The Fifth Circuit Court of Appeals recently affirmed summary judgment on a Fair Debt Collection Practices Act claim in favor of a debtor, finding that the debt collector violated the FDCPA when it failed to mark the debtor’s account as “disputed” when the collector reported the account to the bureaus.
Plaintiff Robert Sayles sued Advanced Recovery Systems (“ARS”) after he received a credit report that reported the debt. After receiving the credit report, Sayles disputed the debt with ARS in a written letter. Sayles then requested another credit report and saw that ARS had updated the information it was reporting, but did not indicate that the debt had been disputed.
Sayles claimed that ARS’s conduct violated § 1692e(8) of the FDCPA, which prohibits a debt collector from “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.” During summary judgment briefing, ARS conceded it had not marked the account as disputed after receiving Sayles’s dispute because ARS believed Sayles had not complied with the requirements of § 1692g which requires consumers to dispute debts in writing within thirty days of receiving notice from a creditor.
In its decision, the Court agreed with Sayles, finding that the requirements of § 1692g do not control a debt collector’s obligation to report debts as disputed when the debt collector knows or should know the debt is disputed. In other words, if a debt is disputed after the 30-day validation period, a debt collector is still required to report the debt as disputed “regardless of how or when that knowledge is acquired.”
In affirming summary judgment, the Fifth Circuit also rejected ARS’s argument, based on the U.S. Supreme Court’s 2016 decision in Spokeo v. Robins, that Sayles lacked standing because he had not been harmed, finding that the alleged violation provided sufficient standing where it posed “a real risk of financial harm caused by an inaccurate credit rating.”