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Judge Rules Collector Violated FDCPA By Not Promptly Reporting Debt as Disputed

In a case that was first reported by Nadia Adams at Womble Bond Dickinson, a federal judge in Illinois has partially granted and partially denied summary judgment requests from both the plaintiff and the defendant in a case in which a collection agency was sued for not promptly reporting a debt had been disputed under the Fair Debt Collection Practices Act.

A copy of the ruling in Francisco v. Midland Funding, LLC and Midland Credit Management, Inc., can be accessed by clicking here.

The plaintiff was sued for an unpaid debt by the defendant and engaged a lawyer to help with her defense. The lawyer faxed a letter to the defendant, which it interpreted as a dispute of the debt. Due to its size, the defendants prepare dispute reports in batches — twice a month on a Monday. The disputes are checked and then sent to the credit bureaus on the following Friday.

The letter faxed by the plaintiff’s lawyer was sent on a Sunday night, and the following day’s batch report had already been prepared. Thus, it was two more weeks before the debt was reported as disputed by the defendant. In that time, the debt was still being reported as not disputed.

The defendants first attempted to argue that the plaintiff did not suffer a concrete injury, but the judge, looking at Evans v. Portfolio Recovery Associates, ruled that failing to report a debt is enough to show a concrete injury.

Because Midland Funding was not involved in creating, checking, or sending the report of disputes to the credit bureaus, the judge granted the defendant’s motion for summary judgment with respect to Midland Funding’s liability in the case. Midland Credit Management, however, was not as fortunate, and the judge ruled that it met the definition of debt collector under the FDCPA.

Midland Credit tried to argue that it complied with the Fair Credit Reporting Act, which provides up to 30 days to investigate disputes, but the judge still ruled that Midland Credit violated Section 1692e(8) of the FDCPA by not promptly notifying the credit bureaus that the account was disputed.

Midland Credit also tried to argue it was covered under the bona fide error defense of the FDCPA and that the plaintiff’s fax “fell through the cracks,” but Judge Joan Lefkow of the District Court for the Northern District of Illinois, Eastern Division, noted that Midland Credit “designed a system with cracks.”

Some good news for the defendants came when Judge Lefkow noted that the plaintiff did not present enough evidence for a jury to award actual damages, and that the plaintiff is only entitled to statutory damages under the FDCPA.

“Sending one report to credit bureaus correctly reciting the amount of the debt but incorrectly omitting that the debt is disputed is not ‘inherently degrading,’ Judge Lefkow wrote. “Francisco’s only evidence of emotional injury is her own testimony, and she does not describe her injury in ‘reasonable detail.’ She testified to losing sleep and feeling stressed, sick, hot-tempered, annoyed, humiliated, embarrassed, sad, and hopeless. But she did not substantiate these claims beyond the bare fact of claiming to experience these emotions.”

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