According to the Credit Reporting Resource Guide (CRRG), a charge-off or a closed account cannot report a value in the minimum payment field. The CRRG was created by the Consumer Data Industry Association (CDIA). It is like a rulebook, or the Bible for credit reporting furnishers, or the Bureaus. They set the standard and regulate themselves when it comes to credit reporting.
Calvin vs. Michigan First Credit Union
In December 2015, Calvin secured a loan from Michigan First Credit Union – an amount of $600 – with a less than 6 percent interest rate. She received a pretty good interest rate even though she had filed for bankruptcy only a few months prior. The amount was to be paid back in monthly installments of $105.88 each. In October 2016, Michigan charged off the account, as Calvin had not made any payments since April 2016. Charge-offs generally occur after six months. However, this does not mean the debt is no longer owed.
Calvin paid off the remaining debt in December 2017.
In July 2018, Calvin obtained credit reports from Equifax and TransUnion. In the reports, Michigan had reported that the account was opened in December 2015, the monthly payment was $105, and the balance was $79. The account status was then reported as closed. This closure was considered a little curious, as Calvin had paid off the remaining debt, albeit later on. The account still showed a remaining balance of non-zero.
In early 2019, Calvin was denied mortgage from Keller Williams Mortgage and Diversified Members Credit Union. When an applicant is denied a mortgage, a list of reasons is provided;
- In her case, a bureau code is given: 038, which means that the consumer has missed many payments, which makes for 35 percent of the FICO score (Fair Isaac Corporation).
- The second reason provided is utilization, which is related to balances.
- The length of credit history – a combination of old and new credit.
If a mortgage company denies mortgage, the consumer is provided with a list of generic reasons. However, Calvin believed that the denial was due to the monthly minimum payments, although the banks did not state this specific reason.
As a response to the denial, Calvin submitted letters to Equifax and TransUnion to dispute the monthly minimum payment. According to CRRG, when an account is charged-off, the creditor cannot report a monthly payment in that field. Hence it should not have appeared in the reports. Equifax and TransUnion did not respond to the dispute.
After three months of no response, Calvin sued Michigan First Credit Union, Equifax, and TransUnion for violating the Fair Credit Reporting Act (FCRA). Both Equifax and TransUnion settled out of court, indirectly admitting that they were at fault by not responding to the dispute. Michigan filed for a motion to dismiss.
They were able to do so because, as the law reads, if you sue the Bureaus as well as the furnisher of the information due to non-response or wilful negligence, in this case, they are liable, but the furnisher is not. Since Equifax and TransUnion may not have notified Michigan about the dispute, Michigan cannot be held liable under FCRA.
The motion to dismiss was granted. Furthermore, Calvin failed to demonstrate and specify how she was injured, as well as how the monthly payment was inaccurate. The banks had been generic in providing their reasons for declining the mortgage. Hence, she had no substantial evidence to provide in court.
All in all, the reporting of the account was inaccurate, which was Michigan’s error, but as they are immune to such disputes, they were granted the motion to dismiss. Equifax, as well as TransUnion, paid Calvin both as they chose to settle.
The Verdict
The district courts relayed on previous cases where it was found that the scheduled monthly payment fields are historical and only communicate what the monthly payment was before an account was charged-off or closed. Calvin tried to use the CRRG as evidence of the inaccuracy. Although the CRRG does reference that monthly payment amounts on closed or charged-off accounts are to be changed to zero, courts have concluded that the CRRG is not dispositive on FCRA compliance.
According to the CRRG, a monthly minimum payment cannot report a value in the monthly minimum payment field. Hence, when we are disputing that account, it is an excellent argument to make that according to the CRRG, if you see a charge-off account with a minimum payment field in there, it is not necessarily a violation of the Fair Credit Reporting Act. It can be, but it is not. But it is more of a breach of the Credit Reporting Resource Guide, which is like the Bible for furnishers and how they are supposed to report.