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From Banking and Finance Law Daily, May 11, 2016

Reinvestigating debt using standard form with attachments was reasonable

By Richard A. Roth, J.D.

A consumer reporting agency that used a standard verification request form, combined with a consumer’s letter and a separate document provided by the consumer, when asking the lender to verify a debt performed a reasonable reinvestigation, a federal district court judge has decided. Sending the lender an Automated Consumer Dispute Verification Form and additional explanation of the consumer’s position satisfied the Fair Credit Reporting Act (Allen v. Experian Information Solutions, Inc., May 10, 2016, Leitman, M.).

The consumer financed a series of laser hair removal treatments through Comenity Capital Bank. Unfortunately, the clinic closed before the treatments were finished, which led the consumer to stop making payments. Comenity reported to Experian Information Solutions, Inc., that the consumer’s account was delinquent and that she owed more than $3,800.

When the consumer learned that her credit report included the delinquency, she contacted Experian, sending a letter that explained why she had stopped making payments and asking that the delinquency be removed from her report. She also included proof that the clinic had closed before her treatments were finished.

Experian’s reinvestigation. The FCRA requires consumer reporting agencies to conduct “a reasonable reinvestigation” when a consumer disputes a credit report entry (15 U.S.C. §1681i). Concluding that it could not independently verify the consumer’s claims, Experian asked Comenity to verify its debt claim. Experian used an Automated Consumer Dispute Verification Form (CDV Form) to communicate its request to the bank and attached to the CDV Form the consumer’s letter and her proof that the clinic had closed.

Comenity replied that the consumer owed the debt, leading Experian to decline her request that the information be removed from her credit report.

Adequacy of reinvestigation. Other courts have determined that sending a CDV Form alone is a reasonable reinvestigation when there is no reason to believe the lender is unreliable, the judge said. Experian had done more than that when it included the consumer’s letter and proof of the clinic’s closure. Experian had explained the consumer’s dispute in her own words, the judge said, adding “It is hard to imagine a better way to inform Comenity Bank of the essence of Allen’s dispute.”

It was true that the CDV Form did not expressly incorporate the attached documents, the judge conceded. However, it was reasonable for Experian to assume that Comenity would look at them. In fact, the only conclusion the bank could have drawn from the inclusion of the letter and proof of the clinic’s closure was that Experian intended they be reviewed.

There was no question that Experian’s reinvestigation was reasonable, the judge concluded.

The case is No. 15-cv-11394.

Attorneys: Gary D. Nitzkin (Nitzkin & Associates) for Tiffany Allen. Sidney L. Frank (Williams Williams Rattner & Plunkett, PC) for Experian Information Solutions, Inc.

Companies: Comenity Capital Bank; Experian Information Solutions, Inc.

MainStory: TopStory FairCreditReporting MichiganNews

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