A false credit reporting lawsuit is a legal process that occurs when the creditors and collection agencies try to collect a debt from a debtor who has filed for bankruptcy. It usually happens when the debtor sends money for what they actually owe (without disputing the accuracy) to a collection agency and that agency then starts pursuing the debt. This lawsuit may not involve court proceedings. A false credit report lawsuit may not have to go through court, but if it does, the process can be much like the other types of lawsuits mentioned here:
A plaintiff will file a complaint in federal court. There are two things that need to happen in this lawsuit: if the plaintiff wins, the collection agency has to correct the negative item on its credit report and pay the plaintiff; if the plaintiff loses, the credit reporting company must remove the false item and warn future creditors of the situation. Some of the cases mentioned above will be settled outside of court. In any event, the lawsuit serves notice to the debtors that they are in a bad credit reporting situation.
The Fair Credit Reporting Act gives consumer rights to dispute inaccurate and outdated information on one’s credit report. This includes credit reports that contain misstatements. When you dispute an item on your credit report, the three major credit reporting companies are required to investigate and verify the accuracy of your claim. They are also obligated to inform you of what the updated information is. If the original creditor doesn’t respond or is unwilling to correct the information, the Fair Credit Reporting Act entitles you to one free credit report per year from the credit reporting companies. You can challenge incorrect items on your credit report with these companies and demand a corrected credit report.
If the original creditor doesn’t acknowledge its obligation or won’t act on your complaint within a reasonable amount of time, you may be able to take legal action. You must file a complaint with the National Foundation for Credit Counseling (NFCC) or the Federal Trade Commission, the attorney general of the state you live in. You must send the complaint through certified mail. It is advisable to keep a copy of each document you send to the creditor and to keep all correspondences regarding your lawsuit with the original creditor. If the collection agency refuses to respond to your complaint, you must file a lawsuit against it.
In a lawsuit filed by a plaintiff, he must prove three things: (1) that the debt was incorrectly reported; (2) that you were the victim of inaccurate and false information; and (3) that you have suffered damages as a result of the creditor’s inaccurate and false information. Collection agency attorneys must prove, beyond reasonable doubt, that a judgment has been made against the debtor based on the false information. To defeat a false information lawsuit, the collection agency must either prove its inability to prove the debt’s validity or that it has no evidence of the debt. Collection attorneys can also use a process known as “peculiar removal” wherein they simply challenge the court to allow them to remove certain items from the debtor’s credit report. If the court agrees with their motion, the item will be removed.
On the other hand, if you are a lender and you fail to report an item in your credit report, you are not required to go after the person who purported to have defaulted on the loan. You can instead choose not to deal with the person at all. However, this should only be done on an emergency basis. If, due to some misunderstanding, you were forced to deal with a defaulter who has chosen not to repay his or her loan, you may be able to recover funds from the failed loan holder.
