Firm Wins Appeal on Issue of Reasonable Investigation under FCRA

The 11th Circuit reversed the decision of the lower court, permitting our client and Plaintiff, Teri Hinkle the right to proceed to a jury trial on whether Midland conducted a reasonable investigation pursuant 15 U.S.C. § 1681s-2(b) of the Fair Credit Reporting Act.

Although the 11th Circuit Court of Appeals affirmed the remaining decisions of the lower court on summary judgment, the court agreed that under the facts of this case, it was possible for a jury to conclude that the actions of Midland were unreasonable, and possibly constituted willful violations of the statute--also a question of fact for the jury.

The 26-page opinion should go a long way in imposing on down-the-line buyers, also known as junk debt buyers, a heavier duty to investigate disputes raised by consumers than has previously been exercised by furnishers. Down-the-line buyers typically do not have any original account-level documentation, and when a dispute it made, depending on the nature of the dispute, they go beyond automated attempts to verify. These companies either need to obtain original documentation, provided some other means of proof other than their own internal documents, and either verify the debt or report they "cannot verify" and thus indicate to the consumer reporting agencies that they need to cease reporting that trade line.

The 11th Circuit, in reaching its conclusions, made several important observations, among them, that junk debt buyers are neither creditors nor collecting of behalf of a creditor, since they are collecting only for themselves. This opens the door to potential permissible purpose claims, since junk debt buyers routinely access the credit files of consumers, and not on behalf of a creditor. They also emphasized that a junk debt buyers who have no original account-level documentation have to conduct a more intensive investigation when a dispute is made.

The case affirmed in part and reversed in part and remanded, with instructions to allow Teri Hinkle to proceed to trial on her 1681s-2(b) claim.