The courts have provided yet another reason why debt buyers should require account-level documentation for every portfolio they purchase.
The 11th Circuit Court of Appeals last week reversed a summary judgment ruling in favor of a debt buyer related to how a debt is verified when it is disputed by an individual. The ruling returns the case — Hinkle v. Midland Credit Management Inc., et al — back to the District Court for the Southern District of Georgia.
Midland purchased portfolios that contained two charged-off debts owed by the plaintiff. Midland sent a collection notice for one of the debts, and the debt was subsequently paid off — although the defendant disputes ever receiving the notice or paying the debt. Midland then sent a collection notice for the second debt, which the plaintiff admitted receiving. The plaintiff disputed both debts, and Midland asked for documentation to support the dispute. Midland did not ask the sellers of the portfolios for additional information related to the accounts.
The Appeals Court ruled that the investigation conducted by Midland into the disputed debt did not meet the threshold of a “reasonable” investigation, as required by the Fair Credit Reporting Act. The court also indicated that a “jury could find that Midland either knowingly or recklessly reported the debts as ‘verified’ without obtaining enough information and documentation to support that conclusion.”
From one legal brief analyzing the decision:
This decision potentially imposes more stringent compliance with the Fair Credit Reporting Act on debt buyers when consumers dispute entries in their credit reports. Debt buyers would be wise to exhaust every effort to obtain documentary evidence throughout the investigation into any such disputes.