FCRA Requirement to Investigate Dispute Does Not Satisfy FDCPA Requirement to Report Disputed Debt

Written By ESR News Blog Editor Thomas Ahearn

On February 8, 2019, the U.S. District Court for the Northern District of Illinois Eastern Division ruled in Francisco v. Midland Funding LLC and Midland Credit Management, Inc. (MCM) that compliance with the federal Fair Credit Reporting Act (FCRA) requirement to investigate a dispute within 30 days does not satisfy the Fair Debt Collection Practices Act (FDCPA) requirement to promptly report a disputed debt.

FCRA Dispute Does Not Satisfy FDCPA

After plaintiff Cecilia Francisco defaulted on a debt after buying a freezer on credit, Midland Funding purchased the debt while MCM was responsible for collection. After collection notices were ignored, Midland filed suit against Francisco. She retained legal counsel with FDCPA litigation experience that faxed a letter to MCM that read in part “the debt reported on the credit report is not accurate.”

The plaintiff faxed the dispute letter to MCM on August 22, 2017, but MCM did not report her debt as disputed to the credit bureaus until September 8, 2017. During the time between those two dates, MCM continued to report that the plaintiff owed a debt to the credit bureaus but did not report that it was disputed. So Francisco sued Midland and MCM for violation of the FDCPA 15 U.S.C. § 1692 et seq.

The FDCPA prohibits debt collectors from “communicating or threatening to communicate 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.” On August 25, 2017, MCM reported Francisco’s debt without reporting she disputed it, which should have been known by processing the dispute August 22.

MCM argued it complied with FCRA 15 U.S.C. § 1681i(a)(1)(A) that allows credit reporting agencies up to thirty days to investigate disputes on credit reports. MCM – which services millions of accounts with special procedures for accounts flagged as disputed – complied with the FCRA by reporting the debt as delinquent within the 30 day investigatory period and should not be held liable for an FDCPA violation.

However, the Court held that the FCRA does not excuse the obligation to promptly report a disputed debt under the FDCPA stating that “taking time to investigate a dispute [under FCRA] does not give a debt collector license to send a false report while the investigation is underway.” Thus, the Court found that MCM had violated the FCDPA since the FCRA “is a different provision with different requirements.”

In addition, the Court concluded that the plaintiff had not demonstrated actual damages for the approximately two and a half week delay in reporting her debt as disputed but found that the plaintiff could still recover statutory damages for the FDCPA violation. The complete opinion in this case is available at www.esrcheck.com/file/Francisco-v-Midland-Funding-Case-17-C-6872.pdf.

Enacted by Congress in 1970, the FCRA requires employers who obtain a “consumer report” on a job applicant to provide the applicant with a “clear and conspicuous disclosure” that they may obtain such a report “in a document that consists solely of the disclosure” before procuring the report. The FCRA is at www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-credit-reporting-act.

Costly lawsuits involving the FCRA are just one of the many compliance concerns for employers performing background checks and this trend was chosen by global background check firm Employment Screening Resources® (ESR) as one of the “ESR Top Ten Background Check Trends” for 2019. The complete list is at www.esrcheck.com/Tools-Resources/ESR-Top-Ten-Background-Check-Trends/.

ESR White Papers on FCRA Lawsuits

Employment Screening Resources® (ESR) – a leading global background check provider – offers two complimentary white papers that examine the many causes behind FCRA lawsuits against employers and background screening firms: “Common Ways Prospective or Current Employees Sue Employers Under the FCRA” and “Common Ways Consumer Reporting Agencies are Sued Under the FCRA.”

NOTE: Employment Screening Resources® (ESR) does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational purposes only.

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