Judge Grants MTD in FCRA Case Over Charged Off Status of Settled Debt

The codes and terms used when furnishing debt sometimes can mean more than one thing and can trip up even the savviest of credit reporting experts. But that doesn’t mean that they are inaccurate. A District Court judge in Nevada has granted a defendant’s motion to dismiss a Fair Credit Reporting Act case, ruling that the defendant did nothing wrong when it continued to report a closed account as charged off and conducted a reasonable investigation when the debt was disputed.

A copy of the ruling in the case of Ohaion v. Bank of America can be accessed by clicking here.

The background in this case is pretty straightforward. The plaintiff checked her credit report and noticed the defendant was reported a debt as paid off, even though the plaintiff had paid and closed the account. The plaintiff alleges she disputed the debt, but claims the plaintiff did not conduct a reasonable investigation.

The plaintiff sited a precedent that Judge Gloria M. Navarro of the District Court for the District of Nevada determined actually helped the defendant more. In that case, the defendant continued to report a debt as charged off even after the plaintiff had settled the debt for less than the full amount owed. The Court noted that the status of the tradeline in both cases — charged off with a zero balance — was determined to be accurate for an account that was charged off and later settled. Technically speaking, noted Judge Navarro, the defendant’s reporting was accurate.

The plaintiff also argued the notation was materially misleading because it made her look less credit-worth than she was. But the plaintiff did not offer enough evidence to support “the proposition that continuing to accurately report an account as charged off after the debtor has paid is misleading to the extent that it can be expected to adversely affect credit decisions,” Judge Navarro wrote.