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Collection Actions: 18.3.2.1 The Dispute Process

The best way to update and correct inaccurate or incomplete information in the consumer’s report after prevailing in a collection action is for the consumer to lodge a dispute with the CRA. The consumer should dispute any inaccurate or incomplete information in the original creditor’s tradeline and in any collection tradeline reflecting the same debt.

Collection Actions: 18.3.2.2 Manner of Case’s Resolution Determines Whether Report’s Historical Data Will Be Corrected

The FCRA requires that a tradeline must accurately reflect the results of the court proceedings, which, after all, is a conclusive determinant of the accuracy of the information as to whether the consumer owes a debt.98 If the dispute process works the way it is supposed to (it often does not), the consumer should be able to use the outcome of the court case to correct the current information in the report—i.e., the current status of the account.

Collection Actions: 18.3.3.2 Send a Dispute at Least to All Three Major Nationwide Consumer Reporting Agencies

The first and most important step to start the FCRA dispute process is to mail a dispute directly to the CRA that produced the inaccurate credit report.105 Disputing the information in a report with the collector, original creditor, or any other furnisher of information—and not with the CRA—is not as effective in protecting the consumer’s rights under the FCRA.106 While the FCRA does give the consumer a right to dispute directly with a furnisher, there is no private remedy if the information

Collection Actions: 18.3.3.3 Also Notify the Collector and Original Creditor of the Dispute

At the same time they notify the CRAs, consumers should directly notify the collector or original creditor furnishing the disputed information. The critical dispute notice must be directed to the CRA, which will then ask the collector or creditor to reinvestigate. But consumers strengthen their position when they also notify the furnisher of the inaccurate information. It is also helpful to put the original creditor on notice of the judgment, if it is not on notice already.

Collection Actions: 18.3.3.4 Form of the Request

Although not required by the FCRA, the consumer’s dispute with the CRA should be in writing, and the consumer should keep copies of all correspondence. Telephone disputes do not allow for the presentation of copies of the judgment and other important documents. They do not create an adequate record in the event that a consumer follows a failed dispute with litigation.

Collection Actions: 18.3.3.5 Content of the Dispute Letter

The dispute itself should be detailed and specific and should enclose a court-endorsed copy of the judgment resulting from the collection action. The dispute letter might also include the name and telephone numbers of the court clerk and of the attorney who represented the collector.

Collection Actions: 18.4 Responding to Renewed Collection on the Same Debt

A creditor or debt buyer who loses a collection suit may improperly continue to seek collection on the debt itself116—or include the extinguished debt in a portfolio of accounts sold to another debt buyer. Of course, the consumer has a complete defense if sued a second time on the same debt after the first case was dismissed with prejudice.

Collection Actions: 18.5.1 Scope of This Section

After prevailing in the collection action, the consumer may wish to initiate a new case to bring affirmative claims against the collector or the collector’s attorney based upon their conduct in the collection action. Chapter 5, supra, examines the advisability of bringing such claims as counterclaims in the collection action itself.

Collection Actions: 18.5.2.1 Relief Sought

The relief the consumer seeks is central to any follow-up litigation against the collector or the collector’s attorney. Americans’ sense of justice and the proper operation of the court system are often deeply offended by collector litigation misconduct. Collectors bring suits when they have no legal right to recover, when they have insufficient evidence that the consumer is liable, or when they seek attorney fees and other charges beyond all reason.

Collection Actions: 18.5.2.4 Timing Considerations

The FDCPA has a one-year limitations period,145 so a consumer must act quickly in bringing any follow-up litigation, particularly when the one year period begins to run early in the collection action. On the other hand, it is risky to bring an affirmative FDCPA action in federal court while the state court collection action is still pending. A natural response by the federal judge is to defer to the state court, and the state court may view with disfavor the consumer’s end-run action in federal court.

Collection Actions: 18.5.2.5 Arbitration Requirements

Credit contracts usually contain a requirement that disputes be settled by binding arbitration. When the consumer sues the collector or the collector’s attorney, the defendant will typically seek to enforce the originating creditor’s arbitration requirement.

Collection Actions: 18.5.3.3 The Bona Fide Error Defense

Collectors may raise the affirmative bona fide error defense, in which good intentions and the absence of culpable knowledge are two of the necessary elements.182 The bona fide error defense was bolstered when the Supreme Court in Heintz cited it as an available mechanism to defeat the suggestion that litigation coverage “automatically would make liable any litigating lawyer who brought, and then lost, a claim against a debtor.”183

Collection Actions: 18.5.3.4 Examples of Litigation Conduct As FDCPA Violations

Collection litigation, particularly debt buyer litigation, may involve FDCPA violations by the plaintiff-collector or the plaintiff-collector’s attorney. These violations are examined in far greater detail in NCLC’s Fair Debt Collection,185 and only some potential violations will be listed here without citations or analysis.

The key to an FDCPA claim is to show that the collector or its lawyer engaged in deception or an unfair practice. It is not enough that the collector failed to prevail in the collection action.

Collection Actions: 18.5.4 UDAP Claims for Litigation Misconduct

State deceptive practices (UDAP) statutes are often available to challenge litigation misconduct.187 Successful UDAP challenges have involved collection cases brought in inconvenient venues, filing actions after the limitations period has run, improper service of process, confusing summons, filing meritless collection actions, misrepresenting facts in affidavits filed with the court, and deceptive settlement practices leading to default judgments.188

Collection Actions: 18.5.5.1 Generally

Tort claims have the advantage of applying to any creditor, collector, or collector’s attorney and providing for punitive damages in appropriate cases. Malicious prosecution and abuse of process are both torts that apply to wrongful use of judicial processes. Malicious prosecution is the more widely accepted, highly developed, and difficult to establish of the two. Both apply to civil proceedings, with malicious prosecution sometimes labeled as “wrongful civil prosecution” when applied to civil processes.

Collection Actions: 18.5.5.3 Abuse of Process

Abuse of process is often described as the use of “legal process against another in an improper manner to accomplish a purpose for which it was not designed.”201 In contrast to malicious prosecution, the tort of abuse of process is not based on the improper institution of legal proceedings but on the improper use of process after it has been issued to accomplish a purpose for which it was not designed.202 While courts vary in their listings of the elements of the tort, one common st

Collection Actions: 15.3.8 Earned Income Tax Credit and Additional Child Tax Credit

Many states make tax refunds consisting of the Earned Income Tax Credit (EITC) exempt as earnings, as support, or as public assistance benefits.386 However, this view is not universal.387 Courts formerly interpreted Missouri’s exemption for “local public assistance” not to exempt the EITC,388 but the word “local” was then removed from the statute by amendment and courts now hold that the EITC is exempt.