An Illinois federal district court recently denied a creditor-defendant’s motion for summary judgment in a Fair Credit Reporting Act (FCRA) case brought by a consumer who questioned why his debt was being reported twice — as both a tradeline with the original creditor and as a tradeline with a third-party collection agency. The court’s opinion in Kyle Fickel vs. Clearwater Credit Union et al. is a warning about the credit reporting issues that can arise when lenders refer or assign debts to collections.
As background, the plaintiff in Fickel obtained a credit card from the defendant and fell behind on payments — prompting the defendant to refer the debt to a third-party collection agency. Thereafter, the plaintiff obtained a copy of his credit report and noticed the debt was listed twice. The first listing, or “tradeline,” was furnished by the defendant and described the debt as a revolving account in collections with a $10,145 balance. The second tradeline, furnished by a third-party collections agency, described the same debt as an open collections account, for which plaintiff owed over $12,000. The plaintiff submitted written dispute letters to the national credit reporting agencies (CRAs), describing the apparent double reporting:
"I have an account with Clearwater Credit Union with [account number] that I fell behind on. I notice they are reporting the debt on my credit report while Northwest Collectors [separate account number] is also reporting what I think is the same debt but for a different amount.
Who do I owe money to? I’m confused . . . . Why are both accounts reporting on my credit report? Are there interest or collection fees that I’m not aware of? I’ve been trying to repair my credit, this has me puzzled."
The CRAs forwarded the dispute letters to the defendant along with Automated Consumer Dispute Verification Forms (ACDVs) containing an otherwise generic description of the dispute, save for the word “duplicate.”
During discovery, the defendant produced two corporate witnesses who testified that their standard procedure for investigating disputes was simply to verify that the information in the ACDV matched that in their internal systems. While the witnesses acknowledged that they knew the plaintiff’s dispute related to alleged “duplicate reporting,” their investigation of his dispute did not diverge from their standard procedure.
Following discovery, the defendant moved for summary judgment, arguing that there was no triable issue of fact showing that its reporting was inaccurate or that its investigation was unreasonable in violation of § 1681s-2(b) of the FCRA. The district court disagreed. In a five-page opinion denying summary judgment, the court noted the absence of governing Seventh Circuit authority on the issue of whether double-reporting is a FCRA violation. The court, however, concluded that a factual issue existed as “to whether the double reporting of [the plaintiff’s] debt with [the defendant] left a misleading impression that he had two separate debts, totaling $22,000 instead of a single debt of approximately $10,000.” The court further found that reasonable minds could differ as to whether the defendants’ investigation was reasonable despite knowing the plaintiff’s dispute concerned “duplicate” reporting.
The reasonableness of the post-dispute investigation was questionable in Fickel where the defendant was on notice regarding the nature of the dispute. This case also raises questions about the defendant’s front-end procedures for ensuring that accounts referred to collections are consistently and accurately reported. Lenders and collections agencies would be well-advised to delineate reporting responsibilities — i.e., who will be reporting the debt, for how long, and under what circumstances — whenever negotiating purchase agreements to mitigate FCRA exposure tied to inconsistent and/or duplicate reporting.