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Update: when must a debt collector report a debt as disputed?

April 3, 2015 Leave a comment

This month’s post will be a follow-up to my post on January 9, regarding when a debt collector must tell a consumer reporting agency (CRA) that a consumer has disputed a debt.  In that post, I discussed cases which say that if a debt collector knows that a debt is disputed, and subsequently reports the debt to a CRA, then the collector must tell the CRA about the dispute; but that if the debt collector reports first, and learns about the dispute afterward, it need not tell the CRA about the dispute.

I then suggested that the rule might be as follows:

[I]f 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. [But], if the debt collector later updates its reporting in Year 4, then its update must mention that the debt was disputed in Year 3.

Questions about that statement have caused me to look into whether my suggestion had any direct support in case law.  It turns out that my suggestion may not actually be the law.  Here’s the story:

A.  Nearly every case that discusses this issue involves facts which are a little bit different than the one in my hypothetical.  For example, the cases that I cited in my initial post, Rogers and Wilhelm, both involved situations where a debt collector reported a debt to a CRA on date 1; received notice of a dispute on date 2; and never updated the report after that.  So those cases don’t answer the question of whether a debt collector who reports a debt; receives a dispute; and then updates its report, must mention the dispute in the update.

B.  Both Wilhelm and the FTC commentary on which it relied contain statements that could be taken in support of either position.  They say that:

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.

The first of these two statements suggests that if a debt collector reports a debt, learns of a dispute, and updates the report, it must mention the dispute in the update.  But the second of these two statements does not.

C.  There is very little case law on the precise question at issue here.  I found two cases, and they give conflicting answers. In O’Fay v. Sessoms & Rogers, P.A., No. 5:08-CV-615-D, 2010 U.S. Dist. LEXIS 104307 (E.D.N.C Feb. 9, 2010), a debt collector reported a debt to the CRAs in 2007 or earlier; the plaintiff disputed the debt with the collector in February 2008; the debt collector updated the report in March 2008 and May 2008 but did not note the dispute; and then the debt collector updated it a third time in July 2008 and did note the dispute.  Plaintiff filed suit six months later, in December 2008, and the court found that the March and May updates were violations of the FDCPA (i.e., the debt collector was required to mention the dispute whenever it updated its report after receiving the dispute).  But in Hinds v. AR Resources, Inc., No. 12-2567, 2013 U.S. Dist. LEXIS 61200 (D. Minn. Apr. 30, 2013), a debt collector reported a debt to the CRAs before April 2012; the plaintiff disputed the debt with the CRAs in April 2012; the debt collector updated the report in July 2012 and did not note the dispute; and the plaintiff filed suit in October 2012.  The court held that the plaintiff did not plead facts to indicate that the debt collector had notice of the July 2012 dispute and dismissed the plaintiff’s claim.

D.  The courts that have addressed the broader question of whether a debt collector must update its report to the CRAs after receiving notice of a consumer’s dispute, have all suggested that there is no “continuing duty” to do this, and that any failure to update or related mistake would be subject to the FDCPA’s one year statute of limitations.  In Rogers, the district court refused “to interpret [15 U.S.C.] Section 1692e(8) as imposing a continuing duty on debt collectors to advise consumer reporting agencies that a debt has been disputed.”  And in Wilhelm, the Tenth Circuit stated that in the absence of any evidence that the debt collector “communicated any credit information about [plaintiff] to any person within the one-year limitations period,” a claim based on updates made prior to that period “is clearly time barred.”

In summary, there is some authority for the proposition whenever a debt collector gets notice of a consumer’s dispute, the FDCPA requires it to make sure that any updates to the CRAs mention that dispute.  However, there is some authority that goes the other way, and there is also some authority that any mistake only subjects the debt collector to liability if the consumer files suit within a year of an update that fails to mention the consumer’s dispute.

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