Can You Sue a Debt Collection Agency for Violating Your Rights Under the FCRA?

By The Kim Law Firm, LLC

Yes — and this is the heart of our practice. If you want the full picture of how an FCRA lawyer holds collectors and credit bureaus accountable — and why it costs you nothing unless you win — start there, then read on for the specifics.

The short answer, and the condition attached to it

Yes. A debt collector that reports a debt to Equifax, Experian or TransUnion is a “furnisher” under the Fair Credit Reporting Act, and the Act gives you a private right to sue a furnisher that mishandles a dispute. But the right has a condition that decides most of these cases before a complaint is ever filed: the dispute has to go through the credit bureau. When you dispute an item with the bureau, the bureau must forward it to the collector, and the collector must then conduct a reasonable investigation, review everything the bureau sent, and correct or delete what it cannot verify. That duty — and the lawsuit for breaching it — is triggered by the bureau’s notice. A letter sent only to the collector does not trigger it; the Act says in terms that its direct-dispute duties are enforced by regulators, not by consumers.

So the practical rule I give every caller is the same: dispute with the bureau, in writing, with proof, and keep everything. The collector’s answer to that dispute is the evidence the case is built on.

What has to be true

Three things. First, the report has to be wrong — not merely unwelcome. A collection that is accurate and timely is not a claim, however much damage it does. The errors I see most are a balance that was paid or settled still showing as open; a debt discharged in bankruptcy reported as owed; a date of first delinquency moved forward so the account stays on the report past the seven-year limit; an account that belongs to someone with a similar name or number; and a disputed debt reported without the “disputed” notation the law requires. Second, you disputed with the bureau and the bureau passed the dispute to the collector. Third, the collector’s investigation was not reasonable — it “verified” the entry without looking at its own records, ignored the documents you sent, or deleted the item and later put it back. Courts treat rubber-stamping a bureau’s dispute as the classic failure, and a collector that re-reports an item it has already agreed to remove has a distinct problem.

What you can recover

For a negligent violation, your actual damages and your attorney’s fees. Actual damages are broader than people expect: the loan or apartment you were denied, the higher rate you paid, the deposit you had to put down, the hours spent, and the distress of being treated as a deadbeat over a debt you did not owe — courts have long recognized emotional harm under the Act. For a willful violation, the Act adds statutory damages of $100 to $1,000 per violation whether or not you can prove a loss, and allows punitive damages. Because the collector pays the fees when you win, I take these cases on contingency: you pay nothing unless we win.

The clock

An FCRA claim must be filed within two years of the day you discovered the violation, and never more than five years after it happened. The discovery date is usually the day you saw the post-dispute report with the item still on it. If that was more than a year ago, call sooner rather than later.

A second law may also apply

If the collector is a third-party agency rather than the original creditor, the Fair Debt Collection Practices Act covers its conduct toward you — the calls, the letters, the threats — and it separately requires a collector that knows a debt is disputed to say so when it reports. Many of my cases carry both claims; the debt collection harassment page covers that side. The FDCPA has its own one-year deadline, which is one more reason not to wait.

What to keep

The credit report entry as it appeared before you disputed; your dispute letter and the proof it was delivered; the bureau’s result; the report afterward showing the item still there or back again; every letter from the collector; and any denial or rate notice that mentions the report. That file is the case. The statistics below are why: most people who complain to the CFPB say they disputed first, and the bureaus record a prior dispute in only about a third of cases.

What the federal data says about disputes and the credit bureaus

Identifying the right defendant before you file

One collection account can involve three separate companies: the original creditor that charged it off, the debt buyer that purchased the portfolio, and the servicing agency that actually places calls and furnishes data. They are not interchangeable defendants. The buyer usually owns the account and is the entity reporting it; the servicer is often the one whose conduct on the phone gives rise to a claim. Naming the wrong company wastes the filing and can cost time you do not have if a limitations period is running.

• LVNV Funding — a purchaser whose accounts are serviced under a different corporate name.
• Resurgent Capital Services — the servicer that manages accounts owned by affiliated buyers.
• Cavalry Portfolio Services — handles collection on debt held by a related acquisition entity.
• Jefferson Capital Systems — buys and collects consumer accounts under its own name.
• Credit Control — a contingency agency collecting on behalf of other owners.
• Penn Credit — an agency working accounts placed by creditors and public entities.

Pull the credit report entry and the collection letter side by side, because the tradeline names the furnisher while the letter usually names both the current owner and the agency contacting you. Request validation in writing early, since the response has to identify the creditor and gives you a documented record of what the company claims. With the corporate structure established, a claim can be brought against each company for its own conduct rather than against a name that turns out to be a brand rather than a legal entity.

Admitted in Pennsylvania and New Jersey; available to appear pro hac vice in other federal courts.

Sources: 15 U.S.C. §§ 1681i, 1681n, 1681o, 1681p and 1681s-2 (United States Code); 12 C.F.R. § 1022.43 (Regulation V, direct disputes); 15 U.S.C. §§ 1692e(8) and 1692k (Fair Debt Collection Practices Act).