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Can a bureau resolve a dispute with an automated form? Sometimes.

May 1, 2015 Leave a comment

Sometimes consumers find what they think are errors on their credit reports, either after the information has been reported to a lender (via a “consumer report”) or before that has happened (via a consumer’s request to see his “consumer file”).  If a consumer contacts a bureau to dispute these errors, the bureau has a duty under 15 U.S.C. Sec. 1681i to conduct a “reasonable reinvestigation” of the dispute, and to correct any actual errors.

Typically, a bureau responds to a dispute by sending an Automated Consumer Dispute Verification form – an ACDV – to the creditor that furnished the information which is being disputed.  So if Jack Stack disputes a Capital One account that as reported by Trans Union, then TU will send an ACDV to Capital One and ask how the account should have been reported.  If Capital One doesn’t timely respond, or if it does respond and confirms that the account should not have been reported as it was, then TU will make a change.  However, if – as often happens – Capital One simply confirms that the account had been reported correctly, then TU will continue to report it that way.

Consumers have long had a problem with this process, as it seems to involve taking the creditors’ word over the consumers’ word.  In the example above, if Jack Stack says that he never had an account with Capital One, but Capital One says that he did, the ACDV process will see TU resolve the dispute in Capital One’s favor.  When this happens, consumers have a right to place a written dispute on future reports (e.g., any future reports about Jack Stack that said he had a Capital One account, would also note that he said otherwise).  But consumers often decide not to bother making any written disputes, and even when they do, they typically have no effect on the consumer’s credit score.  For these reasons, consumers and their lawyers often challenge the ACDV process as not being the “reasonable reinvestigation” that 1681i requires.

This brings us to the question presented in this month’s blog post:  when, if ever, is simply sending an ACDV to a creditor, and reporting whatever comes back, a “reasonable reinvestigation?”  Case law answers the question as follows.

First, the Third Circuit has categorically rejected the proposition that a bureau can simply send an ACDV to a creditor, report whatever comes back, and meet its duty under 1681i.  Cushman v. Trans Union Corp., 115 F.3d 220, 225 (3d Cir. 1997) (stating that “The “grave responsibility” imposed by 1681i(a) must consist of something more than merely parroting information received from other sources”).

Next, the First Circuit, in an opinion that collected cases from around the country, stated that if the consumer is disputing not a factual but a legal aspect of the debt – such as whether he failed to ratify the debt such that he doesn’t owe it – then no process that the bureau could have used would have resolved the issue, so if the bureau only used the ACDV process, it is still not liable for an unreasonable investigation.  DeAndrade v. Trans Union LLC, 523 F.3d 61, 68 (1st Cir. 2008).

Finally, some courts have suggested that if the consumer simply denies owing the debt without explaining why, or if the consumer otherwise makes a broad dispute without any detail, then the ACDV process may be sufficient as a matter of law.  Compare Okocha v. Trans Union LLC, 2011 U.S. Dist. LEXIS 39998 (E.D.N.Y. Mar. 31, 2011) (granting summary judgment to bureau that used ACDV process because “Plaintiff’s dispute letters sent during the relevant time period contained little more than categorical disputes as to the validity of the debt”), aff’d per curiam, 488 Fed. Appx. 535 (2d Cir. 2012) with Gorman v. Experian Info. Solutions, Inc., 2008 U.S. Dist. LEXIS 94083 (S.D.N.Y. Nov. 19, 2008) (finding material dispute of fact as to whether a bureau violated 1681i, where “Plaintiff sent a copy of his Grant Deed in Lieu of Foreclosure, as well as a detailed letter explaining the inaccuracies, to Experian” and it relied on the ACDV process).

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