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When must a debt collector report a debt as disputed?

January 9, 2015 Leave a comment

This blog is supposed to be about both the FCRA and also “consumer finance law generally.”  This month’s post is about “consumer finance law generally,” specifically about an issue where the FCRA interacts with the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. Sec. 1692 et seq.

The FDCPA provides that a debt collector may not “communicat[e] . . . 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.” 15 U.S.C. § 1692e(8) (emphasis added).

This provision, as written, begs the question:  when does failing to communicate that a disputed debt is disputed make a debt collector’s communication “false,” such that the debt collector has violated the FDCPA?  Always, or just sometimes?

Case law suggests that the answer is “sometimes.”  Two scenarios should help illustrate how this works.

First, if a debt collector tries to collect a debt in Year 1; receives notice from the consumer in Year 2 that the debt is disputed; and then reports the debt to the credit bureaus in Year 3, then the debt collector must tell the bureaus, as part of the Year 3 report, that the debt was disputed in Year 2.

But second, if a debt collector tries to collect a debt in Year 1; reports the debt to the CRAs in Year 2, and only afterward receives notice of the dispute in Year 3, then the collector need not report the dispute to the CRAs.

Under this second scenario, if the debt collector later updates its reporting in Year 4, then its update must mention that the debt was disputed in Year 3.  But if the debt collector never updates its reporting – so the only information the bureaus have is the debt collector’s report back in Year 2 – then the debt collector is not required to notify the bureaus of the dispute.

One court framed the issue this way:  does the FDCPA “impos[e] a continuing duty on debt collectors to advise consumer reporting agencies that a debt has been disputed, even when the dispute occurs after the debt collector reports the debt and the debt collector has not reported the debt since the dispute?”  Rogers v. Virtuoso Sourcing Group, LLC, No. 1:12-cv-01511-JMS-DML, 2013 U.S. Dist. LEXIS 27409, at **8-9 (S.D. Ind. Feb. 28, 2013).

The Rogers court answered that question in the negative, and other courts have done likewise.  See Rogers, 2013 U.S. Dist. LEXIS 27409, at *7 (collecting authorities for the proposition that “[w]hen a debt collector learns of a dispute after reporting the debt to a credit bureau, the dispute need not also be reported,” and following Wilhelm v. Credico, Inc., 519 F.3d 416, 418 (8th Cir. 2008)); see also Phillips v. NCO Fin. Sys., No. 12-cv-15482, 2014 U.S. Dist. LEXIS 50089, at **20-21 (E.D. Mich. Apr. 11, 2014) (following Wilhelm); Donatelli v. Warmbrodt, No. 08-1111, 2011 U.S. Dist. LEXIS 69207, *27-28 (W.D. Pa. June 28, 2011) (same).

Categories: FDCPA