Appeals Court Affirms Ruling for Defendant in FCRA Case Over Possibly Discharged Debt

For those of you who don’t credit report, you might read this sentence until you see that it’s a Fair Credit Reporting Act case and move on to something else more important, but this ruling from the Court of Appeals for the Second Circuit also has bankruptcy implications as well, so it applies to more than just those that have to comply with the FCRA. The Court has affirmed the dismissal — albeit on different grounds than the District Court did — of a case that turns on whether the inclusion of a debt on an individual’s credit report is inaccurate because the debt was dischargeable during bankruptcy proceedings.

A copy of the ruling in the case of Mader v. Experian Information Solutions can be accessed by clicking here.

The plaintiff took out a private student loan. Four years later, he filed for bankruptcy protection. The court decreed that the plaintiff was free from “all dischargeable debts.” The student loan servicer then sent the plaintiff a letter indicating that the student loan was not dischargeable. The servicer and the plaintiff worked out a payment plan and the plaintiff made payments for four years. The plaintiff then filed suit, alleging the defendant was violating the FCRA and state law in New York for including the loan on his credit report. The plaintiff never disputed the debt nor did he clarify with the bankruptcy court if the debt was discharged.

A District Court judge granted the defendant’s motion for summary judgment, ruling that the loan was not dischargeable. But that was not the right ruling to make, the Appeals Court determined. Ultimately, it was the plaintiff’s burden to prove there was an inaccuracy on his credit report. There is nothing in the plaintiff’s possession that explicitly indicates the student loan was discharged during his bankruptcy filing. It is not the defendant’s job to resolve an unresolved legal question before determining whether to include the item on a credit report, the Appeals Court ruled.

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