Michigan

There may be a private cause of action against a Furnisher for failing to flag a debt as disputed by the Consumer.

Red Orbit report on the case of Saunders v. Branch Banking and Trust Co. of Virginia, No. 07-1108 (decided May 14, 2008) (Judges Michael, MOTZ, & Keeley (sitting by designation), as follows:

FACTS: On August 31, 2003, Rex Saunders purchased an automobile from Richmond Mitsubishi, and the dealer assigned his loan for the car to Branch Banking & Trust Company of Virginia (BB&T). When Saunders did not subsequently receive a payment book for the new car, he telephoned BB&T and was told that he owed no money on any loan. Thereafter, he visited a BB&T branch and obtained a copy of his loan statement at the bank, revealing that he owed nothing, and checked with the Department of Motor Vehicles, which indicated no liens on the vehicle.

On March 8, 2004, Saunders received a letter from BB&T, informing him his payments were "seriously delinquent," that his loan was in default, and that BB&T had accelerated the payment schedule so that he owed a total balance of $20,441.19, including principal, interest, late fees, and "other applicable charges," all of which was to be paid in full within ten days.

Thereafter, Saunders met with a BB&T lending officer, and said that he would meet his obligations under the loan, but refused to pay any penalties or late fees. The bank refused to waive the late fees or penalties, however. BB&T subsequently repossessed Saunders' car and informed him that he could only redeem it by paying the full amount due, including principal, interest, late fees, and a repossession expense.

On October 24, 2005, Saunders sued BB&T in federal district court, alleging that it violated its duties as a furnisher of information under the Fair Credit Reporting Act (FCRA) by failing to report the dispute. The jury returned a verdict finding that BB&T had intentionally violated its duties under FCRA, awarding Saunders punitive damages.

BB&T appealed to the 4th Circuit, which affirmed.

LAW: FCRA requires credit reporting agencies (CRAs) to follow procedures in reporting consumer credit information that both "meet[] the needs of commerce" and are "fair and equitable to the consumer." 15 U.S.C. [section]1681(b). In addition to the duties it imposes on CRAs, FCRA also imposes duties on "furnishers of information." [section]1681s-2. Under [section]1681s-2(a), FCRA prohibits any person from furnishing information to a CRA that the person knows is inaccurate.

If a consumer notifies a CRA that he disputes the accuracy of an item in his file, FCRA requires the CRA to notify the furnisher of the dispute. [section]1681i(a)(2). FCRA requires furnishers to determine whether the information that they previously reported to a CRA is "incomplete or inaccurate." [section]1681s-2(b)(1)(D).

Here, given the evidence before it, the jury could reasonably have concluded that BB&T's decision to report the debt without any mention of a dispute was "misleading in such a way and to such an extent that it can be expected to have an adverse effect." Dalton v. Capital Associated Indus., Inc., 257 F.3d 409, 415 (4th Cir. 2001). The district court did not err in so holding.

Full post as published by Michigan Collection Law Blog on June 11, 2008 (boomark / email).