New York City Debt Collection Defense Attorney

Debt Collector Placing False Information on your Credit Report? Punitive Damages May be Available under the Fair Credit Reporting Act.

We know that a debt collector's communication of false information to the credit bureaus is a violation of the Fair Debt Collection Practices Act § 1692e(8). But your monetary recovery is limited statutory damages of up to $1,000, with actual damages, if any are demonstrated.

The Fair Credit Reporting Act (FCRA), however, provides a mechanism to impose large punitive damages against any debt collector who fails to reasonably investigate a disputed debt. To hold a debt collector or other furnisher liable under the FCRA, however, the consumer must first send her dispute to the CRA, which is required to forward it to the furnisher. The furnisher's investigation of the dispute will then be examined to determine its liability for verifying a false debt. Private remedies are only available for a breach of the furnisher obligations triggered by the consumer's formal dispute with a credit bureau or credit reporting reseller.[1] A dispute made directly with the furnisher will not trigger application of the FCRA. Furthermore, the violation also must be "willful" to recover punitive damages under FCRA.

You can find an example of "willfulness" in the Brim v. Midland Credit Management case reported in our prior blog. The Brim case established that Midland basically had no system to investigate disputes rightfully started with the credit bureaus. Midland argued that it properly investigated disputes when it reviewed the information in Midland's own internal system and compared it with the information supplied by the credit bureaus. This argument, the court opined, amounted to Midland's own determination that it need not objectively determine the accuracy its own debts that it reports to the credit reporting agencies.

The jury found Midland's behavior to be "reprehensible."

[1] 15 U.S.C § 1681i(a). See NCLC, Fair Credit Reporting § (7th ed. 2010 and supp.).