On March 31, the United States District Court for the Eastern District of Michigan ruled in favor of a furnisher that reporting a dispute using the Compliance Condition Code of “XB,” and updating its reporting to “XH” after completing its investigation, does not violate the Fair Debt Collection Practices Act when the collection agency receives no additional communication from the debtor and there is no basis for ascertaining whether or not the debtor still disputes the debt. 

Factual and Procedural Background

The subject case arose out of a debt collection letter that AFNI sent to Vashonda Foster concerning a $315 debt that she incurred to Comcast. Foster did not respond to AFNI’s letter, but obtained a copy of a credit disclosure statement from a consumer reporting agency, which indicated that the debt remained outstanding several months later. Roughly six months after receiving her credit score, and nearly one year after the initial collection correspondence, Foster sent AFNI a letter disputing the Comcast debt. In response to Foster’s dispute letter, AFNI reported the Comcast debt to a consumer reporting agency using the Compliance Condition Code “XB” (denoting that the completeness or accuracy of the account information was disputed to the data furnisher by the consumer, and that the investigation of the dispute was in progress by the data furnisher). After which, AFNI finalized its investigation and sent Foster a letter advising her that the account had been verified. The letter to Foster also included information about the debt itself, as well as a copy of the Comcast bill showing an overdue amount of $315.24. Two days later, AFNI updated its credit reporting to mark Foster’s with the Compliance Condition Code of “XH” (debt previously in dispute, investigation completed), rather than “XB.”

Shortly after the Compliance Condition Code was modified to “XH,” Foster obtained another credit report and discovered that the trade line associated with AFNI was reporting the status of the alleged debt as “dispute resolved; reported by grantor.” Foster then filed suit against AFNI alleging that the debt collector reported information that it knew, or should have known, was false to a consumer reporting agency, in violation of the FDCPA, 15 U.S.C. § 1692, et seq., the Michigan Collection Practices Act, M.C.L. § 445.251, et seq., and the Michigan Occupational Code, M.C.L. § 339.901, et seq.

No Article III Standing Without Sufficient Concrete Harm

In its motion for summary judgment, AFNI argued that Foster failed to sufficiently demonstrate a concrete injury capable of conferring standing. In response, Foster sought to establish concrete injury in the form of harm to her credit score and ability to obtain credit, and emotional distress as a result of AFNI’s refusal to report its trade line as disputed (“XB”) and, instead, reporting that the dispute had been resolved (“XH”). Foster attempted to rely on a declaration that she filed alongside her own motion for partial summary judgment in support of her emotional distress claims; however, the declaration was not personally signed by her and there was no indication that she had given counsel the permission to sign on her behalf electronically. Consequently, the declaration could not be considered as Rule 56(e) evidence. Foster attempted to rely on the same deficient declaration and inadmissible credit reports to demonstrate harm to her credit score and ability to obtain credit, which also missed the mark.

FDCPA § 1692e(8) Alone Confers Article III Standing

Turning to the issue of whether the FDCPA alone confers standing, the Court looked to the specific statutory provision at issue [§ 1692e(8)] and noted that the “the risk of harm being alleged – failing to report a debt as disputed – [was] precisely the type of harm – abusive debt collection practices – that the FDCPA was designed to prevent.” Thus, Foster’s allegations that AFNI violated § 1692e(8) – standing alone – might be capable of conferring Article III standing; however, at the summary judgment phase, the question of whether those same allegations and the evidence submitted in support thereof actually raised genuine issues of material fact as to AFNI’s knowing failure to report the Comcast debt as disputed, and ultimately was what turned on the merits of Foster’s FDCPA claim.

Analysis of the Merits of Foster’s FDCPA § 1692e(8) Claim

To determine whether a debt collector’s conduct runs afoul of the FDCPA, courts must view any alleged violation through the lens of the “least sophisticated consumer.” It is worth noting that § 1692e(8) turns on not only the perspective of the everyman, but also the state of mind of the debt collector. As such, proof of the debt collector’s knowledge is essential for the purposes of any § 1692e(8) claim or defense, and whether or not the debt collector has communicated or threatened to communicate credit information that is known or should be known to be false (including the failure to communicate that a disputed debt is disputed), must be evaluated alongside the consumer’s subjective understandings of the situation.

With these guiding principles in mind, the Court determined that the only reasonable interpretation that the “least sophisticated consumer” could reach – after receiving a letter from a debt collector confirming that the consumer owed the debt – would be to realize that the collector believed that the debt was valid, and that if the consumer disagreed, he or she should respond by reaffirming his or her dispute of the debt and the reasons for disputing it. Particularly where, as in this case, Foster never argued that any specific language in AFNI’s notice affirming the Comcast account was false or misleading. Accordingly, the Court could find no genuine issue of material fact as to whether AFNI provided false or misleading information to a consumer reporting agency in violation of § 1692e(8) by changing its Compliance Condition Code from “XB” to “XH” following the conclusion of its investigation, and granted AFNI’s motion for summary judgment.