Case Law: FCRA Investigation May Require Examination of Account-Level Documentation

The 11th Circuit Court recently reversed in part a trial court’s ruling granting summary judgment in favor of a debt buyer, its affiliated debt collector and their parent company, holding that a jury could find that all three were in willful violation of the Fair Credit Reporting Act for reporting charged-off accounts as “verified” without obtaining sufficient documentation that all of the debts did in fact belong to the consumer. The case is Teri Lynn Hinkle v. Midland Credit Management, Inc., et al.

Here are the facts of the case:

  • The debt buyer acquired one of the subject debts in the amount of $357.56 from another debt buyer, and later send a collection letter to the debtor offering to settle for $237.49. The debt buyer received the payment for the settlement amount in October 2008, but proceeded to report to the consumer reporting agencies (CRAs) that the debt had been assigned to internal or external collections.
  • By December 2008, the account was marked “paid in full,” but the CRAs continued to show that the account had been in collection as of November and December.
  • In December 2011, the debt buyer acquired another debt attributable to a plaintiff in the amount of $300.80. The plaintiff disputed the debt over the phone, stating that the debt did not belong to her. In February 2012, the debt buyer sent the plaintiff a letter stating that they were investigating the dispute. However, it began reporting the account to the CRAs as “assigned to internal or external collections” and flagged the debt as disputed.
  • In July, the plaintiff disputed the second debt with the CRAs, who then notified the debt buyer of the dispute the same month. The debt buyer verified the debt by cross checking the information it has reported to the CRAs against its own internal records, which consisted of the same information it received from the seller at the time that it purchased the debt. It did not request “account-level” documentation from the seller or the original creditor.
  • The CRAs continued to report the debts as “assigned to internal or external collections” through March 2013. The plaintiff filed suit in federal district court in April, but the court granted summary judgment in favor of the defendant. The plaintiff appealed the matter to the 11th Circuit, arguing that the defendants failed to furnish information to the CRAs promptly and/or modify, delete, or permanently block the reporting of disputed information after an investigation has shown that the disputed information is incomplete, inaccurate, or cannot be verified.
  • On appeal, the court found that the debts in question were “junk debts” that had been repeatedly bought and sold without any account-level documentation that could prove that the debts did, in fact, belong to the plaintiff. They therefore ruled in favor of the plaintiff.
  • The Court determined that furnishers have three options when it comes to handling disputed information:
    • The furnisher can conduct an investigation, verify the information, and report it to CRAs
    • The furnisher can conduct an investigation and conclude that the information cannot be verified, and notify the CRAs accordingly
    • The furnisher can conduct an investigation and conclude that the information is incomplete or incorrect, and must block reporting of the debt to CRAs
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