Negative Credit Report Following Settlement Proper

It is fairly common for settlements of litigation involving consumer/small business matters to raise issues about the defendant's credit rating following settlement.

Martinek v. Canadian Imperial Bank of Commerce, 2008 CanLII 32813 (ON S.C.) deals with a claim arising out of such a settlement.

In essence the plaintiff claimed breach of settlement, and related torts, because the Bank recorded a negative credit report following a settlement.

The Court, after reviewing the documentation, held the Bank was right to make the report. In effect, the decision says a negative credit report is proper following a settlement unless the agreement is explicit that such report will not follow.

The Court held:

[4] The linchpin of all these claims by the plaintiff is that CIBC improperly, inaccurately or falsely reported an R9 credit rating in relation to his CIBC Visa account. He asserts that he never would have entered into the settlement agreement with the defendant on March 12, 2004 if

'he had known CIBC intended to file an R9 report, because that report has damaged his credit reputation. '

[5] In the Minutes of Settlement of March 12, 2004, paragraph 3(d) provided ``the plaintiffs will not continue to contest the reporting of the credit facilities or the CIBC Visa to credit reporting agencies as set out in the action nor is there any requirement that CIBC report in any particular way save and except that CIBC will make the best efforts to report the results of this settlement in the nearest reporting cycle``.

[6] Part of that same settlement required the plaintiff to pay $10,000.00 to CIBC to settle his CIBC Visa account. He did so before the deadline for payment and CIBC wrote off the remaining balance of approximately $3,200.00. As a consequence, CIBC subsequently reported the $3,200.00 written off, in lieu of reporting an outstanding balance of $13,200.00. The characterization of the $3,200.00 written off is what triggers the R9 credit coding.

[7] There is no evidence that CIBC has reported false, inaccurate or misleading credit information to the other defendant Equifax Canada Inc. (Equifax). The only evidence is that the credit information given to Equifax was accurate, in accordance with statutory requirements, in conformity with the North American Standard Account Ratings system and done in the ordinary course and usual manner. See the affidavit of Clarence Layne, sworn January 18, 2008.

...

[9] CIBC has a statutory duty under the Consumer Reporting Act to accurately report its customers` credit history and does so in the usual course of its business, using what are known as ``North American Standard Accounting Ratings``. CIBC was required to report the write-off on the Visa account as a bad debt or R9. To report the Visa account as an R7 would misrepresent the plaintiff's credit history because R7 ratings are for settlements engaging structured payment arrangements to pay off a debt over time. To report it as an R1 (as having been paid) would clearly have been inaccurate and incorrect.