Appeals Court Upholds Dismissal of FCRA Class-Action Over Code Used to Report Debt During Pandemic Forbearance

The Court of Appeals for the Ninth Circuit has affirmed a lower court’s ruling in favor of a defendant that was sued in a class action for violating the Fair Credit Reporting Act because of the code it used when furnishing information about the debt to credit reporting agencies while the account was in a forbearance plan during the COVID-19 pandemic, ruling the lower court did not make a mistake in dismissing the complaint.

A copy of the ruling in the case of Mitchell v. Specialized Loan Servicing can be accessed by clicking here.

The plaintiff sought — and received — a forbearance plan from the defendant in April 2020 at the onset of the COVID-19 pandemic. The forbearance plan lasted for six months. During that time, the defendant reporting the plaintiff’s account status as current, with no reported date of first delinquency and no past-due balance. The defended used a code “D” in the plaintiff’s payment history profile, which corresponded to no payment history, no data, or unknown. A “0” code, for comparison’s sake, indicates “0 payments past due (current account).”

The plaintiff filed suit, alleging the defendant should have used the “0” code when reporting the debt because the 2020 Coronavirus Aid, Relief, and Economic Security Act (“CARES”) amendment to the FCRA required furnishers to report accounts as current if a forbearance plan or other form of relief had been placed on an individual’s account.

A District Court judge granted the defendant’s motion for summary judgment and denied the plaintiff’s request for class certification.

The panel of judges from the Ninth Circuit agreed with the lower court and the Consumer Data Industry Association (CDIA) that the use of “D” “is an acceptable option” when reporting a debt as current.

The plaintiff claims his denial of an application for credit to purchase a new vehicle was related to the defendant’s action, but the Ninth Circuit said that the denials were more likely tied to a bankruptcy filing from the plaintiff back in 2013.

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