A District Court judge in Texas has granted a motion to dismiss filed by one of the defendants in a Fair Debt Collection Practices Act case after the defendant was accused of violating the statute by not removing a dispute flag when furnishing information to the credit reporting agencies.
The background: The plaintiff obtained a personal loan that was later acquired by a debt collector. The plaintiff initially disputed the debt, but later sent a letter stating that the dispute was withdrawn and requesting that any dispute notation be removed from his credit reports.
- Months later, the plaintiff reviewed credit reports from two credit reporting agencies and saw that the account was still marked as disputed. He alleged this reporting was inaccurate and claimed it harmed him, asserting violations of Sections 1692e(2) and 1692e(8) of the FDCPA for falsely representing the status of the debt and communicating credit information that was known or should have been known to be false.
The ruling: Judge Jane J. Boyle of the District Court for the Northern District of Texas dismissed the FDCPA claim against this defendant with prejudice, finding that the plaintiff failed to state a claim even though he had standing to sue. While the judge accepted that alleged emotional distress could satisfy Article III standing, she concluded that the conduct at issue was not actionable under the FDCPA because it was not done in connection with the collection of a debt.
- The court explained that not all communications involving a debt fall within the scope of the FDCPA. To qualify, the communication must be animated by a purpose to induce payment. Here, the reporting of a dispute notation to credit bureaus did not demand payment, threaten consequences, or otherwise attempt to prompt the plaintiff to pay. As the court noted, “bare assertions” that the reporting was intended to induce payment were not enough to survive a motion to dismiss.
- Judge Boyle also observed that marking a debt as disputed can actually be less harmful to a consumer’s credit profile than reporting it as undisputed and unpaid. In a pointed passage, she emphasized that treating such reporting as debt collection activity would require a “bizarre or idiosyncratic” interpretation of how credit reporting functions.
