Federal law requires creditors and debt collection agencies to report credit information truthfully. When creditors and debt collection agencies violate this regulation, consumers have the right to sue in civil court. The law allows debtors to pursue creditors for actual damages suffered as a result of the false credit information as well as costs associated with filing the lawsuit.
Federal Reporting Regulations
It is illegal under the terms of the Fair Credit Reporting Act for a creditor to report false information to any credit bureau, according to the Federal Trade Commission's website. If you believe a negative notation is on your credit report in error, your first step is to contact the reporting bureau showing the notation to investigate the debt. The Fair Credit Reporting Act requires the credit reporting bureau to investigate the validity of the contested debt within 30 days of receiving your written request. If the bureau determines the notation is incorrect, the bureau immediately removes the negative notation from your credit report.
Suing for Damages
Federal law permits you to sue a creditor or debt collection agency in civil court for any damages you suffer as a result of false credit notations and illegal debt collection practices. Damages may include lost wages, payments due to increased interest rates on other accounts and the loss of other credit opportunities due to an falsely damaged credit score. You must show these losses are a direct result of the creditor or collection agency's illegal actions for a court to award you actual damages.
No Damages Suffered
A judge may award you up to $1,000 even if you can't prove you've suffered actual damages from the creditor's false reporting, according to the Federal Trade Commission's website. This award is a kind of punitive damage designed to deter the creditor or debt collection agency from committing the act again in the future. A judge may also award you court costs and filing fees, which means the creditor or debt collection agency must pay your attorney and any fees associated with your lawsuit filing.
Suing Creditors Collectively
A group of consumers may join together to file a civil lawsuit against a creditor or debt collection agency. The group may seek damages up to $500,000 including filing fees and court costs. The ceiling of the monetary award for damages in a group lawsuit is higher than an individual lawsuit to reflect the need of a larger group of debtors and to punish the creditor or debt collection agency for a perceived pattern of behavior in reporting false credit information and illegal collection practices.
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