Can a Person or Business That Reports Incorrect Information to a Credit Bureau Be Sued?

The Law of Negligence Addresses Issues Involving the Reporting of Inaccurate Information to a Credit Bureau. Both the Person or Business Who Reports the Incorrect Information As Well As the Credit Bureau Agency Who Publishes the Inaccurate Information May Be Found Liable.

Understanding That Inaccurate Information Reported to a Credit Bureau May Result In Liability Against the Reporter

Credit Report Document When a person or business submits information to a credit bureau agency, great care should be taken to ensure that the information is provably accurate.  Incorrect information reported to a credit bureau may result in liability for the person or business who reported the incorrect information.

The Law

The common law principles of negligent misstatement apply to matters of incorrect information reported to, and reported by, credit bureau agencies; and accordingly, both the person or business who report incorrect information to a credit bureau as well as the credit bureau itself may become subject to liability. This case of Clark v. Scotiabank, 2004 CanLII 34438 explains these principles well where it is said:

[27]  Mr. Clark claims that Equifax and Scotiabank were negligent in failing to correct the error on his credit rating over the course of seven years, and that they are, therefore, liable for his psychological problems, such as stress, anxiety and depression, that he claimed he suffered as a result of that ongoing mistake.

[28]  The first issue to turn to is whether the defendants owed Mr. Clark a duty of care with regard to his credit rating. Following the decision of the Ontario Court of Appeal in Haskett v. Equifax Canada Inc. et al (2003), 2003 CanLII 32896 (ON CA), 63 O.R. (3d) 577, I find that Equifax and Scotiabank did owe a duty of care to Mr. Clark.  In holding that there is a relationship of proximity between a credit reporting agency and a person who is the subject of a credit report, the Court in Haskett noted at p. 589 that:

It is reasonably foreseeable that if the respondents [the credit reporting agency] are negligent in the way they gather and report the information, and if they report inaccurate information, their actions could cause credit grantors to either deny credit or to charge more than they otherwise would.  To the extent that a person such as the appellant authorizes, either expressly or impliedly, the gathering and reporting of credit information… it is fair to say that any such authorization would normally be limited to accurate and non-negligent reporting.

[29]  Moreover, the Court held that as a matter of public policy, it was appropriate to find these parties to be in a relationship of proximity giving rise to a duty of care.  Feldman J.A. noted at pp. 589-590 the importance of credit and credit ratings in our society:

Credit is an integral part of everyday life in today’s society.  Not only people seeking loans, mortgages, insurance or car leases, but those who wish, for example, to rent an apartment or even obtain employment may be the subject of a credit report, and its contents could well affect whether they are able to obtain the loan, the job or the accommodation.  Credit cards are a basic form of payment but their availability is also limited by one’s creditworthiness.  Without credit, one is unable to conduct any financial transactions over the telephone or on the internet.  As credit is so ubiquitous, there is nothing exceptional about consumer reliance on credit reporters to carry out their function not only honestly, but accurately, with skill and diligence and in accordance with statutory obligations.

The importance of the role of credit reporting agencies is reflected in legislation enacted specifically to regulate and govern their operations – in Ontario, the Consumer Reporting Act

[30]  Having found that Equifax and Scotiabank owe Mr. Clark a duty of care with regard to his credit rating, I further find that Equifax and Scotiabank breached their duty of care to Mr. Clark when they failed to take reasonable care with his credit rating.  Scotiabank has admitted their failure.  While Equifax could not be blamed for applying information provided by Scotiabank, they indeed can be faulted for not responding to the plaintiff’s repeated requests for clarification over the span of years, assuming the veracity of his assertions.

[31]  As a result, Mr. Clark is entitled to compensation for foreseeable harm suffered as a result of the negligence of both defendants.

Legal issues involving improper credit reporting conduct also arose within, among many others, the cases of:

  • Albayate v. Bank of Montreal, 2015 BCSC 695 (breach of privacy, incorrect address provided);
  • Nammo v. TransUnion of Canada, 2010 FC 1284 (PIPEDA violations, incorrect details); and
  • Chrysler Financial Canada v. Morris, 2009 SKQB 510 (incorrect and incomplete details reported).

Interestingly, in all three of the above cases, the legal disputes arose, and liability was assessed, for the improper reporting of information beyond the nature of indebtedness.  Of extra-special interest is the point within the Chyrsler Financial Canada case that a failure to report that the indebtedness was disputed and was undergoing litigation constituted an omission or an incomplete detail which contributed to the finding of negligent reporting and the reasoning for a liability award.  A duty to report accurate and thorough information, rather than just half truths, to a credit bureau agency so to avoid any misleading was stated in Chrysler Financial Canada whereas it was said:

[205]  Presumably Mrs. Morris authorized the release of information about CFC’s credit experience with Mrs. Morris on her credit application but no such credit application was placed in evidence before me. I will assume CFC had an authorization as Mrs. Morris has not claimed that the release of any information was a breach. Such an authorization does not extend, of course, to the release of misleading, incomplete or inaccurate credit information. That obviously occurred in this case. Implicit as a condition of any such authorization was that the released information be accurate, complete and not misleading. The credit report submitted by CFC did not tell the whole truth as CFC knew it to be about Mrs. Morris’ credit information.

[206]  Mr. Atwal confirmed that at the time of the repossession of the Van, it reported to Equifax that Mrs. Morris should have a 1-9 rating, which is a bad debt write-off rating. At the time of the repossession of the Van, CFC knew that Mrs. Morris had a dispute about the quality of the Van and the refusal by the manufacturer to live up to the warranty. As well, Mr. Atwal confirmed that in July, 2005, CFC again reported the I-9 rating, and at that time, they were aware that the within law suit which questioned the quality of the Van and the refusal to comply with the warranty work. Mr. Atwal said CFC did that because “those issues were not of interest” to CFC. Mr. Atwal confirmed that they would report the I-9 regardless of the dispute.

[207]  CFC was, as the assignee under the Contract, the financing institution and the seller. CFC received Mrs. Morris’ counsel’s letter detailing the problems. Mr. Atwal confirmed in his evidence that CFC was aware that the transmission had failed on this Van, was aware that Mrs. Morris was refusing to make any further payments because of the failure of the Van and the failure to repair the Van and comply with the warranty. The credit report from CFC to the credit agency described what people would understand to be a delinquent creditor.

[208]  Section 9 of the Consumer Reporting Act, R.S.O, 1990 c. C-33, mandates the adoption of all procedures reasonable for ensuring accuracy and fairness in the contents of its consumer reports. In the situation here too, is like the case in Millar, supra. Justice Seppi of the Ontario Superior Court of Justice said at para. 68 through 71:

68  Section 9 of the Consumer Reporting Act, R.S.O. 1990, c. C.33 mandates the adoption of "all procedures reasonable for ensuring accuracy and fairness in the contents of its consumer reports". The testimony of the credit agency representative confirmed that the inaccurate report would have been withdrawn by the credit agency had GMAC requested it. Any request by Mr. Millar would not result in deletion of the report without the direction of GMAC.

69 One authority regarding the obligations of a creditor in reporting to consumer credit agencies, a decision of the British Columbia Commercial Appeals Commission, indexed as Chrysler Credit Canada Ltd. v. British Columbia (Registrar of Credit Reporting Agencies), [1994] B.C.C.O. No. 16, (Quicklaw) Appeal No. CAC-9313, offers some insight into the issue. Chrysler Credit Canada Ltd. had reported a repossession' after an allegedly defective vehicle had been returned. The consumer, whose credit rating was seriously harmed by this report, claimed this characterization of the transaction was incomplete or inaccurate. The Registrar of Credit Reporting Agencies agreed and ordered the reporting agency to "cease to report this matter to any credit reporting agency in the future" (p. 2). It also ordered that the Credit Bureau "block this information from their credit files and cease reporting it to their members" (p. 2). Chrysler Credit Canada Ltd. appealed to the Commission arguing that the credit community needs to be informed of these kinds of situations. The Commission noted the requirement under s. 17 of the Credit Report Act, R.S.B.C. 1979, c. 78, "to provide accurate information", which is similar the above-quoted requirement of accuracy and fairness in credit agency reporting under the Ontario Consumer Reporting Act. The Commission upheld the Registrar's decision to delete the negative report stating that, "any harm to the credit community which may flow from non-reporting this as a repossession' even if accurate is far outweighed by the serious harm to the individual given the unsubstantiated allegation". (p. 2).

70 In the circumstances of this case, accurate credit reporting by GMAC, as a minimum, would have necessitated a request for deletion of the lowest credit rating and the insertion of a notation that this alleged debt involved a dispute over an alleged defective vehicle voluntarily returned by the consumer. The better and proper course would have been to hold off on reporting to the credit agencies, or to withdraw the negative report entirely as had been requested by the plaintiff, pending the resolution of the dispute in court. Given Mr. Millar's prior unblemished credit record and the involvement of GMAC in the dispute, there was no risk of harm that could flow to the credit community as a result of not reporting the returned vehicle and disputed debt in the circumstances of this case.

71 In the result, GMAC is liable for damages to the plaintiff for breach of its obligations under the lease financing agreement to provide accurate and complete information of its credit experience with the plaintiff. Further, there shall be an order directing the defendant GMAC to withdraw, and request deletion of all negative credit reports regarding this plaintiff, which may have been given to credit agencies or others in connection with this lease.

[209]  In the circumstances here, accurate credit reporting by CFC should have, as a minimum, necessitated an insertion of a notation that the alleged debt involved the dispute over an alleged defective vehicle. Perhaps CFC could have held off reporting to the credit agencies or withdrawn the negative report in any resolution of the dispute in court. Given Ms. Morris’ evidence about her credit record and the involvement of CFC in this dispute, there was no risk of harm that could flow to the credit community as a result of not reporting the vehicle as repossessed and disputed debt in the circumstances.

[210]  In the result, I am satisfied that CFC is liable for damages to Mrs. Morris for breach of its obligation to provide accurate and complete information of its credit experience with her.

There are ample case decisions to show that the common law holds both creditors and credit reporting agencies to a high degree of accuracy and completeness as well as prompt attention to correcting any inaccuracies.

Summary Comment

A person or business who reports information to a credit bureau should take proper care to ensure that the information reported is provably accurate so as to reduce and avoid the risk of a negligent reporting claim.

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