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“Reasonable Belief” Applied to Credit Repair Organizations’ Activities

ciskey debra jYou have seen them by the binful, no doubt, if you are a data furnisher to credit reporting agencies. The nearly identical envelopes containing nearly identical disputes from consumers, written in such archaic language you would think they were written sometime early in the last century. Language such as: “data dispatched by our company” and “may evince an intention” and my favorite which is used frequently, “may be contained with visà- vis that data. . .” And, interestingly, many seem to be signed by the same hand. The cherry on top is the sender’s use of presorted first class postage stamps. Got the picture? Hold that thought, we’ll come back to it in a moment.

These letters would purport to be direct disputes – written disputes to a data furnisher of information furnished to credit reporting agencies. If legitimate, that is, sent by the consumer to the data furnisher, containing specific information that the consumer is disputing and an explanation of the basis for the dispute, the data furnisher would be required to conduct reasonable investigation and correct or remove the furnished data within 30 days, and then notify the sender of those actions. (CFR Title 12, Chapter X, Part 1022, Subpart E, §1022.43(e). However, when the furnisher has a reasonable belief that the direct dispute is submitted by, is prepared on behalf of the consumer by, or is submitted on a form supplied to the consumer by a credit repair organization (CRO), the data furnisher does not have such a duty.

The senders of bulk letters take steps to conceal the fact that the sender is not the consumer to prevent the data furnisher from invoking the credit repair organization/reasonable belief exception. The letters have a signature, they are on plain white paper – not letterhead. They carry the consumer’s return address. Maybe if a data furnisher received one or two such letters in any given period of time, they might not conjecture that the letter might be from a CRO – but might instead think the consumer has downloaded a generic dispute letter from the Internet. However, when the letters are delivered, literally, in mail trays from the post office, it gives one pause.

Now, the data furnisher doesn’t even have to open a letter to know it was not sent by the consumer, just by observing the postage. Unless one is a stamp collector or aficionado, who looks at the stamp? Close observation will reveal that the postage is a presort first class stamp. This would indicate that the sender is in the business of sending letters – sound familiar? A sender who qualifies to use presorted first class mail must at a minimum have 500 pieces of mail in a batch. Of course, that is where mail consolidators enter the picture, further supporting the belief that the sender is an organization of some type, not an individual. This alone can create a reasonable belief that the letters carrying such postage come from a credit repair organization.

Another ploy I have heard about recently appears to be another effort by a credit repair organization to save money. The data furnisher receives a large envelope containing a large amount of pages – even 50 or more – all of which are dispute letters, nearly identical in appearance but from different people. Do you suppose everyone living in the same area got together on their own and decided to send you one big envelope with all their disputes? No, I didn’t think so. This practice has CRO written all over it.

What about a debt collector’s duty to report the debt as disputed if he knows or should know that the consumer disputes the debt? This can be a hang up. Look at the provisions of the Fair Debt Collection Practices Act that define who a consumer is, or who can stand in the shoes of the consumer. There is no provision for a credit repair organization to speak for the consumer. CROs are third parties. The FDCPA says that the consumer has the right to identify any third party as an authorized party, but this authorization must be given directly to the debt collector by the consumer. (§805(b)). Such letters do not provide authorization. Would you mark an account disputed if a random, unidentified individual called your office to tell you that John Doe disputes his debt? Experience of many is that the accounts have previously been marked disputed anyway as the result of indirect disputes via eOscar (www.e-oscar.org).

Any data furnisher who decides to apply a “reasonable belief” approach to their handling of inbound mail should have policies and procedures in place based on consumer financial protection statutes, and even in postal regulations, to justify their actions. Seek the advice of counsel. Look at the statues and Regulation V. Sleep on it a few nights, counting identical #10 envelopes instead of sheep. You will come to the conclusion that is right for you.


Debra Ciskey is the Compliance Officer at Wakefield & Associates. Inc. She is a member of the board of directors and a certified instructor for ACA International.