Debt Collectors Beware: Gruber Decision Impacts Treatment of Consumer Verifications under FDCPA

On February 19th, we posted a  blog regarding the recent Seventh Circuit decision in Gruber v. Creditor’s Protection Service, Nos. 13-2084, 13-2164, 13-2297 & 13-2351 (7th Cir. January 23, 2014).  In Gruber, the Seventh Circuit found that “a request to verify the existence of a debt constitutes a ‘dispute’ under the [FDCPA].”  This decision is extremely important for debt collectors within the Seventh Circuit because it requires these collectors to treat all verification requests as disputes. 

Consumer disputes trigger additional obligations for debt collectors.  Under FDCPA § 1692g(b), if a consumer disputes the debt, or any portion thereof, in the manner and time frame stated, a debt collector must cease collection of the debt until the debt collector obtains verification of the debt or a copy of a judgment against the consumer and a copy of the verification or judgment is mailed to the consumer. Under FDCPA §1692e(8), a collector must also report the debt as disputed to any credit reporting agencies if they are credit reporting the debt. Regardless as to whether a collector reports, however, they should take steps to comply with §1692e(8) if they service creditors which engage in credit reporting. Depending on the circumstances, a consumer may successfully argue that receipt of a dispute by a collector triggers a creditor’s obligation to report the account as disputed.  

Further, there may be implications under other consumer protection statutes, such as the Fair Credit Reporting Act (“FCRA”), 16 U.S.C. §1681. FCRA §1681s-2(a) places an affirmative duty on furnishers of credit information to correct and update information which they know, or have reasonable cause to know, is inaccurate. A furnisher also has an obligation to flag or otherwise provide notice to credit reporting agencies of the dispute. 15 U.S.C. §§ 1681s-2(a)(1)-(3).

In short, the failure to treat a verification as a “dispute” can create real problems for debt collectors in the Seventh Circuit. For more information, please contact Stephanie Strickler at 312-334-3465 or sstrickler@messerstrickler.com