Western District of Wisconsin Dismisses Claim Against CRA Reporting a Non-Zero Balance for an Account Discharged in Bankruptcy

On January 19, 2021, the United States District Court for the Western District of Wisconsin granted a motion to dismiss filed by a consumer reporting agency in Ewert v. FD Holdings, LLC d/b/a Factual Data, 2021 WL 168967 (W.D. Wis. Jan. 19, 2021).  The plaintiff, Lance M. Ewert, filed a bankruptcy petition in 2017, identifying a Chase credit card account as a disputed debt.  The credit card debt was ultimately discharged in the bankruptcy case.  In the District Court case, plaintiff asserted a FCRA claim against the defendant, Factual Data, alleging that it improperly reported the discharged account as being “due and owing” to a third-party financial institution.

Examining the credit report to which the plaintiff objected, the District Court determined that the report does not state that the discharged account is “due and owing.”  Rather, the report showed that the debt was included in the bankruptcy case and discharged.  However, the “balance” of the account was reported as $2,066 as opposed to $0.  Plaintiff argued that “putting the balance on a consumer report when the debtor does not have a personal obligation to pay it misrepresents the consumer’s obligations and therefore inaccurately states the risk that a creditor may have by lending money to that consumer.”

In beginning its analysis of plaintiff’s argument, the District Court noted that 15 U.S.C. 1681e(b) requires that “[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates” and that pursuant to Seventh Circuit precedent, a plaintiff must allege the reporting of “inaccurate” information to survive a motion to dismiss.  The District Court then discussed cases bearing on whether the reporting of a discharged debt with a non-zero balance is “inaccurate” or not.  In citing Vogt v. Dynamic Recovery Services, 257 B.R. 65 (D. Colo. Bankr. 2000), the District Court held that the listing a non-zero “balance” on a credit report is not “by itself inaccurate” because a bankruptcy discharge eliminates personal responsibility for a debt, rather than the debt itself.  The District Court also quoted Abeyta v. Bank of Am., N.A., 2016 WL 304308 (D. Nev. Jan. 25, 2016) for the proposition that “it was unaware of any statute or case providing that discharge in bankruptcy makes a debt unreportable … so long as only the fact of the previous delinquency is reported” and that Congress’ grant of permission for bankruptcies to be reported for ten years “undermines any argument that Congress intended specific debts discharged in bankruptcy to be categorically unreportable.”  For these reasons, the District Court determined that the reporting of plaintiff’s credit card debt with a balance was not inaccurate because it included context about the bankruptcy and discharge.  As such, the District Court concluded that plaintiff’s FCRA claim based on inaccurate reporting failed as a matter of law.

The takeaway from Ewert is that a consumer reporting agency must be careful with how it reports discharged debt.  Reporting a non-zero balance following a discharge in bankruptcy may be appropriate if the report also includes appropriate information related to the bankruptcy and discharge.  Notably, in its opinion the District Court discussed another case, Steinmetz v. American Honda Finance, 2019 WL 4415090 (D. Nev. Sept. 16, 2019), for the proposition that it may also be accurate to report a discharged account as having a $0 balance, but that there is not a mandate to do so.