CHICAGO — A federal appeals panel has ruled credit bureaus aren’t equipped to fully investigate consumer disputes over creditors’ claims.
The July 15 opinion from the U.S. Seventh Circuit Court of Appeals addresses consolidated claims from plaintiffs who owe debts not owned by the creditors listed on reports. These plaintiffs sued under the Fair Credit Reporting Act, alleging the reporting agencies didn’t follow that law’s guidelines for thoroughly investigating their claims.
Six different federal judges presiding over the seven original complaints either dismissed the claims or granted judgment to the creditors. Defendants include Experian Information Solutions, TransUnion Data Solutions and Equifax Information Services.
Seventh Circuit Judge Michael Brennan wrote the opinion; Judges Diane Wood and Amy St. Eve concurred.
Brennan said the panel’s task was “discerning the sometimes-murky boundary between ‘law’ and ‘fact’ ” and that the disputes ultimately were legal issues outside the reporting agencies’ expertise.
“Each plaintiff incurred a consumer credit card debt,” Brennan wrote. “The debts were purportedly sold and assigned to other companies — creditors — and this change appeared on plaintiffs’ credit reports. The creditors then attempted to collect the debts from the plaintiffs.”
In some cases, the new creditors sued demanding payment, but the consumers claimed the new creditor didn’t own their debts, demanded proof of ownership and requested arbitration. In other instances, the consumers wrote to the new creditors contending ownership of the debt. Ultimately, all the consumers contacted either Experian, TransUnion or Equifax, which contacted the creditors, who said the debts were accurate despite failing to “produce the original sale or assignment agreement in any case.”
According to the panel, the consumers argued the FCRA requires the credit agencies to determine if each debt has a purchase and sale agreement. Absent such proof, the agencies should determine the creditor doesn’t own the debt, consumers said. But the panel said the mere existence of those agreements wouldn’t establish their validity.
“They see requesting the purchase and sale agreement as a straight-forward factual inquiry,” Brennan wrote. However, “a clear line has not been drawn between legal and factual inaccuracies in the FCRA context.”
The panel looked at other cases where consumers tried to argue their debts weren’t owed because of an invalid paper trail, but courts — including the Seventh Circuit Court of Appeals — have determined credit agencies aren’t suited to resolve the question of whether a loan is legally valid.
Credit agencies, Brennan explained, can resolve disputes over things like “the amount a consumer owes, and what day a consumer opened an account or incurred a payment. These questions do not require the consumer reporting agencies to make any legal determinations about the facts or legal judgments.”
What the consumers in these actions sought to do, the panel continued, was have a credit agency apply law to the facts of their case — which is the role of courts — rather than asking a credit agency to just examine the facts of their specific situations.
“Consumer reporting agencies are competent to make factual determinations, but they do not reach legal conclusions like courts and other tribunals do,” Brennan wrote. “Courts sometimes employ different actors to help answer certain questions, but the ultimate result is a legal determination.”
Even though the panel affirmed the ruling in favor of the credit agencies, it noted the consumers could still confront the creditors directly or have the disputes noted on their credit reports.
“What these plaintiffs cannot do, though,” Brennan concluded, “is place the burden for determining whether their debts were validly assigned onto the consumer reporting agencies, where it does not belong.”
The consumers were represented in the action by attorneys Michael Wood and Celetha Chatman, of Community Lawyers Group, of Chicago; and Daniel R. Brown, of
Main Street Attorney LLC, of Chicago.
The credit bureaus were represented by attorneys Rodney L. Lewis and Claire Brennan, of Polsinelli PC, of Chicago, and Camille R. Nicodemus, of Schuckit & Associates, of Zionsville, Ind.