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11th Circuit Requires Debt Collectors To Make A “Reasonable Investigation” Into Account Documents

How far does a debt collector have to go to verify that an account belongs to the correct person? According to the U.S. Court of Appeals for the 11th Circuit, a debt buyer or debt collector may need to go all the way back to the original documents that created the account.

In a case from the Southern District of Georgia called Hinkle v. Midland Credit Management, a woman named Teri Lynn Hinkle filed a pro se federal lawsuit against Midland Credit Management (MCM), a large national debt collector and buyer.

MCM purchased two junk debts from another debt buyer in 2008. Junk debts are not worth very much money, and are often sold for pennies of their original value. Usually, junk debts are old and may no longer be collectable.

MCM purchased two junk debts that it says belonged to the plaintiff, Teri Lynn Hinkle. Hinkle disputed that she owed either of the debts, and claimed that MCM was pursuing the wrong person. Hinkle only found out about these two debts when she checked her credit report. Interestingly, one of the debts had been settled and had a zero balance, even though Hinkle claims that she did not own the account and did not make a settlement payment.

Hinkle contacted the three major credit bureaus and informed them that she was disputing the debts owned by MCM. The bureaus contacted MCM about the dispute, and the company was required to investigate the claim under the rules of the Fair Credit Reporting Act (FCRA). Rather than checking that the information was correct, MCM simply confirmed that the information matched what they had been sent from the previous debt collector.

MCM also sent Hinkle multiple letters requesting proof that she did not own the account in question. Hinkle responded with her own letter informing the company that it was impossible for her to provide such evidence. Since she did not owe the debt nor own the account in question, she had no proof that she was not the owner. After all, people do not generally receive account statements or monthly bills for accounts that they don’t own.

Fed up with MCM, Hinkle filed her own lawsuit without an attorney against MCM in federal court. Her lawsuit claimed that the company had violated the FCRA by failing to take steps to properly verify the owner of the accounts.

The FCRA requires that companies who report consumer information to the credit bureaus must conduct a reasonable investigation into the actual owner of the account before reporting negative information. Hinkle argues that MCM failed that test because they did not contact the previous debt collector or the original lender to verify the information.

The 11th Circuit agreed and held that MCM had not conducted a “reasonable” investigation under the FCRA. The court stated that while what is considered reasonable would change under the circumstances, MCM should have made more of an effort. The FCRA requires that companies be able to end an investigation in one of three ways: with the information confirmed as accurate, with the information confirmed as inaccurate, or with a note that there is not enough information to confirm the accuracy either way.

The language of the statute requires companies to verify information and perform an investigation. While the statute does not define exactly what the terms “verity” or “investigation” mean, the appellate court held that the law required the company to do something. If the company does not have enough information to verify the account owner’s identity, the debt collector will need to go look for it. The court went as far to say that the debt collector may need to find and get copies of account-level documents like billing statements that will confirm a person’s name, address, and account number.

The decision has the potential to force companies to pay closer attention to their legal responsibilities when collecting a debt. If debt collectors spent more time verifying their debts, people like Ms. Hinkle would be saved from months of aggravation and harassment over debts that they don’t owe.

If you have been harassed by debt collectors or are worried that you may face a debt collection lawsuit, contact Loan Lawyers. Our South Florida debt defense attorneys will help you create a plan to get your finances back on track and will work to help you fight back against shady and illegal debt collection tactics.

To schedule your free consultation, call (888) FIGHT-13 (344-4813) today.
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  • Florida Trend's - Florida Legal Elite 2014
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  • National Association of Consumer Bankruptcy Attorneys
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  • The New York Times
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