In a recent precedential opinion, the Third Circuit held that
the failure of colleges and universities to respond to a
student loan borrowers’ credit report dispute is in violation of
the Fair Credit Reporting Act (“FCRA”) and such a violation may
subject the institutions to punitive damages for their
conduct. Under the FCRA, colleges and universities are
required to furnish information regarding student
loan borrowers’ debts and under this recent opinion, are no
longer immune from inaccurate reporting.
On February 21, 2014, the Third Circuit held in Seamans v.
Temple University, that reliance on the Higher Education Act
(“HEA”), a statute enacted to protect colleges and universities,
will not protect these entities from FCRA compliance. In
response to its refusal to investigate a student debtor’s request
for investigation of an inaccurate student loan report pursuant to
the FCRA, Temple University argued that as an exception to the
statute, universities do not need to report the initial date of
delinquency to the
credit reporting agencies (“CRAs”) to prevent the debt from
falling off the consumer report for a longer period of time.
Furthermore, the university went on to argue that because student
loan debts do not age-off a consumer report in the same manner as
other debt, institutions of higher education should not be required
to provide all of the data including the delinquency
date.
The court disagreed with the University’s argument and stated
that institutions of higher education do in fact have the same
obligation under the FCRA as any furnisher and therefore must
investigate all disputes received from the CRA on behalf of a
student debtor. Essentially, what the court stated is that
when an institution of higher education reports information
regarding a student
loan to the CRAs, it must report it in a manner consistent with
the rules of the FCRA and it must also respond to a request for
investigation in compliance with the statute. Despite the
fact that student loans will follow a debtor through life and
cannot be expunged without making payment, barring a few limited
exceptions to the rule, the FCRA should still protect consumers
from inaccurate reporting. Debtors deserve the right to
dispute a debt and request an investigation of inaccurate
reporting. Allowing colleges and universities to avoid their
responsibility as a furnisher would contradict the purpose of this
consumer minded statute. So while student loans are permitted
to remain on a student debtor’s report beyond the seven year period
and are immune from falling off a consumer report, debtors should
still be entitled to dispute
an inaccuracy and expect a response to a request for
investigation.
If you have inaccurate information on
your credit report and need assistance or advice of counsel,
contact SmithMarco P.C. for a free
case review.