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From Banking and Finance Law Daily, December 5, 2014

Verifying disputed debt to credit reporting agency not a misrepresentation

By Richard A. Roth, J.D.

A debt collector did not violate the Fair Debt Collection Practices Act by telling a consumer reporting agency that a consumer owed a debt without mentioning that the consumer disputed that debt, according to the U.S. Court of Appeals for the Eighth Circuit. Since the omission could not possibly have misled the reporting agency, it did not constitute a “false, deceptive, or misleading representation,” the court decided. The court also rejected the complaining consumer’s assertion that the debt collector’s report was in connection with collecting the debt (McIvor v. Credit Control Services, Inc., Dec. 4, 2014, Murphy, D.).

The consumer said that she used the website offered by credit reporting agency TransUnion to dispute a $242 debt claimed by the debt collector, and that she told TransUnion that the debt had been settled and should be removed from her file. However, when TransUnion contacted the debt collector to investigate, as the Fair Credit Reporting Act requires, the debt collector said the debt still was owed.

Ban on misrepresentations. According to the FDCPA, a debt collector cannot make misrepresentations “in connection with the collection of any debt.” The ban specifically includes “Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed” (15 U.S.C. §1692e(8).

The consumer sued the debt collector for violating that ban. According to her, TransUnion is a person, and the debt collector failed to communicate to it that the debt in question was disputed.

However, the district court judge disagreed. He decided that there was no misrepresentation and that the debt collector’s statement was not in connection with collecting the claimed debt. The consumer appealed those decisions.

No deception. Whether a communication is false, deceptive, or misleading depends on its effect on the recipient, the appellate court began. Even a statement that was literally false would not violate the FDCPA if the recipient would not be misled. Since the consumer began the dispute by using TransUnion’s website, TransUnion knew the debt was disputed and thus could not be misled, the court said.

The court did not permit the consumer to argue that deception was present because the failure to mention the dispute would affect how TransUnion calculated her credit score. The consumer had not described the reporting agency’s calculation process, and the court declined to take judicial notice of descriptions contained in other court opinions.

In connection with collecting a debt. Noting that the Eighth Circuit had never defined “in connection with the collection of a debt,” the court said that the phrase referred to a communication that had, as “an animating purpose,” inducing the consumer to pay. A communication from a debt collector to a reporting agency sometimes would meet that standard, but would not always do so, the court said.

The appellate court then emphasized that the debt collector had not chosen to communicate with TransUnion. Instead, the debt collector was required by the FCRA to investigate the consumer’s dispute and report back to TransUnion. The animating purpose of the debt collector’s communication to TransUnion was complying with the FCRA, not collecting the claimed debt, the court determined. Thus, there was no FDCPA violation.

The case is No. 14-1164.

Attorneys: Jonathan Lester Robert Drewes (Drewes Law) for Sarah McIvor. Ashley M. DeMinck (Hinshaw & Culbertson) for Credit Control Services, Inc.

Companies: Credit Collection Services; Credit Control Services, Inc.; TransUnion

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