The Eighth Circuit in McIvor v. Credit Control Services, Inc. struck down a consumer claim under the Fair Debt Collection Practices Act last week, making it more difficult for consumers to bring claims against debt collectors who violate federal law. A quick rundown:
Credit Control Services was attempting to collect an unpaid car insurance bill from Sarah McIvor. Sarah, however, had paid this debt to the original creditor years earlier. When CCS put the debt on her Trans Union credit report, she wrote a letter to Trans Union stating that she did not owe the money and asked that it remove the debt. Following a federal law called the Fair Credit Reporting Act, Trans Union sent Sarah's dispute to CCS, and, under the same law, CCS was required to investigate the dispute and return the results to Trans Union. CCS refused to remove the debt, and sent Trans Union an "all clear" on the information.
Under the FDCPA, debt collectors like CCS are required to "communicate that a disputed debt is disputed." This requirement was set with credit reporting in mind: Trans Union, and the other credit bureaus Experian and Equifax, remove debts marked as 'disputed' from consideration when calculating your credit score (to oversimplify, they don't find disputed debts reliable enough to use). Which makes CCS' "all clear" communication to Trans Union a problem, because under the FDCPA it was required to mark the account as 'disputed.'
The court, however, got hung up on CCS's argument that Trans Union already knew about the dispute, and so the "all clear" update lacking mention of it was not "false, deceptive, or misleading." This ignores one salient fact: that Trans Union rubber stamps whatever CCS and any other creditor sends it. Trans Union relies on collectors and creditors to provide it debt information, knowing little about these accounts itself, so if CCS does not mark an account as 'disputed,' Trans Union will not report it as disputed. In Sarah's case, this hurt her credit-- remember, calling the account 'disputed' removes it from her credit score calculation.
The 8th Circuit declined to take judicial notice of this fact, however, and dismissed the case.
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