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Responsibilities of Creditors under the Fair Credit Reporting Act

Federal Courts have declared that furnishers of information must conduct a reasonable investigation into a consumer dispute, just as is required of the credit reporting agencies.  In Hinkle v. Midland Credit Management, Inc. the plaintiff sued the collection agency for failing to conduct a reasonable investigation into her dispute regarding its accounts on her credit report.

Under the Fair Credit Reporting Act ("FCRA"), the federal statute enacted to protect consumers from the dissemination of inaccurate information reported on their credit report, consumers are entitled to dispute inaccurate information with the credit reporting agencies. In a dispute a consumer can request an investigation of an account that may have an inaccurate balance, a wrong date, or an account that does not belong to the consumer. Upon receipt of a dispute, the credit reporting agency must conduct an investigation and contact the furnisher of the information to confirm the account is reporting accurately.

In Hinkle v. Midland Credit Management, Inc. the plaintiff discovered that two inaccurate accounts were reported by the defendant on her credit file.  The plaintiff drafted a dispute letter to the credit reporting agency and to Midland directly, despite it not being a requirement under the law.  In Hinkle’s dispute, she claimed the accounts did not belong to her.  Both of the accounts were charged off by the original creditor and had eventually been bought by the defendant.  During its acquisition of the debt, Midland only received basic information regarding the two accounts, including the amount of the debt, the name of the original creditors, charge off information and personal information associated with the account.  Midland contained no additional information tying the plaintiff to the accounts.

Upon receiving a dispute from both the plaintiff and the credit reporting agency, Midland decided not to investigate one of the two accounts because it had already marked the account as paid and was no longer reporting the account to the credit reporting agencies.  As for the second account, Midland requested additional supporting information from the consumer directly that would assist it in conducting an investigation, a reasonable request under the FCRA.  However, simultaneously, Midland responded to the credit reporting agency verifying the information as reported accurately based on the information it had in its file.  Midland did not request any additional information from the original creditor to further investigate and did not request the credit reporting agency mark the account as disputed while it continued an investigation based on information requested from the plaintiff.              

As a furnisher of information, Midland had an obligation under the FCRA to conduct a reasonable investigation.  The appeals court held that a jury could find Midland did not perform such an investigation and could be liable for its conduct under the statute.  The FCRA imposes a duty on furnishers, like Midland, to reinvestigate a dispute.  The FCRA requires credit reporting agencies to make reasonable efforts to investigate and correct inaccurate information and according to the 11th Circuit, this obligation should also extend to the companies that furnish the information to the credit bureaus.  The Court went on to state that the reasonableness of a furnisher’s investigation should be based on its status and the type of information available to it.  In a situation where not enough information is available to a furnisher to conduct a reasonable investigation, it certainly can report an account as “unverifiable.”  In Midland’s situation, to respond to the credit reporting agency verifying the account, when Midland was also notified of the dispute from the plaintiff directly, showed its lack of conducting a reasonable investigation.  Midland requested the plaintiff provide it with more information so it knew additional information could be made available to it.  Midland should have a duty to review any additional information BEFORE verifying the account to the credit reporting agencies under the FCRA.         

If the purpose of the FCRA is to protect consumers from the dissemination of inaccurate information on their credit report, furnishers and credit reporting agencies alike must be held to the same standard.  If you believe your rights have been violated under the FCRA and would like the advice or assistance of counsel, contact SmithMarco P.C. for a completely free case review.


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