Lawsuits filed in U.S. federal courts involving collection and credit issues surged in the fiscal year ended Sept. 30 compared with the previous year - a jump linked to Americans struggling with foreclosures and consumer debts.
The FY 2009 numbers released yesterday by the Administrative Office of the U.S. Courts showed that cases filed by individuals or state regulators under the Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA) were up 53% to 6,463 from 4,239 in FY 2008.
Those FDCPA and FCRA numbers are much lower than record-breaking, full-year 2009 statistics published by Collections & Credit Risk in early January, see story. Jack Gordon, CEO at research firm WebRecon LLC in Grand Rapids, Mich., a company that analyzes data provided by the courts, said FDCPA cases alone totaled 8,287 in full-year 2009. Nine of the 12 months compared in the two reports were the same.
Gordon does not believe that accounts for the difference of nearly 2,000 FDCPA cases in the two reports.
"My suspicion is that [the Administrative Office of the U.S. Courts] just counted the cases that were neatly labeled as FDCPA and FCRA. There are a lot more that are not properly categorized," Gordon says. "For example, instead of FDCPA they may say "Federal Question" or something like that. It takes a lot of work to go through all the cases and pick out the relevant ones."
Whatever the case, the FY 2009 numbers showed that many lawsuits were filed against credit reporting agencies regarding the accuracy of information. The three major credit reporting agencies are Equifax Inc., Experian Group and TransUnion LLC.
The law requires these agencies to keep accurate records and respect consumers' privacy rights, and spells out consumers' right to access their credit reports and dispute inaccurate information.
The fiscal year numbers also show a tripling of new foreclosure cases, to 1,517, brought in federal court under the Truth-in-Lending Act. Foreclosure typically is a state process but homeowners may challenge the terms of the mortgage under federal law.
Finally, new personal and business bankruptcy filings increased 35% in the last fiscal year, to more than 1.4 million, according to the report. That was the largest number of filings in any fiscal year since 2005, when a new law was enacted making it more difficult for people to erase their debts in bankruptcy proceedings.