7th Circuit says credit agencies need not dig into debt ownership

(Reuters) - The 7th U.S. Circuit Court of Appeals ruled that the Fair Credit Reporting Act does not require consumer credit agencies to further investigate when a borrower disputes a debt collector's ownership of their debt.

U.S. Circuit Court Judge Michael Brennan wrote for the court on Thursday that six consolidated appeals by borrowers in cases against Experian, TransUnion and Equifax involved "the sometimes-murky boundary between 'law' and 'fact.'"

"We hold that plaintiffs' allegations that the creditors did not own their debts are not factual inaccuracies that the consumer reporting agencies are statutorily required to guard against and reinvestigate, but primarily legal issues outside their competency," Brennan wrote for the three-judge panel.

Attorneys for the borrowers and credit agencies did not immediately reply to requests for comment on Friday.

The six cases involved borrowers who disputed the ownership of their credit card debts in lawsuits against the big three consumer credit reporting agencies.

The borrowers had alleged the agencies failed to fully investigate the ownership of the debts, which appeared on their credit reports, in violation of the FCRA.

The law requires the agencies to conduct a "reasonable reinvestigation" when borrowers complain of inaccuracies in their credit report.

In all six cases, federal judges in Chicago either dismissed or entered judgment in favor of the credit agencies, finding that the law did not require them to further investigate after debt collectors including Midland Credit Management told the agencies they owned the debts.

Brennan, joined by Circuit Court Judges Diane Wood and Amy St. Eve, upheld the rulings on Thursday.

The court rejected the borrowers' argument that the question was one of fact because all the credit agencies needed to do was to verify the debt collectors' purchase and sale agreement.

"An assignment is a creature of law: to have a valid assignment parties must meet certain legal requirements," the court said.

The case is Chuluunbat v. Experian Information Solutions Inc. et al., 7th U.S. Circuit Court of Appeals, No. 20-2373.

For Chuluunbat: Celetha Chatman and Michael Wood of Community Lawyers Group and Daniel Brown of Main Street Attorney

For Trans Union: Camille Nicodemus of Schuckit & Associates

For Equifax Information Services: Rodney Lewis and Claire Brennan of Polsinelli

For Experian Information Solutions: Adam Wiers, Chris Hall and Jules Cantor of Jones Day