A District Court judge in Nevada has granted a motion to dismiss filed by a creditor in a Fair Credit Reporting Act case over how it furnished information related to a student loan after the plaintiff filed for bankruptcy protection. The case centers on how a student loan was reported to the credit bureaus while the plaintiff was in an active Chapter 13 bankruptcy.
The background: The plaintiff filed for Chapter 13 bankruptcy protection and had a plan confirmed by the bankruptcy court.
- The defendant was the servicer of a federal student loan and acted as a furnisher of information to the credit reporting agencies.
- The plaintiff alleged that the defendant continued to report a growing balance on a student loan account during the bankruptcy, which she argued was misleading and harmful to her credit profile.
- She also argued that the defendant failed to properly account for the bankruptcy status of the debt and did not follow industry reporting guidelines, including the Metro 2 format published by the Consumer Data Industry Association.
- Based on those allegations, the plaintiff brought claims under the FCRA including claims tied to accuracy, reasonable investigation, and improper furnishing of information.
The ruling: Judge James C. Mahan of the District Court for the District of Nevada rejected the plaintiff’s theory that reporting a balance during an active bankruptcy is inherently inaccurate or misleading.
- Citing prior Ninth Circuit and Nevada district court precedent, Judge Mahan noted that the FCRA does not prohibit the accurate reporting of debts during the pendency of a bankruptcy and that “bankruptcy does not prevent the reporting of debt.”
- Judge Mahan emphasized that the automatic stay limits collection activity, not the act of credit reporting.
- The judge also found it significant that the student loan at issue was disbursed after the bankruptcy plan was confirmed, undercutting the claim that the reporting was misleading.
- Judge Mahan also dismissed the argument that alleged deviations from Metro 2 reporting standards created FCRA liability, explaining that industry guidelines do not establish the legal standard for accuracy under the statute.
