Background to the case – Hammer VS Equifax
In 2010, the plaintiff acquired a credit from Capital One and was timely about the payments made to the card every month. The three major credit reporting agencies (CRAs); Equifax, Experian and TransUnion, all reported this account until 2017, after which they stopped.
When the plaintiff got wind of this non reporting, he requested all three of the agencies to restore the account on the reports; TransUnion was the only bureau which complied right away. Based on the remaining two’s non compliance, Scott David Hammer kept filing disputes with Equifax and Experian. Later, Equifax added the account and then removed it after a week, without providing any explanations.
As a result, plaintiff claimed that this activity led to a low credit score on which basis he was denied a credit card, a loan for mortgage and a higher interest rate.
Allegations of the plaintiff
- Failure to follow reasonable procedures to assure maximum possible accuracy of his credit report against Equifax.
- Failure to investigate both Equifax and Experian.
- A failure to notify claim against Equifax based on its alleged failure to notify him when it reinserted the Capital One account in his credit report.
The verdict of the case
There were three judges on the panel, and all of them dismissed the claims. The Fifth Circuit affirmed their decision later.
They noted that not reporting the information is not violating the FCRA. The consumer credit reporting agency report accounts on a voluntary basis and are not under any obligation to do so. Hence, if they miss out on reporting a whole account, it will not be considered as misreporting.
The second claim was dismissed on the grounds that the plaintiff did not file a dispute against one single item of information. The plaintiff disputed the whole missing account instead of a particular item on his credit report.
Thirdly, §1681i(a)(5)(B)(ii) is for items deleted from credit files. Even after two chances to amend his suit, the plaintiff continually claimed that Equifax had not removed the item from the credit file, only the credit report. This claim harmed the plaintiff’s case as this section is about deleting and reinserting items on credit files as opposed to credit reports.
What should a client do in such cases?
In this particular case, Hammer could have reached out to Capital One in the first place and lodged his initial complaints with them. They could have reported that trade line of information. Hence, a phone call to the creditor would have sufficed. If a creditor reports when a consumer is at default, the consumer has the right to complain to the creditor if they are not reporting when the consumer is obliging.
Some creditors have a policy that if the client calls to complain about the non reporting of a dormant account, they can resume reporting it, but if the client does not make any requests, then the creditor does not do anything to reinstate the reporting of the dormant account.
A good case of violating the FCRA is when there is inaccurate information on the report or if some information is missing. Not reporting does not hold a solid ground for a case of violating the FCRA.
The role of creditors
A furnisher of information can stop reporting at any point in time as they are not under any obligation to report on accounts. It costs creditors to report information to consumer credit reporting agencies, something like 30 cents per agency, which means 30 cents per account. Looking at it from a pandemic perspective, creditors/ banks would want to save this money and stop providing information to the agencies. This is an incentive for the creditors to stop reporting information.
Considering this aspect from a creditor’s perspective, reporting a dormant account and paying 30 cents per account per agency can be inconvenient for the banks. This is a form of cost cutting for the banks especially in the days of crisis, as it ties into their Oscar bills and they would want to lower their e-Oscar bills.
However, if a furnisher does report, they have to do accurately as reporting of inaccurate information is considered a violation of the FCRA.
If a consumer has a paid off account which they are not using, the consumer is putting their account at risk as well as their credit. At some point, the creditor will close the account out or cut the limit out as the account will be closed due to inactivity. The creditor can take this step after about a year. This does not mean that they will be removing the account from the credit report immediately, but it does mean in the long run it will lower the consumer’s credit limit and as a result, lower their credit score.
Generally, accounts fall of seven years from the Date of First Delinquency (DOFD). Positive accounts can stay on indefinitely but from this case, they can fall off too. The most important thing to remember is that account information will be reported as long as the creditor has something to report and they are a reporting creditor. If a consumer wants to see the account being reported, they should not let the account go dormant.