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  • Writer's pictureJohn K. Rossman

“Fair Credit Dispute” Lawsuits Deluge Consumer Finance Industry: Three Strategies to Avoid Liability

Updated: 2 days ago

The author of this article, Attorney John K. Rossman, is actively involved in the advancement of the credit and collection industry, serving as a long-standing steering committee member of the Consumer Relations Consortium and a frequent contributor to InsideARM. John can be reached at

Companies that report consumer accounts to the credit reporting agencies are experiencing an unprecedented increase in so-called “Fair Credit Dispute” lawsuits. These hybrid consumer claims typically assert violations of the Fair Debt Collection Practices Act (“FDCPA”) and/or the Fair Credit Reporting Act (“FCRA”) arising from a similar factual pattern (discussed below). Due to the sheer volume of new cases filed nationwide, this surge of Fair Credit Dispute litigation is being compared to the thousands of cases the credit and collection industry faced recently with both Telephone Consumer Protection Act lawsuits and Hunstein lawsuits.

Consumer Form Letter Commences Dispute

Most of the recent Fair Credit Dispute cases follow a similar factual pattern: The consumer mails a form dispute letter to the furnisher (typically a creditor or debt collector). While these form letters vary, most assert that the consumer disputes all debts. The letters may also state that the consumer does not seek written verification of the debt. Further, some dispute letters indicate that the consumer may only be contacted during a brief time frame each week and only by certain means of communication, such as email or text. Some experts in our industry note that these recent consumer dispute letters are similar to form letters sent by many credit repair organizations.

Furnisher Investigates Consumer Dispute

After receipt of the consumer dispute, the furnisher (typically a creditor or debt collector) commences an investigation and reports the code “XB” to the credit reporting agencies (the credit bureaus) on the disputed account. “XB” denotes that the consumer disputed the account information “directly” to the furnisher and that the furnisher is “conducting its investigation.”* The furnisher then investigates the dispute and mails the consumer a written response advising on the outcome of its investigation.

Upon conclusion of the investigation, the furnisher then reports the code “XH” to the credit reporting agencies which denotes that the consumer’s account was “previously in dispute” and that the furnisher “completed its investigation.”

Consumer Commences Fair Credit Dispute Lawsuit

After the furnisher concludes its investigation, the consumer typically commences a so-called Fair Credit Dispute lawsuit against the furnisher, asserting violations of the FDCPA and often the FCRA due to the furnisher’s “failure” to report the account as disputed upon conclusion of the dispute investigation. Specifically, the consumer will allege that the furnisher should have reported the code “XC” to the credit reporting agencies when concluding the investigation, instead of “XH”. The “XC” code denotes that the investigation of the consumer’s dispute is “complete,” but that the consumer “disagrees” with the results.

The Plaintiffs in these matters will contend that they advised the furnisher of an “ongoing dispute” and thus the furnisher should have used the XC code to denote the ongoing dispute. Further these Plaintiffs allege that the XH code is misleading because it indicates the “previous dispute” and the furnisher’s “completed investigation” but is silent as to whether the consumer continues to dispute after the completion of the investigation.

Courts Uniformly Reject Consumer Claims of “Ongoing Dispute”

As noted in a previous edition of InsideARM, Courts have examined and rejected these Fair Credit Dispute claims.ii In Wood v. Security Credit Services (Case No: 2020-CV- 02369, N.D. Ill. 2023) the Court examined the very fact pattern described above in the context of an FDCPA case and dismissed the consumer’s claim completely, writing:

". . . when a debt collector investigates a dispute and communicates the results to the consumer, the dispute is resolved unless the consumer indicates that it disagrees with the results."

This result above was similar to the ruling of the in Foster v. AFNI No. 2:18-CV-12340 (E.D. MI March 31, 2020) where the Court reviewed a similar fact pattern, granted summary judgment in favor of the debt collector, completely dismissed the claims of the consumer and wrote:

"After receiving the letter from Defendant indicating that it concluded that debt was valid, Plaintiff did not communicate any disagreement with the investigation. Instead, she filed this lawsuit. On this record, Defendant could not have had knowledge that Plaintiff disputed the outcome of its investigation.

Plaintiff argues that Defendant should have understood her original dispute of the debt to mean that she also disputed the outcome of the investigation and also disputed any resolution that involved her owing the debt. But she did not communicate this to Defendant at any point. . . ."

Three Strategies for Avoiding “Fair Credit Dispute” Liability

The prevalence of these Fair Credit Dispute lawsuits nationwide cannot be understated. The author of this article is presently involved in defending furnishers against these consumer FDCPA and FCRA claims in jurisdictions including Alabama, District of Columbia, Florida, Georgia, New York, Pennsylvania, Tennessee and Texas. Below are three strategies every furnisher should consider to avoid liability in these lawsuits:

1. Investigate all Direct Disputes

The recent Fair Credit Dispute cases all begin with the consumer sending a form letter to the furnisher. Furnishers must have a written policy with procedures detailing how direct disputes are investigated and be aware of form letter disputes used by consumers. Often these form consumer disputes may include contradictory language such as “I dispute but don’t send me verification”.

Further, we expect that the consumer dispute form letters will continue to evolve to challenge even the recent Court rulings cited herein. Furnishers must continue to monitor these form consumer disputes for variations and new attempts to create liability.

2. Consider all Defenses

The Fair Credit Dispute claims are scripted and formulaic. Thus, these claims are susceptible to defenses including challenges to standing (because the consumer suffered no harm) and materiality.

Additionally, the written form disputes that the consumers use in these recent cases are often sent months after the debt collector sends the consumer a validation notice. At least one Federal Appellate Court has held that a consumer’s failure to articulate a dispute in response to the validation notice precludes subsequent challenges to the validity of the debt. Richmond v. Higgins 435 F.3d 825 (8th Cir. 2006).

3. Avoid Settlement if No Liability

Many companies have chosen to settle these recent Fair Credit Dispute cases for less than the anticipated cost of litigation defense. Unfortunately, settling these cases only results in more litigation, similar to the issues caused by settlements during the peak of the TCPA and Hunstein lawsuits. The plain language of the FCRA, the FDCPA and case law all support the furnishers in these cases as set forth above. Thus, we encourage furnishers to fight these cases where counsel advises that the facts and law warrant a vigorous defense.


* The codes XB, XH and XC -- which are discussed in this article -- are components of the Metro 2 Format, which was developed by the Consumer Data Industry Association for furnishers to report debts to the national credit reporting agencies.


This article is provided only as a general discussion of legal principles and ideas. Every situation is unique and must be reviewed by a licensed attorney to determine the appropriate application of the law to any particular fact scenario. If you have a legal question, consult with an attorney. The reader of this publication will not rely upon anything herein as legal advice and will not substitute anything contained herein for obtaining legal advice from an attorney. No attorney-client relationship is formed by the publication or reading of this document. Rossman Attorney Group, PLLC assumes no liability for typographical or other errors contained herein or for changes in the law affecting anything discussed herein.

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