DENVER — A recent federal appeals court ruling out of Denver could make it harder for consumers to fight false debt and errors on their credit reports, especially in identity theft cases.
The 10th Circuit Court of Appeals recently overturned a $500,000 jury verdict awarded to a Colorado man whose identity was stolen and used to rent an apartment in Texas.
The case involved Robbin Ward, who discovered the debt while applying for a mortgage. According to court records, Ward disputed the debt and said he was a victim of identity theft.
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Consumer protection attorney Matt Osborne represented Ward in the lawsuit against National Credit Systems, a debt collection company.
“So the 10th Circuit, they changed the verdict from $500,000 to zero, and then they made it a lot more difficult for victims of fraud to have any rights going forward in the 10th Circuit,” Osborne said.
A federal jury originally sided with Ward and found National Credit Systems failed to reasonably investigate the disputed debt. But the appeals court reversed that outcome.
At the center of the case was how much proof consumers must provide before companies investigating disputed debt are required to take additional steps.
“The Fair Credit Reporting Act says that a creditor shall investigate when people dispute. There are no exceptions in the statute,” Osborne said. “The 10th Circuit created an exception, which now says that they no longer have to investigate if they can say that they can't verify what you're saying.”
The 10th Circuit ruled consumers must provide what it called “objectively and readily verifiable” evidence showing a debt is inaccurate before companies may have to investigate further.
“Well, they didn't really define it, so it's kind of up in the air,” Osborne said. “But it's not in the law. They just sort of made it up. It's nowhere in the statute.”
Osborne argued Ward had provided significant evidence disputing the debt.
“There was an FTC affidavit submitted under penalty of perjury by Mr. Ward,” Osborne said. “There was also the fact that the IP addresses with the application showed it came from Dallas, Texas. He also provided information proving he was in Colorado and not in Dallas on that day, and couldn't have submitted it.”
Even with that information, Osborne said the debt remained on Ward’s credit report until the lawsuit.
“Well, they didn't believe him,” Osborne said. “They just kept writing back saying that they were going to continue reporting it on his credit.”
The ruling applies across the 10th Circuit, including Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming.
Osborne said the practical impact could be significant for consumers trying to dispute fraudulent debt.
“If you're a victim of fraud, you used to be able to sue the credit bureaus and the creditor if they wouldn't fix it after the dispute process,” Osborne said. “You're mostly not going to be able to do that anymore.”
He also warned the decision could affect more than identity theft cases.
“This decision changes the landscape for anybody that's a victim of fraud, and even more generally, the decision applies to any type of credit reporting dispute,” Osborne said. “It's not necessarily limited to only identity theft.”
Credit reports are commonly used by lenders, landlords, employers and credit card companies.
The debt collection industry has argued companies should not be required to sort out complicated factual disputes.
ACA International, a trade group representing debt collectors, has argued companies should not be responsible for resolving complicated factual disputes when consumers and creditors disagree.
Denver7 reached out to ACA International for additional comment but had not received a response as of publication.
Osborne said consumers disputing fraudulent debt should now keep as much documentation as possible.
“The best thing you can do is try to give the creditor and the credit bureaus as much evidence as you can to prove that it wasn't you,” Osborne said.
He recommended consumers save records, gather proof of where they were when disputed accounts were opened and maintain detailed documentation during the dispute process.
“It remains to be seen how it will be applied,” Osborne said. “So that's still kind of up in the air.”
