Despite identity theft, 7th Circuit rules debt collectors didn’t violate federal law in collection action

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While the process of remedying a case of credit card identity theft caused “a world of aggravation” for the plaintiff, the 7th Circuit Court of Appeals has affirmed the debt collectors’ actions during the investigation didn’t violate the Fair Debt Collection Practices Act or Fair Credit Reporting Act.

In March 2018, someone opened an American Airlines Citibank credit card under the name Kevin Woods, who lives in Tipton. Whoever did so made the card’s only purchase that same day: a $377.61 one-way flight from Dallas to Los Angeles.

Over the next six months, the account accumulated interest and late fees. By the time American Airlines closed it, the outstanding balance was $723.55. American then sold the account to LVNV Funding LLC, which placed it for collection with Resurgent Capital Services L.P.

Resurgent sought to collect the debt from Woods, but he claimed the debt was not his and maintained that he had “never received a statement for the account and remained unaware of its existence” until the collectors came calling. So when the letters began arriving in January and February 2019, Woods disputed the account with Resurgent.

Throughout February and March, Woods continued to call and write Resurgent to dispute the debt. Resurgent sent Woods another account verification letter on April 3, identical to the one it sent in February, and two more letters on May 1, 2019.

The first contained, for the first time, a copy of the disputed account’s final statement. The address listed on the statement was not Woods’s current address but an address at which he had not lived since 2013. The second letter stated Resurgent had found insufficient evidence to support Woods’ fraud claim but listed some documents he could provide to aid in the investigation.

Woods did not respond to either letter but called American Airlines. Over the phone, American confirmed the account was opened under Woods’ old address and under an email address he says he had never heard of. American sent Woods two letters indicating it had determined the debt was his.

Next, Woods turned to local law enforcement, filing a report with the Tipton County Sheriff’s Office alleging he had been the victim of identity theft. Woods brought with him the two letters he had received from American. Reviewing the letters, the officer who spoke to Woods wrote in his report that American “had completed an investigation and … determined that it was in fact him.”

Woods formally disputed the debt with the credit reporting agencies and provided them a copy of the police report containing the officer’s commentary. The CRAs forwarded the materials to Resurgent in what is known as an automated credit dispute verification.

Resurgent reviewed the new materials and again matched Woods’ name and address to the account information in its database. It verified to the CRAs that the debt was indeed that of Kevin Woods.

Woods filed his lawsuit in the U.S. District Court for the Southern District of Indiana on Aug. 14, 2019. Two weeks later, American wrote Woods to say it had concluded he was not responsible for the unpaid charge on the account, though it was not apparent what led the company to its changed view. Upon learning of that development, Resurgent promptly asked the CRAs to remove the account from Woods’ credit report, which they did.

Woods sued Resurgent and LVNV under various provisions of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. But the Southern Indiana District Court granted summary judgment for the defendants, and the 7th Circuit affirmed.

“Woods has not explained why Resurgent’s letters seeking to collect the American Airlines debt were false as that term is defined in our cases, as distinct from false in a literal sense,” 7th Circuit Justice Michael Yale Scudder Jr. wrote for the court.

Scudder further outlined how the debt collectors conducted a reasonable investigation and how Woods submitting a police report actually hurt his case.

“Under these circumstances, we cannot say that Resurgent’s investigation was unreasonable. But a word to the wise: this opinion is no license for furnishers to offload their § 1681s-2(b)(1)(A) investigation obligations to consumers by spamming them with requests for additional information,” Scudder wrote. “Instead, like all questions of reasonableness, our conclusions depend on the totality of the circumstances in the case before us.”

The case is Kevin Woods v. LVNV Funding, LLC and Resurgent Capital Services L.P., 21-1981.

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