If your business provides information on your deadbeat clients to any one of a number of credit reporting agencies, such as Equifax, Experian, or TransUnion, you are regarded as a “furnisher” under the Fair Credit Reporting Act (“FCRA”).

The FCRA regulates the collection and disbursement of personal credit information and dictates the duties and responsibilities of those who furnish that information, including creditors and debt collectors. As enacted, the FCRA provided near-blanket immunity from common law tort liability (defamation, invasion of privacy, negligence) to furnishers in order to facilitate full and complete reporting. This immunity is slowly eroding, subjecting furnishers to liability for damages for failing to properly investigate a consumer’s dispute and correct inaccurate information.

Enforcement of the FCRA had been left largely to government officials and state Attorneys General. A consumer’s private right of action was severely limited. As the FCRA is amended, more and more consumers are successfully prosecuting their private remedies under the FCRA and increasingly, the target of this is litigation is the furnisher of information that appears on their credit report. Where once a consumer who disputed information on his report had to deal only with the credit reporting agency that published the information, beginning in December, the consumer can dispute negative information directly with the furnisher himself. In either case, when a furnisher is made aware of a consumer dispute they must investigate the claim and verify that the information being reported is accurate or delete it. This validation procedure must generally be completed within thirty (30) days and is the source of the increase in consumer litigation. Rather than a cursory review of the disputed information, I would encourage all furnishers to vigorously investigate a disputed claim before verifying that the negative information is valid. Recent case law has raised the bar for investigations and suggests that verification should occur only when the furnisher has documentation to “conclusively” support the negative report.

FCRA amendments that become effective December 4, 2004 prohibit a furnisher from reporting information that he “knows or has reasonable cause to believe” is inaccurate. If a client disputes his account with your company and provides you with documentation to support his position, prudence would dictate that the item be deleted from any credit reporting agency and your internal record system updated. Many successful consumer complaints are the result of a disputed item reappearing on a credit report months after the dispute was resolved in the consumer’s favor. Though these furnishers passed the investigation and verification test, they failed the FCRA final exam when their internal record-keeping system re-reported the negative and false information with knowledge of the inaccuracy.