. Plaintiff makes no factual allegations against defendant other than inaction after she disputed the debt that defendant had previously reported to a credit reporting agency. Because her only factual allegations are based on an invalid legal theory, she fails to state a claim on which relief can be granted, so this Court must dismiss her complaint.” 

In a footnote to the opinion the court discussed Plaintiff’s argument that other FDCPA provisions were also violated. The court wrote: 

“Plaintiff cites a number of other provisions of the FDCPA, including 15 U.S.C. 1692d, 1692e(2), 1692e(10), and 1692f, in addition to section 1692e(8). But she makes no factual allegations of wrongdoing other than failing to “remove[] the credit account [or] mark[] it as ‘disputed by consumer,’” and section 1692e(8) is the only provision of the FDCPA that is even arguably applicable to this alleged misconduct. See Rogers v. Overton, Russell, Doerr & Donovan, LLP, No. 16cv784, 2017 WL 570811, at *2 n.1 (N.D.N.Y. Feb. 13, 2017) (describing the aforementioned provisions of the FDCPA and concluding that section 1692e(8) was the only subsection that was even “arguably applicable based on” a complaint making similar factual allegations). Plaintiff concedes as much in her response brief because she makes no specific argument based on any provision other than section 1692e(8).” 

insideARM Perspective 

Readers should note that this case was brought under the FDCPA, not the Fair Credit Reporting Act (FCRA). It was an individual FDCPA claim. It was not a regulatory action by a state or federal regulatory agency.

While the court in this case ruled that under the FDCPA the company had no obligation to report the dispute, insideARM would suggest that conservative industry best practice in this area would be to REPORT the dispute EVEN THOUGH the company learned of the dispute AFTER initially reporting the debt. Accordingly, insideARM would suggest that all disputes be reported regardless of when received.