Lawsuit: Equifax Unlawfully Reports Old Payday Loans Forgiven in Class Action Settlement [UPDATE]

A proposed class action filed this week centers on Equifax’s allegedly unlawful reporting of debts from payday lenders Plain Green, Great Plains and MobiLoans that were forgiven as part of a nationwide class action settlement in December 2019.

According to the 27-page case, the debts at issue stem from an allegedly illegal “rent-a-tribe” scheme whereby the lenders purported to be associated with Native American tribes in order to skirt state usury laws. Years-long litigation against the companies resulted in a December 2019 settlement through which loans made by Plain Green, Great Plains and MobiLoans were forgiven—and thus, should have been removed from consumers’ credit reports, according to the complaint.

Nevertheless, debt collectors Midwest Recovery and Consumer Adjustment Company, Inc. (CACI) continued to report the forgiven debts in order to coerce consumers into paying them, the lawsuit alleges.

If that wasn’t enough, Midwest Recovery, who the suit says has engaged in particularly shady debt collection practices, has an alleged habit of “re-aging” old debts that should have been removed from consumers’ credit reports seven years after they first became delinquent. Per the case, this practice allows the debt collector to pressure consumers into paying debts that, under federal law, are too old to report.

According to the case, defendant Equifax Information Services, LLC, as a consumer reporting agency, was obligated to adhere to provisions of the Fair Credit Reporting Act (FCRA) that were designed to “prevent this type of misconduct.” By continuing to report debts it knew were too old to be included on consumers’ credit reports or were otherwise forgiven in the “widely known and publicized” class action settlement, Equifax has violated both the FCRA and a similar California state law, the lawsuit alleges.

Which Debts Are We Talking About Here?

The debts at issue in the lawsuit arise from what has come to be known as a “rent-a-tribe” scheme through which certain lenders purport to partner with Native American tribes in order to shield themselves from liability under state usury laws by exploiting the tribes’ sovereign immunity.

The case explains that payday lender Think Finance used Plain Green, Great Plains and MobiLoans—three entities formed under tribal law—as fronts to offer consumers small loans at excessively high interest rates considered usurious under state laws. While pretending to be run by Native American tribes, the lenders cited the tribes’ sovereign immunity as a means to avoid liability, the suit says. The tribes, for their part, allowed the entities to use their names in exchange for “a nominal fee” from the revenue generated by the loans, yet in reality, had no control over the businesses’ everyday operations, according to the complaint.

“Extensive litigation” against Think Finance and related entities established that these so-called “rent-a-tribe” schemes violated “a host of state and federal lending laws,” the suit says, and resulted in a “groundbreaking” nationwide class action settlement that received final approval in December 2019.

Under the terms of the deal, certain outstanding loans issued by Great Plains, Plain Green and MobiLoans were canceled and the three companies were instructed to assist with the removal of “derogatory tradelines” associated with the debts from reports issued by consumer reporting agencies, including Equifax.

According to the suit, the settlement should have ensured that the unenforceable debts would no longer appear on consumers’ credit reports. Nevertheless, debt collectors Midwest Recovery and CACI continued to report the debts as a means to coerce consumers into repaying them, the lawsuit alleges.

Per the suit, it was Equifax’s responsibility to ensure the “maximum possible accuracy” of the information reported about consumers. By allowing Midwest Recovery and CACI to continue reporting the canceled debts, Equifax violated its duty under federal and state law, the case alleges.

“Re-Aged” Debts

The lawsuit goes on to claim that some of the debts at issue in the case were more than seven years old and thus should not have been included in consumers’ credit reports in the first place.

According to the suit, the FCRA mandates that adverse information other than convictions of crimes must be removed from consumers’ reports after seven years. In order to avoid the “aging-off” of debts, however, some creditors and debt collectors have undertaken a practice whereby they “re-age” the obligation to make it appear newer, the case says. This can be accomplished by simply changing the “date of first delinquency,” a standard field on all credit reports with the “Big 3” credit reporting agencies, to a more recent date, according to the complaint.

The lawsuit alleges that Equifax “freely allows” furnishers to change the date of first delinquency “without providing any explanation or justification” for doing so and has no policy, practice or procedure in place to determine when a debt is re-aged.

Moreover, the case claims Equifax either knew or should have known that Midwest Recovery, in particular, frequently engages in the practice of re-aging debts and is “an unreliable source of information.” Per the suit, the Consumer Financial Protection Bureau’s website displays hundreds of complaints against Midwest Recovery, many of which refer to the debt collector’s alleged practice of “re-aging” debts. Additionally cited in the complaint is a Federal Trade Commission action against Midwest Recovery in which the agency found that the debt collector had placed “bogus or highly questionable debts onto consumers’ credit reports to coerce them to pay the debts.”

The lawsuit alleges that if Equifax had reasonable procedures in place to ensure that Midwest Recovery was providing accurate information, it would not have allowed the debt collector to report old debts.

Who Does the Lawsuit Look to Cover?

Proposed in the complaint are several “classes,” or groups that the lawsuit looks to represent.

One proposed class looks to cover anyone in the U.S. for whom Equifax furnished a consumer report anytime within the past two years and while the case proceeds that contained an account with Midwest Recovery where the original creditor of the loan was either Plain Green, Great Plains or MobiLoans and the individual’s delinquency began more than seven-and-a-half years before the report was issued.

The lawsuit also looks to represent anyone in the U.S. for whom Equifax furnished a consumer report since December 19, 2019 that contained an account where the original creditor of the loan was either Plain Green, Great Plains or MobiLoans. A class has also been proposed for California residents who fit the same criteria.

How Do I Join the Lawsuit?

There’s typically nothing you need to do to join a class action when it’s first filed. If the case moves forward and settles, that’s when those affected, i.e., “class members,” would be sent notice of the settlement with instructions on how to claim their share.

It’s important to keep in mind that it could take months or years for a class action to be resolved, which typically happens through a dismissal or settlement.

For now, one of the best things you can do is to stay informed. Check back to this page for updates or get class action news and settlement information sent straight to your inbox by signing up for ClassAction.org’s free weekly newsletter here.