Saturday, January 24, 2015

FYI: 8th Cir Holds Debt Collector's Communication to CRA in Response to Debtor's Dispute Did Not Violate FDCPA

The U.S. Court of Appeals for the Eighth Circuit recently held that a debt collector’s failure to report to a credit reporting agency that the borrower disputed the debt at issue did not constitute a false, deceptive, or misleading communication in violation of the FDCPA.


In so ruling, the Eight Circuit rejected the borrower’s contentions that the required communication between the debt collector and the consumer reporting agency was “in connection with the collection of any debt” for the purposes of the FDCPA.


A copy of the opinion is available at:


In April 2013, the borrower used a consumer reporting agency’s (“CRA”) online system to dispute a debt that the lender had supposedly agreed to settle.  As part of its required reinvestigation under the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. (“FCRA”), the CRA communicated the dispute to the debt collector.  The debt collector allegedly failed to confirm that the borrower had disputed the debt, and “in turn verified the debt to [the borrower].” 


The borrower argued that the debt collector’s failure to report that the debt was disputed constituted a false, deceptive or misleading communication of credit information to the CRA, in supposed violation of federal Fair Debt Collection Practices Act (“FDCPA”).  The lower court rejected the borrower’s argument, and granted judgment on the pleadings in favor of the debt collector.


As you may recall, the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692e(8), provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt,” which includes “(8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed”


To evaluate whether the debt collector’s verification of the debt was “false, deceptive or misleading,” the Eight Circuit views the communication “through the eyes of an unsophisticated consumer.”  See Hemmingsen v. Messerli & Kramer, P.A., 674 F.3d 814, 819 (8th Cir. 2012); Peters v. Gen. Serv. Bureau, Inc., 277 F.3d 1051, 1055 (8th Cir. 2002).  However, in this case, the recipient of the debt collector’s statement was the CRA, not a consumer. 


The Eighth Circuit noted that, although liability under § 1692e of the FDCPA is not confined to statements by collectors to consumers, the challenged statement must have the potential to "misl[ea]d, deceive[], or otherwise dupe[]" someone in order to be actionable. Hemmingsen, 674 F.3d at 818-19. 


The Eighth Circuit held that the facts alleged in the complaint did not support the borrower’s claim that the CRA could have been misled, deceived or duped when the debt collector did not explicitly state that the debt was disputed, because "the sole reason for [the debt collector] to even communicate with the credit agency… was in response to Plaintiff's dispute of the debts through the credit agency’s own dispute notification system." Neeley v. Express Recovery Servs., 2012 WL 1641198 at *2 (D. Utah 2012).


Next, the Appellate Court was asked to determine whether or not the communication between the debt collector and CRA was not a communication “in connection with the collection of debt.” 


In a case of first impression to the Eighth Circuit, it followed the interpretations of the Third, Sixth and Seventh Circuits, concluding that "for a communication to be in connection with the collection of a debt, an animating purpose of the communication must be to induce payment by the debtor." Simon v. FIA Card Servs., N.A., 732 F.3d 259, 266-67 (3d Cir. 2013); Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th Cir. 2011); Gburek v. Litton Loan Servicing, 614 F.3d 380, 385 (7th Cir. 2010).


As you may recall, under the FCRA, when a consumer disputes a debt directly with a reporting agency, the CRA must within 30 days "conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file" if it is "found to be inaccurate, incomplete, or cannot be verified." § 1681i(a)(1)(A), (5)(A). When a furnisher of information (such as a debt collector) is contacted as part of this reinvestigation process, it is obligated to "conduct an investigation with respect to the disputed information" and report the results to the consumer reporting agency. § 1681s-2(b).


Acknowledging that a communication between a debt collector and a consumer reporting agency may at times be in connection with debt collection, the Eighth Circuit held that the only “animating purpose” for the instant communication between the debt collector and the agency, was to comply with the reinvestigation procedures required by the FCRA, and not to induce payment from the borrower.


Thus, the Appellate Court concluded that the borrower failed to plausibly allege that the communication at issue was "false, deceptive, or misleading",” or  was "in connection with the collection of any debt."


Accordingly, the trial court’s judgment in favor of the debt collector was affirmed.





Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874


Admitted to practice law in Illinois





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