Recently, a credit union failed to have a court case dismissed. According to the suit, the credit union violated the Fair Credit Reporting Act (FCRA). This case involves someone delinquent in payments on a credit card through the credit union. This delinquency caused the credit union to assign the debt to a third-party collection agency.

After receiving the debt, the collection agency reported it to a credit reporting agency. However, the credit union continued registering the growing debt despite assigning it to a third party. The credit union also updated the account to indicate it as closed and in collection.

The collection agency also clarified that the original creditor is the credit union. However, the two companies reported varying balances. This discrepancy caused the plaintiff to file a dispute against the credit union’s report. According to the plaintiff, they submitted a dispute to each of the three major credit reporting agencies.

Case Details

In these disputes, they claimed the credit union reported inaccurately and revealed that the debt appeared double-reported. They supported this claim by showing how the credit union and collection agency documented the same debt. Though the credit union claimed to investigate the case, it refused to change the reports because it claimed the information was accurate.

The plaintiff filed a lawsuit against the credit union in Utah District Court. In the court, they claimed that the credit union negligently and willfully violated the FCRA. They explained that the credit union continued reporting the balance after they made the dispute. 

However, the credit union moved to dismiss the case. The company declared that it had conducted a reasonable investigation. According to their review, the information it reported to the credit reporting agencies proved correct. The company maintained its report valid because it noted how they closed the account and sent it to collection.

However, the court denied the credit union’s request to dismiss the case. The court explained that items in a credit report may prove inaccurate for reasons other than inaccuracy. One example included misleadingly presenting information. The court explained that this action could negatively affect credit decisions.

Court’s Decision

As such, the court found that some aspects of the plaintiff’s credit report might prove misleading. They specifically addressed how the credit union and collection agency included a balance on the credit report. They also stressed how the reported accounts did not match, further impacting the plaintiff.

Furthermore, the court could not find authority that gives clear guidance concerning reporting the assigned debt. The credit union argued how the Fair Debt Collection Practices Act (FDCPA) permitted them to report the debt. They also claimed that the Metro 2 guidelines published by the Consumer Data Industry Association contained this process. However, because they did not provide the court with these guidelines, it did not consider them in its decision.

Therefore, the court decided that the plaintiff successfully alleged that her credit report contained an inaccuracy. The plaintiff also proved that the credit union failed to change its reporting. As such, there is a plausible claim that a violation of the FCRA occurred. 

This decision shows how important it is for businesses to comply with the FCRA. The same is true for companies during the hiring process. The best way to ensure compliance with the FCRA is by partnering with a trusted background check company. The right provider will deliver accurate and compliant reports.

Keep your business compliant with new laws and regulations with JDP’s reliable background checks. Contact a sales rep today.

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