A Friendly Reminder On Credit Reporting: Accounts Discharged in Bankruptcy

Earlier this week, the United States District Court for the Middle District of Tennessee reminded us of an important (and sometimes forgotten) wrinkle to the Fair Credit Reporting Act (“FCRA”). In Blanch v. Transunion, the plaintiff, April Blanch, complained that the defendants had violated her rights under the FCRA by allegedly inaccurately reporting certain accounts as being included in bankruptcy with a balance of $0. In October 2012, Ms. Blanch filed Chapter 13 Bankruptcy and her debt was discharged in June 2017. When Ms. Blanch noticed that the trade lines for the subject accounts continued to report the status of the account as included in bankruptcy she filed a dispute with the Credit Reporting Agencies (“CRAs”). In her dispute, Ms. Blanch explained that the subject accounts were discharged in her bankruptcy, attached a copy of the Order of Discharge, and requested that the CRAs remove the account to report the correct status. After the CRAs refused to change her credit report due to information provided to them about the accounts from the account holders, Blanch filed suit, asserting claims under the FCRA, and alleged that she has suffered credit and emotional damages due to the defendants’ negligent and/or willful failures to correct the inaccurate reporting.

The Court began its discussion by pointing out that the FCRA does not define the term “accurate,” but that the Federal Trade Commission (“FTC”) has promulgated a regulation that defines the term “accuracy” for consumer credit reporting: “Accuracy means that information that a furnisher provides to a consumer reporting agency about an account or other relationship with the consumer correctly: (1) Reflects the terms of and liability for the account or other relationship; (2) Reflects the consumer’s performance and other conduct with respect to the account or other relationship; and(3) Identifies the appropriate consumer.” 12 C.F.R. § 41.41(a).

The Court then went on to grant the defendants’ motions to dismiss, citing guidance from the FTC (16 C.F.R. pt. 600 app’x § 607(b)(6)) on a consumer report being accurate for reporting an account discharged in bankruptcy so long as it reports a zero balance is due. “The Federal Trade Commission has explicitly stated: “A consumer report may include an account that was discharged in bankruptcy (as well as the bankruptcy itself), as long as it reports a zero balance due to reflect the fact that the consumer is no longer liable on the discharged debt.”

Relying on the above language, the District Court found that the Defendants’ reporting of Blanch’s account was neither inaccurate or incomplete nor was it materially misleading. Specifically, the Court found that the account contained the following notation: “Chapter 13 Bankruptcy; Acct Info Disputed By Consumer; Account Included In Bankruptcy; Account Closed by Credit Grantor; Account Balance: $0.” The Court concluded that this reporting accurately reflected a previous debt, the correct balance, and that it was discharged in bankruptcy. Case dismissed.


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