ABA Consumer Guide to Understanding & Protecting Your Credit Rights

When to Hire a Lawyer to Deal with a Credit Report Problem

If you think your legal rights have been violated by (a) a consumer reporting agency, (b) a person furnishing information to a consumer reporting agency, or (c) a person using information from a consumer reporting agency (including an employer), you should seek the advice of an attorney. In some cases, but not always, a consumer reporting agency or other person who has violated the Fair Credit Reporting Act (FCRA) must pay damages and your attorney’s fee. You generally have two years in which to bring suit.

There are two principal obligations imposed by the FCRA in cases of inaccurate information. First, the bureaus are required to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates” (emphasis added) (15 U.S.C. §1681e(b)). This section is most appropriate for situations that are clearly the credit bureau’s fault—such as a mixed-file case or the misreporting of public record information. The algorithms used to “match” files may not satisfy this standard.

Under another section of the FCRA, there is an obligation to conduct a reasonable investigation if you dispute an item; 15 U.S.C. §1681i, “Procedure in case of disputed accuracy,” states:

a.Reinvestigations of disputed information.

1.Reinvestigation required.

A.In general. If the completeness or accuracy of any item of information contained in a consumer’s file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly of such dispute, the agency shall reinvestigate free of charge and record the current status of the disputed information, or delete the item from the file in accordance with paragraph (5), before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer.

B.Extension of period to reinvestigate. Except as provided in subparagraph (C), the 30-day period described in subparagraph (A) may be extended for not more than 15 additional days if the consumer reporting agency receives information from the consumer during that 30-day period that is relevant to the reinvestigation.

C.Limitations on extension of period to reinvestigate. Subparagraph (B) shall not apply to any reinvestigation in which, during the 30-day period described in subparagraph (A), the information that is the subject of the reinvestigation is found to be inaccurate or incomplete or the consumer reporting agency determines that the information cannot be verified.

2.Prompt notice of dispute to furnisher of information.

A.In general. Before the expiration of the 5-business-day period beginning on the date on which a consumer reporting agency receives notice of a dispute from any consumer in accordance with paragraph (1), the agency shall provide notification of the dispute to any person who provided any item of information in dispute, at the address and in the manner established with the person. The notice shall include all relevant information regarding the dispute that the agency has received from the consumer.

B.Provision of other information from consumer. The consumer reporting agency shall promptly provide to the person who provided the information in dispute all relevant information regarding the dispute that is received by the agency from the consumer after the period referred to in subparagraph (A) and before the end of the period referred to in paragraph (1)(A). . . .

3.Consideration of consumer information. In conducting any reinvestigation under paragraph (1) with respect to disputed information in the file of any consumer, the consumer reporting agency shall review and consider all relevant information submitted by the consumer in the period described in paragraph (1)(A) with respect to such disputed information.

4.Treatment of inaccurate or unverifiable information.

A.In general. If, after any reinvestigation under paragraph (1) of any information disputed by a consumer, an item of the information is found to be inaccurate or incomplete or cannot be verified, the consumer reporting agency shall promptly delete that item of information from the consumer’s file or modify that item of information, as appropriate, based on the results of the reinvestigation. . . .

The obligation to investigate is imposed on both the bureau and the furnisher of information. The bureau must take reasonable measures to initiate an investigation. If information from a furnisher is involved, it must take reasonable measures to communicate the dispute to the furnisher. The furnisher must, upon receipt of a dispute from the bureau (not directly), conduct a reasonable investigation and accurately report its results to the bureau. The bureau must act reasonably in evaluating the response.

A reasonable investigation generally does not extend to resolving contested issues of fact or law relating to a dispute between the furnisher and the consumer, although the “tradeline” must be listed as disputed.

Claims against furnishers of information are generally dependent on the consumer disputing with the bureau first. Although furnishers also have a duty to report accurate information, there is usually no private right of action by a consumer for failure to do so, absent a dispute with the bureau. You can copy the furnisher on your letter to the bureau, but it is absolutely essential to give notice to the credit bureau in order to take legal action against anyone for failure to investigate a dispute. Only government agencies can pursue a furnisher without a dispute through the bureaus.

This somewhat counterintuitive scheme is created by 15 U.S.C. §1681s-2(b), which provides:

b.Duties of furnishers of information upon notice of dispute.

1.In general. After receiving notice pursuant to section 611(a)(2) [15 USC §1681i(a)(2)] of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall

A.conduct an investigation with respect to the disputed information;

B.review all relevant information provided by the consumer reporting agency pursuant to section 611(a)(2) [15 USC §1681i(a)(2)];

C.report the results of the investigation to the consumer reporting agency; and

D.if the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis.

E.if an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation under paragraph (1), for purpose of reporting to a consumer reporting agency only, as appropriate, based on the results of the reinvestigation promptly -

i.modify that item of information;

ii.delete that item of information; or

iii.permanently block the reporting of that item of information

2.Deadline. A person shall complete all investigations, reviews, and reports required under paragraph (1) regarding information provided by the person to a consumer reporting agency, before the expiration of the period under section 611(a)(1) [15 USC §1681i(a)(1)] within which the consumer reporting agency is required to complete actions required by that section regarding that information.

There is one major exception to the rule that you need to dispute an item with the credit bureau. If the furnisher of information is a “debt collector,” the provision of inaccurate information to a credit bureau may violate the Fair Debt Collection Practices Act (FDCPA); 15 U.S.C. §1692e(8) provides that it is a violation of the FDCPA to communicate or threaten to communicate credit information that is known to be or should be known to be false, including the failure to communicate that a disputed debt is disputed.

Collection agencies often violate this section by failing to report the fact that a debt is disputed to the credit bureaus after receiving a dispute from a consumer. This entitles the consumer to sue for statutory damages under the FDCPA but not the FCRA. It is not necessary to prove actual damages in such a case.

NOTE

Debt collectors include collection agencies, collection lawyers, and (in most jurisdictions) companies that purchase delinquent debts.

Other common FCRA violations involve obtaining reports without a permissible purpose and failing to comply with the procedures for using consumer reports (including background checks and other nonfinancial reports) by employers and landlords. If you have been denied employment or a rental because of a “consumer report,” consult an attorney.

Note that although the written permission of the subject of the report constitutes a “permissible purpose,” permission is not required if a permissible purpose otherwise exists, such as a request for credit. There is a common misconception that a creditor cannot obtain a credit report without the consumer’s permission, but that is not correct.

Under the FCRA, a successful lawsuit requires either (a) negligence plus injury that was caused by the inaccuracy or (b) a willful violation. If a dispute is required, only damages that occurred after the consumer sent the dispute letter are recoverable.

The statute of limitations under the FCRA is two years from discovery or five years from the violation, whichever is shorter. The statute of limitations under the FDCPA is one year.