A District Court judge in Illinois has granted a defendant’s motion to dismiss claims it violated the Fair Credit Reporting Act, ruling that it has no obligation to determine whether a debt has been discharged in bankruptcy or not.
The background: The plaintiff filed for Chapter 13 bankruptcy in October 2020 and scheduled 26 claims. While the bankruptcy was still pending, the plaintiff opened several additional credit accounts with different creditors. Because these accounts were opened after the original bankruptcy filing, they were not included on the original bankruptcy schedules.
- In November 2023, the plaintiff converted the case from Chapter 13 to Chapter 7 after failing to make required plan payments. The plaintiff later amended the bankruptcy schedules to include additional debts, bringing the total number of scheduled debts to 52. However, the amended schedules did not include all of the accounts at issue and did not list account numbers or the dates the debts were incurred for some of the creditors.
- In February 2024, the bankruptcy court issued a standard discharge order. The order cautioned that some debts may not be discharged, including debts that were not properly listed in the bankruptcy schedules.
- After reviewing her credit report, the plaintiff discovered that several of the accounts were still being reported as delinquent, charged off, or in collections rather than discharged.
- The plaintiff then filed suit alleging the defendant violated the FCRA by failing to report the accounts as discharged and failing to maintain reasonable procedures to ensure maximum possible accuracy.
The ruling: Judge John F. Kness of the District Court for the Northern District of Illinois rejected the plaintiff’s argument, explaining that the FCRA does not require credit reporting agencies to interpret bankruptcy law or determine whether particular debts were legally discharged.
- The judge noted that liability under the FCRA generally arises only when there is an objectively verifiable factual inaccuracy. In contrast, disputes over whether a debt has been discharged often involve legal analysis rather than simple factual verification.
- Citing prior appellate decisions, Judge Kness explained that credit reporting agencies are not required to examine bankruptcy dockets or make legal determinations about the validity or dischargeability of debts. Doing so would be “unduly burdensome and inefficient.” The ruling detailed that the law does not require credit reporting agencies “to hire individuals with legal training to preemptively determine the validity of reported debts.” Instead, agencies are permitted to rely on the information provided by furnishers and on the face of court documents unless a consumer disputes the information.
- Judge Kness also pointed out that the plaintiff did not dispute the credit report information with the credit reporting agency before filing the lawsuit. Had the plaintiff submitted a dispute, that could have triggered the agency’s reinvestigation obligations under a different provision of the FCRA.
