District Court (Ind.) Finds that 15 USC § 1692e(8) Imposes No Duty upon Debt Collectors to Advise Credit Reporting Agencies that a Debt is Disputed when it is Disputed after it is Reported

In Wells v. Deca Financial Services, LLC, 2013 WL 772870 (S.D.Ind. 2013), Judge Magnus-Stinson found that 15 USC § 1692e(8) imposes no duty upon debt collectors to advise credit reporting agencies that a debt is disputed when it is disputed after it is reported.

Deca argues that “when a debt collector has made a report to a credit agency and the consumer subsequently disputes the debt, the debt collector is under no affirmative duty to report the dispute to the credit agency …,” citing to several cases and the Federal Trade Commission’s (“FTC” ) 1988 Staff Commentary on the FDCPA [Id. at 4–5.] Deca requests that the Amended Complaint be dismissed with prejudice, since amendment would be futile. [Id. at 6–7.]  ¶  In response, Mr. Wells argues that both the plain language of the FDCPA and a 1997 FTC Staff Letter indicate that “if a dispute is received after a debt has been reported to a consumer reporting agency, the debt collector is obligated by Section 1692e(8) to inform the consumer reporting agency of the dispute.” [Dkt. 16 at 8.] Mr. Wells also asserts that requiring debt collectors to inform credit reporting agencies of disputes after the debt is reported is consistent with the FDCPA’s purpose of protecting consumers. [Id. at 7.] ¶  15 U.S.C. § 1692e(8) provides that it is a violation of the FDCPA to: ¶  Communicat[e] or threaten[ ] to communicat[e] 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. ¶  Neither party cited—and the Court could not locate—a Seventh Circuit Court of Appeals or a local district court opinion considering the issue of whether Section 1692e(8) imposes a duty upon debt collectors to advise credit reporting agencies that a debt is disputed when it is disputed after it is reported. The Eighth Circuit Court of Appeals, however, addressed a very similar situation to the one at hand. In Wilhelm v. Credico, Inc., 519 F.3d 416 (8th Cir.2008), plaintiff’s credit card debt was assigned to a debt collector, then subsequently to a second debt collector. The first debt collector reported the debt to credit reporting agencies, but plaintiff had not yet disputed the debt so it did not advise the credit reporting agencies that it was dis-puted. Plaintiff alleged that the second debt collector violated Section 1692e(8) by failing to report his dispute of the debt to the first debt collector who, in turn, should have reported to the credit reporting agencies that it was disputed. The Court disagreed, stating: ¶  Both claims are premised on [plaintiff’s] assertion that § 1692e(8) imposed an affirmative duty on [the two debt collectors] to disclose that [plaintiff] had disputed the debt. He cites no case supporting this contention, and we reject it. Section 1692e generally prohibits “false, deceptive, or misleading representation .” Subsection 1692e(8) applies to the “communicating” of “credit information.” “Communication” is defined as “the conveying of information regarding a debt directly or indirectly to any person through any medium.” … Reading these provisions together, as we must, the relevance of the portion of § 1692e(8) on which [plaintiff] relies—“including the failure to communicate that a disputed debt is disputed”—is rooted in the basic fraud law principle that, if a debt collector elects to communicate “credit information” about a consumer, it must not omit a piece of information that is always material, namely, that the consumer has disputed a particular debt. This interpretation is confirmed by the relevant part of the Federal Trade Commission’s December 1988 Staff Commentary on the [ FDCPA]:  1. Disputed debt. If a debt collector knows that a debt is disputed by the consumer … and reports it to a credit bureau, he must report it as disputed.  ¶  2. Post-report dispute. When a debt collector learns of a dispute after reporting the debt to a credit bureau, the dispute need not also be reported.  ¶  Id. at 418 (emphasis in original) (citing FTC Staff Commentary, 53 Fed.Reg. 50097–02, 50106 (Dec. 13, 1988)). ¶ Several district courts have followed the Wilhelm court’s approach. See, e.g., Jacques v. Solomon & Solomon P.C., 2012 U.S. Dist. LEXIS 118092, * 11 (D.Del.2012) (“The duty to report a debt under [Section 1692e(8) ] arises only if one elects to report credit information”); Donatelli v. Warmbrodt, 2011 U.S. Dist. LEXIS 69207, *27–28 (W.D.Pa.2011) (“There is no authority to support the proposition that a debt collector must inform the credit reporting agency that the consumer disputes the debt”) (citation omitted); Edeh v. Aargon Collection Agency, LLC, 2011 U.S. Dist. LEXIS 79160, *11 (D.Minn.2011) ( “when a debt collector learns that a debt is disputed only after the collector has reported the debt to the credit reporting agencies, the collector has no affirmative obligation to report the dispute”); Benson v. Med–Rev Recoveries, Inc. (In re Benson), 445 B.R. 445, 449–50 (Bankr.E.D.Pa.2010) ( “Plaintiff’s premise is that a disputation of a debt after such debt is reported by a consumer reporting agency creates a duty on the entity that informed or furnished such information to the agency to update the credit report to reflect that such debt is disputed. This is incorrect….”); Kinel v. Sherman Acquisition II LP, 2006 U.S. Dist. LEXIS 97073, *53–54 (S.D.N.Y.2006) (noting a “dearth of precedent” on the issue of whether a debt collector has an affirmative duty to report a dispute made after it initially reported the debt, relying upon the 1988 FTC Commentary, and stating that “the FTC Commentary has interpreted § 1692e(8) as not explicitly requiring a debt collector to update information about the disputed status of a debt about which it has not reported, or about which it has already reported prior to a consumer’s dispute”); Black v. Asset Acceptance, LLC, 2005 U.S. Dist. LEXIS 43264, *13 (N.D.Ga.2005) (“only if a debt collector reports a consumer debt to a credit bureau under Section 1692e(8) must he then also report that debt as disputed”) (emphasis in original). ¶  Mr. Wells urges the Court to interpret Section 1692e(8) as imposing a continuing duty on debt collectors to advise consumer reporting agencies that a debt has been disputed, even when the dispute occurs after the debt collector reports the debt and the debt collector has not reported the debt since the dispute. However, the cases he cites do not support his proposition. Cf. Smith v. Nat’l Credit Sys., 807 F.Supp.2d 836, 840 (D.Ariz.2011) (plaintiff disputed debt before defendant reported it to credit reporting agencies); Kasalo v. Monco Law Offices, 2009 U.S. Dist. LEXIS 113848, *19 (N.D.Ill.2009) (case dealt with whether reporting debt to credit reporting agency was a “communication” subject to the requirements of Section 1692e(8), not with whether debt collector had obligation to report all debts after they are disputed; case did not “critically” consider Wilhelm as Mr. Wells argues and, indeed, did not even mention Wilhelm); Reichert v. Nat’l Credit Sys., 531 F.3d 1002 (9th Cir.2008) (failure to report a debt as disputed under Section 1692e(8) was not an issue in the case); Acosta v. Campbell, 2005 U.S. Dist. LEXIS 39889, *43–44 (M.D.Fla.2005) ( FDCPA claim survived dismissal where, unlike here, debt was reported after dispute and it was unclear whether defendants reported debt correctly); Semper v. JBC Legal Group, 2005 U.S. Dist. LEXIS 33591, *8–9 (W.D.Wash.2005) (court did not address whether debt collector must inform credit reporting agency of dispute made after debt reported, stating only that the FDCPA “does not give debt collectors the authority to determine unilaterally whether a dispute has merit or whether to comply with the requirements of the FDCPA in a given case”); Ryan v. Wexler & Wexler, 113 F.3d 91, 92 (7th Cir.1997) (court did not consider the reporting of a debt as disputed, instead stating “[t]he sole issue presented by this case is whether the FDCPA applies to debt collection activities on dishonored checks or is limited to those activities related to an extension of credit”). ¶  Additionally, Mr. Wells’ attempt to discredit the 1988 FTC Commentary relied upon by the Wilhelm court and others is unavailing. While it is true that the FTC Commentary is “not binding on the courts because it is not a formal regulation and did not undergo full agency consideration,” McMillan v. Collection Professionals, Inc., 455 F.3d 754, 764 (7th Cir.2006), it is “entitled to ‘respectful consideration,’ “ Gulley v. Markoff & Krasny, 664 F.3d 1073, 1075 (7th Cir.2011) (quoting Carter v. AMC, LLC, 645 F.3d 840, 844 (7th Cir.2011)). Mr. Wells argues that an FTC Staff Letter from 1997—written after the 1988 FTC Commentary—supports his reading of Section 1692e(8) because it states that “if a dispute is received after a debt has been reported to a consumer reporting agency, the debt collector is obligated by Section 1692e(8) to inform the consumer reporting agency of the dispute.” [Dkt. 16 at 8, quoting FTC Staff Letter to Cass, Pg. 1 (Dec. 23, 1997).] The 1997 Staff Letter is ambiguous at best. The portion Mr. Wells quotes is in answer to the following question:  Is it permissible under the FDCPA for a debt collector to report, or continue to report, a consumer’s charged-off debt to a consumer reporting agency after the debt collector has received, but not responded to, a consumer’s written dispute during the 30–day validation period detailed in § 1692g?  http://www.ftc.gov/os/statutes/ fdcpa/letters/cass.htm (last viewed February 26, 2013). The Staff Letter can be interpreted to mean that a debt collector cannot “continue to report”—as the question asks—the debt without also reporting that it has been disputed. It does not stand for the proposition that the debt collector has an obligation to report the debt after the dispute.