A District Court Judge in Michigan has granted a defendant’s motion for summary judgment in a Fair Credit Reporting Act case, ruling that the defendant did not violate its obligations under the law by continuing to report a disputed debt.
The background: The case began when the plaintiff disputed a debt reported by the defendant, a major bank. The debt originated from a credit card account that the plaintiff allegedly stopped paying in early 2021, leading the bank to charge off an unpaid balance of $9,772. The defendant subsequently reported this information to the credit reporting agencies (CRAs).
- In early 2023, the bank filed a lawsuit to recover the outstanding debt. However, during the trial, the defendant’s counsel was not prepared to proceed, prompting the state court to dismiss the case with prejudice as a sanction.
- Following this dismissal, the plaintiff argued that the state court’s decision effectively nullified the debt, and subsequently, she disputed it again with the CRAs. Despite her dispute, the defendant verified the accuracy of the information it had reported.
The ruling: In granting summary judgment to the defendant, Judge Sean F. Cox of the District Court for the Eastern District of Michigan ruled that the dismissal of the bank’s lawsuit with prejudice did not equate to an adjudication on the merits of the debt itself. The judge noted that the dismissal was a procedural sanction rather than a substantive decision regarding the validity of the debt. Consequently, the defendant was not required to alter the reporting of the debt.
- Judge Cox further explained that the FCRA does not obligate creditors to investigate or resolve legal issues related to the validity of a debt, such as whether a state court dismissal is res judicata. The court agreed with the defendant’s argument that the information reported — specifically, that the plaintiff owed $9,772 — was accurate and complete, as there was no genuine evidence provided by the plaintiff to dispute this claim.
