Division of Financial Practices
Bureau of Consumer Protection
Ronald G. Isaac
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
November 5, 1999
Re: Section 605(a)(1) of the Fair Credit Reporting Act
Dear Mr. :
This will respond to your letter inquiring whether Section 605(a)(1) of the Fair Credit Reporting Act ("FCRA") allows a consumer reporting agency to report the filing of an involuntary bankruptcy petition for more than seven years when the petition was dismissed without the entry of any order for relief and without any adjudication of bankruptcy, and when the consumer report does not fall within one of the exemptions set forth in Section 605(b).
You assert that, unlike a voluntary bankruptcy filed under Section 301 of the Bankruptcy Act, 11 U.S.C. § 301, there is no presumption or determination of bankruptcy for an involuntary bankruptcy petition filed under Section 303, 11 U.S.C. § 303, unless and until an order for relief is entered or an adjudication of bankruptcy is made by the court. Thus, you maintain, where a petition for involuntary bankruptcy has been dismissed with no entry of an order for relief, information regarding the involuntary petition does not qualify to be reported for ten years under Section 605(a)(1); rather, it should be reported no longer than seven years, as permitted for most other adverse items of information under Section 605(a) of the FCRA.
Section 605(a)(1) permits a consumer reporting agency to report the following information for up to ten years:
Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
While there was no order for relief entered in the case you described in your letter, there was apparently an adjudication. You state, "After numerous hearings in the bankruptcy court, the involuntary petition was dismissed by the bankruptcy judge in an order entered on April 23, 1992." Inasmuch as that involuntary bankruptcy proceeding qualifies as a case under Section 303 of the Bankruptcy Act, it appears that information regarding the order dismissing the petition may be reported for ten years from the date that order was entered; i.e., until April 23, 2002. If the involuntary petition for bankruptcy is being reported without identifying it as involuntary or without disclosing that it has been dismissed, you may require, pursuant to Section 611 of the FCRA, that the item be reinvestigated and updated to reflect its complete and accurate current status.
You express concern that permitting involuntary bankruptcy petitions to be reported for ten years might spur a rash of such vexatious suits by "Rambo litigators." The Bankruptcy Code provides a remedy for such actions. Section 303(i) states:
If the court dismisses a petition under this section other than on consent of all petitioners and the debtor, and if the debtor does not waive the right to judgment under this subsection, the court may grant judgment -
. . .
(2) against any petitioner that filed the petition in bad faith, for -
(A) any damages proximately caused by such filing; or
(B) punitive damages.
This is an informal staff opinion and is not binding on the Commission. At your request, we will not include your name and address in versions of this letter we make available to the public.
Ronald G. Isaac
Information that should and should not be reported where there is a bankruptcy.
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