Consumer complaint received 2024-10-08
Product: Credit reporting or other personal consumer reports — Credit reporting
Issue: Improper use of your report — Reporting company used your report improperly
Company: Bread Financial Holdings, Inc. (CT)

I, XXXX XXXX, hereby submit this formal complaint against XXXX XXXXXXXX XXXX XXXX XXXXXXXX XXXX XXXX XXXX XXXX XXXX, Comenity Bank, and XXXX XXXX for violations of the Fair Credit Reporting Act ( FCRA ) in relation to the improper and misleading reporting of a charged-off account. Additionally, XXXX XXXX, XXXX, and XXXX XXXX has engaged in practices that may violate federal tax law principles regarding double recovery, as established in several landmark court decisions and IRS rulings. 1. Improper Monthly Reporting of Charge-Offs XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX  XXXX Comenity Bank XXXX and XXXX XXXX has engaged in the practice of reporting the account as " charge off '' every month, thereby creating the misleading impression that the account has been charged off repeatedly. Under accounting and legal standards, a charge-off is a one-time event. Repeated reporting of this charge-off constitutes inaccurate reporting and violates FCRA Section 623 ( a ) ( 1 ) ( A ) ( 15 U.S.C. 1681s-2 ( a ) ( 1 ) ( A ) ), which requires furnishers to provide accurate and complete information. This inaccurate reporting is also in violation of FCRA Section 607 ( b ) ( 15 U.S.C. 1681e ( b ) ), which mandates that furnishers must adopt procedures that ensure the maximum possible accuracy of consumer information. By continuing to report the charge-off on a monthly basis, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX Comenity Bank XXXX and XXXX XXXX  has XXXX extended the negative impact of this event on my XXXX XXXX. 2. Improper Reporting of Credit Limits on Charged-Off Accounts In addition to the above, XXXXXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX Comenity Bank XXXX and XXXX XXXX has also reported a credit limit on the charged-off and closed account. This is misleading because a charged-off account is no longer an active line of credit. Reporting a credit limit falsely suggests that there is still available credit, which affects my credit utilization ratio and further damages my credit score. This practice is in clear violation of the accuracy standards required under 15 U.S.C. 1681e ( b ), as the information furnished is neither relevant nor accurate. 3. Misleading Reporting of a XXXX Balance on a Charged-Off Account Furthermore, Comenity Bank and XXXX XXXX continues to report a XXXX balance on the charged-off accounts they have furnished on my credit report, while also maintaining the status of the account as " charged off. '' This reporting is misleading and suggests that the debt is still tied to the original creditor, even though they no longer own it, having sold it to a third party. Under Rev. Rul. 70-367, 1970-2 C.B. 37, once a bad debt deduction is taken, the debt is considered worthless, and any subsequent attempt to claim ownership or collect on it constitutes an improper attempt at double recovery. Sunday, XX/XX/XXXX XXXX. Violation of Federal Tax Law Principles of Double Recovery This issue also implicates principles established in federal tax law regarding double recovery. Several key cases emphasize that creditors can not claim a bad debt deduction while simultaneously asserting continued ownership or collectibility of the debt : United States XXXX XXXX XXXX XXXX, XXXX XXXX XXXX ( XXXX ) : The U.S. Supreme Court ruled that a taxpayer must recognize income when a debt is discharged to prevent benefiting from both a deduction and continued control over the debt. This principle applies here because Comenity Bank and XXXX XXXX  can not continue reporting and benefiting from the charge-off while the debt has been discharged or sold. XXXX XXXX v. XXXX, XXXX XXXX. XXXX ( XXXX ) : The Tax Court ruled that once a debt is claimed as uncollectible, it can not be treated as still owed. By continuing to report the account, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX, Comenity Bank, and XXXX XXXX are attempting to assert the existence of a debt that has already been deemed worthless. XXXX XXXX XXXX XXXX v. XXXX, XXXX XXXX. XXXX ( XXXX ) : This case reinforces that a creditor can not claim a bad debt deduction while simultaneously attempting to assert the debts collectibility. XXXX v. XXXX, XXXX XXXX XXXX ( XXXX Cir. XXXX ) : The Fifth Circuit ruled that a debt must be proven worthless before a deduction can be claimed, and any subsequent assertion of the debts collectibility would be improper. Please see my request to opt out.