- Case
- Wood v. Security Credit Services, LLC
- Court
- U.S. Court of Appeals for the Seventh Circuit
- Citation
- 126 F.4th 1303 (7th Cir. 2025) (No. 23-2071)
- Decided
- January 28, 2025
- Bottom line
- A debt buyer that reports your account without a dispute flag may be liable if it should have known you disputed the debt, even if you never contacted it directly.
Background
Section 1692e(8) of the Fair Debt Collection Practices Act prohibits a debt collector from communicating credit information “which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.” In practice, it means a collector reporting a debt to the credit bureaus must flag it as disputed if it knows or should know the consumer disputes it.
Michael Wood disputed a credit card balance with Pentagon Federal Credit Union (PenFed) in 2017, through his attorney. PenFed investigated, told him the debt was valid, and suggested he call to set up a payment plan. Wood did not respond, but continued to believe the debt was wrong. PenFed coded the account as previously disputed and resolved. In 2018, PenFed sold the account in a bundle to Security Credit Services (SCS), a debt buyer. PenFed’s sale file did not indicate any dispute, and SCS reported the debt to the credit bureaus without a dispute notation. PenFed had warranted that it used commercially reasonable efforts to remove accounts with “unresolved disputes,” and the record was conflicting on how SCS understood that term.
The district court granted summary judgment to SCS, reasoning that Wood’s silence after PenFed’s letter meant he no longer disputed the debt.
What the court held
The Seventh Circuit reversed in a published opinion by Judge Kolar.
On standing, the court applied its precedent analogizing § 1692e(8) claims to defamation. It found sufficient evidence that the credit bureau understood the significance of the reporting, noting record evidence that a debt marked as disputed affects a credit score less than one that is not.
On the merits, the court disagreed that Wood’s silence ended his dispute, noting PenFed’s letter did not ask him to respond if he still disagreed. It then construed “should be known” as a negligence standard, holding that § 1692e(8) holds debt collectors “to a duty of reasonable care not to report false information.” It rejected the argument that a plaintiff must show the collector should have known the debt was more likely than not disputed. Because the record told “two different stories” about what SCS believed it was buying, summary judgment was improper.
The court also held that the bona fide error defense could not save SCS if the violation stemmed from a mistake of law about what counts as a dispute, citing Jerman v. Carlisle (2010).
Our take
Wood closes a gap that debt buyers have relied on. When a creditor sells an account, information about the consumer’s dispute often does not travel with it. A debt buyer that never received a dispute directly could argue it had no way to know. The Seventh Circuit’s answer is that a debt buyer must exercise reasonable care, including in how it structures and interprets its purchase agreements. The court pointedly rejected the idea that a practice producing errors in a large share of accounts could be “reasonable care.”
We agree with the court’s treatment of silence. Consumers frequently stop writing after an unsatisfying response; that does not mean they have accepted the creditor’s position. Defendants will argue that Wood is fact-bound, and the court did emphasize the conflicting record about SCS’s own understanding. They will also point out the court expressly declined to decide how the FCRA’s furnisher duty under § 1681s-2(a)(3) relates to § 1692e(8).
What it means if your report is wrong
If you disputed a debt with the original creditor and it was later sold or placed with a collector that reports it without a dispute notation, you may have an FDCPA claim against the collector, in addition to any FCRA dispute rights. Keep copies of every dispute letter and response, and if a new collector appears, send it a written dispute as well. That removes any argument that the collector did not know.
A free case review can assess how this ruling affects a claim, and there is no fee unless we win.
Sources
Primary
Commentary we reviewed
- Commentary: Seventh Circuit reverses summary judgment in FDCPA debt dispute case (Consumer Financial Services Law Monitor)
- Commentary: Fair Debt Collection Practices Act 2025 review (NCLC Digital Library)
Updated November 1, 2026. "Our take" is the firm's opinion. This page is general information, not legal advice, and later decisions may change the law.