Judge James Teilborg of the U.S. District Court Judge for the District of Arizona awarded Thomas McDermott over $17,000 in damages and attorney's fees after he obtained a default judgment against collection agency, Perfection Collection LLC (Perfection Collection), for violating the Fair Credit Reporting Act (FCRA) by furnishing inaccurate information when it reported a delinquent home monitoring alarm system account (Account) that was more than seven years old.
McDermott ceased making payments on the Account in 2011, which was ultimately placed with Perfection Collection in 2019. Perfection Collection reported the Account to two national consumer reporting agencies (NCRA), one of which verified the Account information was accurate. After learning the Account was appearing on his credit report, McDermott disputed the Account to both NCRAs that originally reported the Account, claiming that the Account should not appear on his credit report because it is more than seven years old. Despite McDermott's dispute, the Account remained on his credit report because Perfection Collection continued to report the Account to one of the NCRAs. McDermott filed suit on March 15, 2020, alleging the negative reporting of the Account led to a 20 to 30-point decrease in his credit score, and he received less than favorable interest rates and terms when he went to refinance his home.
McDermott's suit initially named the two NCRAs, one of which was dismissed, and Perfection Collection. However, Perfection Collection failed to respond to McDermott's complaint and default judgment was ultimately entered last May. In Judge Teilborg's decision, he awarded McDermott $3,500 in actual damages, $12,900 in attorney's fees, and $728.80 in costs, for a total judgment of $17,128.80.
Notably, Judge Teilborg found Perfection Collection's violation of the FCRA was willful, entitling McDermott to an award of either his actual damages or statutory damages. Judge Teilborg noted that Perfection Collection's initial reporting could have been a "careless error" if not for its continued reporting of the Account information "after receiving notice of Plaintiff's dispute." Despite an investigation into the disputed information before Perfection Collection continued reporting the Account information, Judge Teilborg held "an adequate investigation would have revealed that the alarm system account became deficient more than seven years prior . and was therefore unreportable on Plaintiff's credit report." As such, Perfection Collection was "likely aware of the incorrect information after its investigation and willfully violated the FCRA by continuing to report" the Account, thus entitled McDermott to a judgment for the full amount of $3,500 in actual damages he sought.
Judge Teilborg's decision as to Perfection Collection's willfulness violation provides a clear example, at least in the Ninth Circuit, as to what could be considered a "willful violation" and what is merely a "careless error" under the FCRA.
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