A credit reporting agency’s reliance on data from a collection firm, even when that data is later disputed, is not automatically unreasonable under the Fair Credit Reporting Act, a District Court judge in Illinois has ruled, while leaving key questions about dispute handling and reinvestigation procedures for a jury to decide.
The background: The case stems from a relatively common scenario that quickly became more complicated. The plaintiff maintained an auto insurance policy and paid monthly premiums through autopay. Then, one month, the insurer claimed a payment attempt failed, even though bank records suggested the funds were withdrawn and sent.
- After being notified of the alleged missed payment, the plaintiff made a manual payment the next day, which was received. He later disputed that second payment and was refunded, maintaining he had already paid via autopay. The insurer disagreed, ultimately canceling the policy and placing a $230 balance with a collection agency.
- The collection agency began reporting the account to the credit reporting agency, which added it to the plaintiff’s credit file.
- Months later, the plaintiff submitted a dispute letter. While the letter included detailed personal information, supporting documents, and an electronic signature, it was prepared and mailed with the assistance of a third party.
- The credit reporting agency flagged the letter under its “suspicious mail” procedures and declined to reinvestigate, instead sending a notice stating it would take no action unless the dispute was submitted differently.
The ruling: The decision from Judge Colleen R. Lawless [EDITOR’S NOTE: Great name for a judge] of the District Court for the Central District of Illinois draws several important lines for the industry.
- First, on accuracy, the judge found there is a genuine dispute of material fact as to whether the debt was actually owed. A jury could reasonably conclude either that the payment was made or that it was not. That alone prevents summary judgment on core FCRA claims tied to accuracy.
- Second, and more favorable for furnishers and CRAs, Judge Lawless held that the credit reporting agency’s initial reliance on the collection agency was reasonable as a matter of law. The opinion emphasized that CRAs can rely on “facially reliable furnishers” and are not required to independently verify underlying facts before a dispute is received.
- The judge pointed to the collection agency’s performance metrics, noting that more than 99% of its tradelines complied with industry standards, with a below average error rate. That mattered.
- Third, and where things get more nuanced, the judge refused to grant summary judgment on the agency’s “suspicious mail” procedures. A jury could find those procedures unreasonable if they prevent legitimate disputes from being investigated. She also rejected the argument that any reinvestigation would have been futile.
- On the reinvestigation issue itself, Judge Lawless declined to rule that the dispute was not sent “directly” by the consumer. The plaintiff’s involvement in supplying information, reviewing, and signing the letter created enough evidence for a jury to decide.
- Finally, the court allowed claims for willful violation and damages to proceed, noting prior scrutiny of similar procedures and evidence of emotional distress tied to the reporting.
