9th Circuit Finds Question of Fact Whether 4th-in-Line Debt Collector “Should Have Known” the Debtor’s Account was Disputed

In Holmes v. NCO Financial Services, Inc., — Fed.Appx. —-, 2013 WL 4376585 (9th Cir. 2013), the Court of Appeals for the Ninth Circuit reversed the district court’s grant of summary judgment to a 4th-in-line debt collector who purportedly communicated information to the consumer reporting agencies without also reporting that it was disputed.

The FDCPA provides that a debt collector may not communicate “to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.” 15 U.S.C. § 1692e(8). The CCRAA prohibits any person from furnishing information “to any consumer credit reporting agency if the person knows or should know the information is incomplete or inaccurate.” Cal. Civ.Code § 1785.25(a). “The statutory term ‘should have known’ imparts a test of reasonableness.” . . . The critical question under both statutes is thus whether a reasonable debt collector in NCO’s position would have known that Holmes’s account was disputed.  ¶  The district court erred by holding that there was no triable dispute of material fact as to whether NCO should have known that Holmes disputed his debt. The parties agree that NCO was the last of a series of four debt collectors to handle Holmes’s account. Holmes disputed his debt while it was placed with an earlier debt collector, which recorded the dispute on the web portal system (“Oasis”) used by the debt collectors to relay information about accounts. Although NCO should have had access to information provided by the earlier debt collectors, because of a coding error, it did not. NCO asserts that it did not know that it lacked access until after Holmes filed suit.  ¶  Holmes adduced evidence that NCO had no access to information provided by predecessor debt collection agencies when it reported his account, and that after Holmes filed this suit, NCO discovered the limitation and remedied the error in less than a week. This evidence supports an inference that had NCO clicked on the applicable button on the Oasis interface, it would have discovered that its access to essential information was blocked and needed to be restored before NCO could report the account to a credit reporting agency. Viewing all the evidence in the light most favorable to Holmes, a trier of fact could conclude that a reasonable debt collector in NCO’s position should have known that Holmes’s account was disputed.