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Credit Damage: Can You Sue Over Ruined Credit?

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Comcast sent Karen to collections for a bill she didn’t owe, and it took her several months to clear it up. She’s angry and wants to take them to court to sue them for damaging her credit. She wants to know how much she can ask for.

Here’s how Karen described it in an email to us:

Comcast had me in collection for 4 months or so knowing the whole time I did not owe them one dime. Everyone from the local office to corporate headquarters agreed I had returned all of my equipment from them within the 30 day trial period and I had the paperwork to prove it if need be. Still it took them over 4 months to remedy their mistake.

I want to collect damages from them by sending a demand letter for starters (hoping to avoid small claims court) and I wondered if you might have an idea what I should ask them to pay me for those damages?

How does one figure something like this out and is there a formula or precedent-setting cases?

It was so beyond annoying and cost me in time and energy as well as lost credit.

[The Credit.com Forum: Your Credit Questions Answered]

First Things First

The first thing consumers who believe their credit may have been damaged need to do is get a full credit file disclosure, says William Howard founder and managing partner of the consumer protection division at Morgan & Morgan. That’s different than getting your credit report from AnnualCreditReport.com, he says, because it may contain additional information. He provided a sample letter consumers can send to the credit reporting agencies for this purpose.

After you receive the disclosure, you must dispute mistakes with the credit reporting agencies that are reporting the wrong information. That’s true even if you know that the lender (called the “furnisher” in the Fair Credit Reporting Act) is the source of the mistake. Otherwise, you cannot sue under the FCRA.

“If (a lender) puts a bankruptcy on your credit and it’s wrong, you can dispute it with (the lender) until the cows come home but you can’t sue them,” warns Howard. “You are required to dispute it with the credit reporting agencies.”

Free Tool: Credit Report CardChi Chi Wu, staff attorney with the National Consumer Law Center concurs. “Under the Fair Credit Report Act the only time when the consumer has a private remedy is when they file a dispute with the credit reporting agency. If you send a dispute just to the furnisher and they don’t properly investigate then you have no recourse.” She also adds that, “You can’t sue the furnisher under the FCRA for the initial reporting of information.”

If Karen finds the collection account listed on her credit reports, then she needs to dispute that. “Send a certified letter that says, ‘Attached is my credit report and you are reporting this mistake,'” recommends Howard. If you dispute a mistake and can’t get it corrected, then a lawsuit may be required to set the record straight.

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How much is credit damage worth?

Assuming that you have found a legitimate mistake and can’t get it fixed through the usual dispute channels, how much can you sue for?

Under the FCRA, consumers can sue for:

  • Statutory damages of $100 – $1000 per violation
  • Actual damages for injury the consumer suffered
  • Emotional damages for stress or physical ailments resulting from the ordeal
  • Punitive damages to punish the violator for their actions

In Karen’s case, she had recently bought a home, which is why she had recently set up cable service through Comcast. She cancelled the service during the free trial period because it didn’t work properly and the service technician sent to her home couldn’t fix it to her satisfaction. But Comcast billed her anyway, despite the fact that she had proof she was well within the time frame to cancel without being charged.

While all that was going on, she was trying to remodel her home and the collection account prevented her from getting the credit she needed to proceed. “It was a mess,” she says.

[Related Article: When Bad Credit Keeps You from Homeownership]

While that was a lousy experience, it’s probably good if she wants to pursue a credit damage case. “The best way to be able to show actual damages is to show you were turned down for credit,” says Howard. “If you were turned down multiple times for credit or you were forced to pay a higher interest rate on something,” then you would be able to demonstrate actual damages.

And in the case of emotional and punitive damages, the figures can go quite high in some situations. “There have been some multi-million dollar verdicts in these cases when they include punitive damages,” Howard explains.

But trying to go it alone as Karen wants to do may prove challenging.

Wu warns, “These are not easy lawsuits. If you can find an experienced lawyer, that’s always best.”

Howard agrees and says that attorneys who regularly take these kinds of cases will typically take them at no cost to the consumer if they believe there is a strong case, since the attorney will recover his or her fees from the other party. “If you are charged an upfront fee (in a credit damage case), that’s a sign you have the wrong lawyer,” he insists.

Image: Robert S. Donovan, via Flickr

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