People often ask, especially in bad economic times, how to fight negative credit agency reports.
Most readers probably know that they have a right to dispute information reported by the big three credit reporting agencies. But, how far must the agencies go to investigate disputed information? This was recently addressed by the U.S. Court of Appeals for the First Circuit, which has jurisdiction in New Hampshire, Maine, Massachusetts, Rhode Island and Puerto Rico.
When a consumer disputes an item on his or her credit report, the Fair Credit Reporting Act, or FCRA, requires the credit reporting agency to do a "reinvestigation" to determine whether the disputed item is accurate. Within 30 days of receiving the request, the agency must either report the current status of the disputed information or delete the item from the file, free of charge.
A Rhode Island couple claimed a fraudulent mortgage had been attached to their home. They bought windows and agreed to mortgage financing. But the mortgage was not what they agreed to and was switched over to a second bank which did not send copies of the loan documents for nearly two years. When the documents arrived, the couple said their signatures were forged.
They stopped monthly payments, deposited the money owed into an escrow account and sued the bank in a Rhode Island court.
The bank notified the credit agencies of the alleged delinquent payments. The couple wrote to the "big three" telling them that the mortgage underlying the negative reports was a fraud.
The FCRA was adopted to protect consumers against errors in credit reporting. For example, suppose a credit report says you were 120 days late paying a bill. That's a big deal. You send a dispute. The agency sends a verification request to the company and learns you were only 12 days late. Not as big of a deal and the agency must correct the report.
The problem in this case is that the issue of whether the mortgage was a fraud had not been decided by the local court in Rhode Island.
The Federal Court held that because there was no proof that the reported information was inaccurate, the credit agency report was correct. The FCRA is intended to protect consumers against reporting of inaccurate credit information. Because legal questions over the mortgage were unresolved in the state court, the credit agency could not be faulted.
The court seemed reluctant to reach this conclusion in DeAndrade v. Trans Union, decided on April 15, 2008. The driving force behind amendments to the FCRA in the 1990s, the court pointed out, was the significant amount of inaccurate information being reported by credit reporting agencies and the difficulty faced by consumers seeking corrections.
Senior Circuit Judge Norman H. Stahl, a well known New Hampshire attorney before his judicial appointment, wrote the decision. Stahl was appointed to the U.S. District Court for the District of New Hampshire in 1990, and was elevated to the Court of Appeals in 1992.
FCRA allows consumers to submit a statement explaining their version of any dispute. The consumer in this case did not take that step. So, if you dispute an item on your credit report, and the agency's action is not satisfactory, submit your side of the story, which must then be included in your credit report.
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Andrew Myers of Derry has law offices in Derry and North Andover, Mass. He is a member of the American Association for Justice and the New Hampshire Trial Lawyers Association. Send questions to andrew@attorney-myers.com.
