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Sunday, May 31, 2009

New Ninth Circuit case regarding credit scoring

Ojo v. Farmers Group, Inc., Ninth Circuit, No. 06-55522 - In a Fair Housing Act action alleging racial discrimination by a homeowner's insurer, the dismissal of the complaint is reversed where the District Court erred by construing the complaint as challenging credit scoring per se, when in fact it only challenged Defendant's use of scoring that resulted in a racially disparate impact.

Read the whole opinion here - http://www.ca9.uscourts.gov/opinions/view_subpage.php?pk_id=0000009553

Saturday, May 30, 2009

15 U.S.C. 1681a - part 10

We are almost done with the explanation of 15 U.S.C. 1681a - the definition section of the Fair Credit Reporting Act. The next subsection I will explain is subsection (u) which defines the term "reseller".

"(u) The term 'reseller' means a consumer reporting agency that - -

(1) assembles and merges information contained in the database of another consumer reporting agency or multiple consumer reporting agencies concerning any consumer for purposes of furnishing such information to any third party, to the extent of such activities; and

(2) does not maintain a database of the assembled or merged information from which new consumer reports are produced."

[In other words, this means a company that buys the credit information from a consumer reporting agency and then resells it to a third party. You see this a lot with mortgage companies that buy "3 in 1" reports from resellers that take the information from all three national credit bureaus and combine them into one credit report that is easier for the loan officer at the mortgage company to use. Subsection (2) makes it clear that a consumer reporting agency could never be a reseller and vice versa.]

"(v) The term 'Commission' means the Federal Trade Commission."

[The Federal Trade Commission oversees the government's enforcement of the Fair Credit Reporting Act so anywhere you see the word "Commission" in the FCRA, its referring to the Federal Trade Commission.]

"(w) The term 'nationwide specialty consumer reporting agency' means a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis relating to - -

(1) medical records or payments;

(2) residential or tenant history;

(3) check writing history;

(4) employment history; or

(5) insurance claims."

[This definition refers to many of the non-traditional consumer reporting agencies, such as those that deal exclusively with medical histories, tenant histories (used by landlords), check writing CRAs such as Telecheck, employment histories used by prospective employers, or companies that maintain records of your insurance claim history.]

"(x) Exclusion of Certain Communications for Employee Investigations

(1) A communication is described in this subsection if --

(A) but for subsection (d)(2)(D), the communication would be a consumer report;

(B) the communication is made to an employer in connection with an investigation of - -

(i) suspected misconduct relating to employment; or

(ii) compliance with Federal, State, or local laws and regulations, the rules of a self-regulatory organization, or any preexisting written policies of the employer;

(C) the communication is not made for the purpose of investigating a consumer's credit worthiness, credit standing, or credit capacity; and

(D) the communication is not provided to any person except - -

(i) to the employer or an agent of the employer;

(ii) to any Federal or State officer, agency, or department, or any officer, agency, or department of a unit of general local government;

(iii) to any self-regulatory organization with regulatory authority over the activities of the employer or employee;

(iv) as otherwise required by law; or

(v) pursuant to section 608."

[In other words, communications that are for investigations of suspected misconduct of employees or regarding compliance with a law, that also does not include the investigation of a consumer's credit history and is not just given out to a third party unless its the employer, a regulatory authority or a Federal or State officer, then its not a consumer report and is not covered by the Fair Credit Reporting Act.]

"(2) Subsequent disclosure. After taking any adverse action based in whole or in part on a communication described in paragraph (1), the employer shall disclose to the consumer a summary containing the nature and substance of the communication upon which the adverse action is based, except that the sources of information acquired solely for use in preparing what would be but for subsection (d)(2)(D) an investigative consumer report need not be disclosed."

[In other words, if a communication that is described in paragraph one is made and an adverse action (i.e. firing, demotion, decision not to hire), the employer must provide a summary of the communication to the consumer, much like a credit grantor must disclose such a summary after an adverse credit action (i.e. denial of credit application).]

"(3) For purposes of this subsection, the term 'self-regulatory organization' includes any self-regulatory organization (as defined in section 3(a)(26) of the Securities Exchange Act of 1934), any entity established under title I of the Sarbanes-Oxley Act of 2002, any board of trade designated by the Commodity Futures Trading Commission, and any futures association registered with such Commission."

This concludes (finally) my explanation of the definition section of the FCRA. Next is 15 U.S.C. 1681b which deals with the permissible reasons why someone can access your credit report.

15 U.S.C. 1681a - Part 9

I continue my explanation of 15 U.S.C. 1681a with subsection (r).

"(r) Credit and Debit Related Terms

(1) The term 'credit issuer' means - -

(A) a credit card issuer, in the case of a credit card; and"

[i.e. Bank of America, Chase, etc.]

"(B) a debit card issuer, in the case of a debit card."

[i.e. your bank or whoever issues your bank card]

"(2) The term 'credit card' has the same meaning as in section 103 of the Truth in Lending Act."

[I think everyone in the nation knows what a credit card is, unfortunately.]

"(3) The term 'debit card' means any card issued by a financial institution to a consumer for use in initiating an electronic fund transfer from the account of the consumer at such financial institution, for the purpose of transferring money between accounts or obtaining money, property, labor, or services."

[You probably know what a debit card is too. Its your ATM card that also allows you to make purchases just like a credit card, except that the money comes directly out of your bank account to pay the seller. Think of it this way, a debit card is like gambling in Vegas with your money. You can get into trouble but you can't lose more than you have. A credit card is like gambling in Vegas on a line of credit from the casino, which means you can lose more than you have and get in big trouble. With a credit card, you can spend more than you have. With a debit card, you can't.]

"(4) The terms 'account' and 'electronic fund transfer' have the same meanings as in section 903 of the Electronic Funds Transfer Act."

[The Electronic Funds Transfer Act (i.e. EFTA) defines "account" as "a demand deposit, savings deposit, or other asset account". So its a bank or other financial instution account that holds your money, but does not include a credit card or other credit type account (i.e. line of credit). An "electronic fund transfer" according to the EFTA is a debit or credit to an account that is initiated electronically.]

"(5) The terms 'credit' and 'creditor' have the same meaings as in section 702 of the Equal Credit Opportunity Act."

[The Equal Credit Opportunity Act defines "credit" as " the right granted by a creditor to a debtor to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor". In other words, the right to charge it but not have to pay for it until later.

The term "creditor" according to the ECOA means "any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit." In other words, any lender such as a credit card company, a bank, a mortgage company, etc.]

"(s) The term 'Federal banking agency' has the same meaning as in section 3 of the Federal Depost Insurance Act."

[The Federal Insurance Act defines "Federal banking agency" as "the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Board of Governors of the Federal Reserve System, or the Federal Deposit Insurance Corporation."]

"(t) The term 'financial institution' means a State or National bank, a State or Federal savings and loan association, a mutual savings bank, a State or Federal credit union, or any other person that, directly or indirectly, holds a transaction account (as defined in section 19(b) of the Federal Reserve Act) belonging to a consumer."

["Financial institution" pretty much means any bank, credit union, savings and loan (do those still exist?), or anyone that holds a transaction account of a consumer.]

Ok, that's it for part 9. Part 10 of the explanation of 15 U.S.C. 1681a will start with subsection (u)'s definition of "reseller".

LifeLock does not work

You've probably heard the ads and seen the commercials for "LifeLock", which claims to be able to prevent your identity from being stolen. Believe me, there's absolutely no 100% way to prevent your identity from being stolen. LifeLock is just another company preying on victims of identity theft or people scared of having their identity stolen.

LifeLock's sales gimmick is that its CEO reveals his real Social Security number on its advertisements, supposedly because LifeLock can prevent his identity from being stolen. Wrong. LifeLock's ads fail to tell you that his identity has been stolen numerous times since his Social Security number started being revealed in LifeLock's ad campaign, despite LifeLock's supposed "protection".

Not only does LifeLock not work, what it does do can be done easily and for free by you. All LifeLock does is add fraud alerts to your credit reports (regardless of whether you are a fraud victim or not), take you off junk mail lists and request your free credit reports for you. Everything that LifeLock supposedly does for you, you can do for yourself with one letter to each of the credit bureaus and the completion of one simple form sent to annualcreditreport.com. Why pay LifeLock over $100 a year for that, especially in this economy.

LifeLock used to automatically tell each of the credit bureaus that its customers were fraud victims, even if they were not. In fact, why sign up for LifeLock AFTER your identity was stolen? Isn't the whole point to sign up and PROTECT your identity? But LifeLock would tell the credit bureaus that its customers were already fraud victims, thereby committing a fraud themselves and, in the process, weakening any case its clients might have under the Fair Credit Reporting Act, since juries don't take kindly to plaintiffs who commit fraud but then complain when someone commits one against them.

I guess LifeLock got sued for this fraudulent practice enough times so that now they only report its customers as fraud victims if they are actually victims of identity theft or suspect they are identity theft victims. But if that is already true, then it is already too late for LifeLock to help them, so what's the point? The truth is ... there is no point to LifeLock. It does not work. It does not do anything that you can't do yourself easily for free. And it does not work. I know I said that last one twice but that was on purpose since LifeLock is a total waste of money.

Advice from this consumer attorney, save your money and DON'T USE LIFELOCK.

Friday, May 29, 2009

Scam alert - www.legalcpn.com

This website is a scam - http://www.legalcpn.com/. This website offers to assign you a "CPN" a.k.a. a "Credit Profile Number" to use instead of a Social Security number. Their claim is that by using a CPN, a consumer can avoid any bad credit history already associated with their Social Security number. Don't fall for their claims, which include:

"CPN Services: For as low as $79.99 we will develop your personal business foundation which will be legal for you to own and operate base on current IRS and business rules of law . Don't be discouraged by CPN witch hunters, who rant and rave over the term 'CPN' which is nothing more than a abbreviated 3 letter word which means; nothing more than, Credit Profile Number; which is simply defined as, 'ANY 9 DIGIT NUMBER WHICH CAN BE USED FOR CREDIT,' which means exactly that! Any 9 digit number that can be used for credit, which can be found in every bank, credit union, or financial institution as a SSN, ITIN, TIN, or EIN. Banks and lending institutions DO IN FACT LEND TO; individuals using SSN's, legal non resident aliens using ITIN's, tax paying individuals using TIN's, and businesses using EIN's! For proof and articles proving, 'Their is life beyond SSN Credit.'"

Using a different number is possibly illegal and, regardless, does not work. The credit bureaus' matching logic, while faulty on multiple levels, is able to see through this charade and simply assign the consumer's SSN bad credit to their new "CPN". So, beware, be aware and don't fall for this scam!

Wednesday, May 27, 2009

Sensitive data missing from National Archives

By LARRY MARGASAK, Associated Press Writer Larry Margasak, Associated Press Writer –

WASHINGTON – The National Archives lost a computer hard drive containing massive amounts of sensitive data from the Clinton administration, including Social Security numbers, addresses, and Secret Service and White House operating procedures, congressional officials said Tuesday.

One of former Vice President Al Gore's three daughters is among those whose Social Security numbers were on the drive, but it was not clear which one. Other information includes logs of events, social gatherings and political records.

Archives spokeswoman Susan Cooper said in a written statement that the agency was preparing to notify affected individuals of the breach. The representative of former President Bill Clinton has been notified, but Cooper gave no indication whether the former president's personal information was on the hard drive.

"The drive contains an as yet unknown amount of personally identifiable information of White House staff and visitors," the statement added.

The FBI is conducting a criminal investigation of the matter, according to Rep. Edolphus Towns, D-N.Y., chairman of the House Oversight and Government Reform Committee. Towns and the committee's senior Republican, Rep. Darrell Issa of California, said they would continue to seek more information.

The lawmakers said they learned of the loss from committee aides after the staff was briefed by the inspector general of the National Archives and Records Administration. There was no indication that anyone has been victimized, aides said.

The drive is missing from the Archives facility in College Park, Md., a Washington suburb. The drive was lost between October 2008 and March 2009 and contained 1 terabyte of data — enough material to fill millions of books.

A Republican committee aide who was at the inspector general's briefing said the Archives had been converting the Clinton administration information to a digital records system when the hard drive went missing.

The aide, who was not authorized to be quoted by name, said the hard drive was left on a shelf and unused for an uncertain period of time. When the employee tried to resume work, the hard drive was missing.

Committee staff members were told there is a copy of the massive amount of information, but Archives officials have only just begun to learn what was on the drive.

Towns said he would have the FBI and inspector general brief committee members so they can "begin to understand the magnitude of the security breach and all of the steps being taken to recover the lost information.

"The committee will do everything possible to prevent compromising the integrity of the FBI's criminal investigation while we fulfill our constitutional duty to investigate the compromised security protocols," he said.

Issa called for the Archives acting director, Adrienne Thomas, to appear before a committee panel Thursday to "explain how such an outrageous breach of security happened."

"This egregious breach raises significant questions regarding the effectiveness of the security protocols that are in place at the National Archives and Records Administration," he said.

Issa said the hard drive was moved from a "secure" storage area to a workspace while it was in use. The inspector general explained that at least 100 badge-holders had access to the area where the hard drive was left unsecured.

Besides those with official access to sensitive material, the inspector general said janitors, visitors, interns and others passed through the area, according to Issa. Further, the workspace is in an area that Archives workers pass through on their way to the bathroom and the door often is left open for ventilation.

"The IG is investigating the situation as a crime with the assistance of the Department of Justice and the Secret Service but they have not yet determined if the loss was the result of theft or accidental loss," Issa said.

New FTC Template May Help Low-Risk Entities Comply With the Red Flag Rules

Federal Trade Commission offers guidance for developing an identity theft prevention program. As technology use increases, it has become significantly easier to fraudulently access a consumer's bank account. In light of this, the Federal Trade Commission (FTC) implemented the Red Flags Rule under the Fair Credit Reporting Act to help mitigate identity theft among consumers.

The Red Flags Rule requires financial institutions and creditors to implement a written Identity Theft Prevention Program to detect the warning signs (“red flags”) of identity theft. By identifying red flags, these entities will be in a better position to spot an imposter trying to defraud them by using someone else's identity. The goal of implementing a Identity Theft Prevention Program is to help business and organizations detect, prevent and mitigate identity theft with regards to existing and new consumer accounts.

On May 13, 2009, the FTC released a template (see the following link - http://www.ftc.gov/bcp/edu/microsites/redflagsrule/RedFlags_forLowRiskBusinesses.pdf )that guides “low-risk” businesses in developing an identity theft prevention program to comply with the Red Flags Rule. Businesses that have personal contact with their customers, provide services at their customer's homes or have never experienced identity theft before are generally considered “low-risk” businesses. The FTC's template provides guidance and instructions enabling companies to complete and print the fill-in-the-blank form online.

Dispute addresses for the Big Three credit bureaus

The big three credit bureaus all have addresses that consumers are supposed to use to dispute inaccuracies appearing on their credit reports. However, Experian likes to play games in order to avoid recceiving disputes from consumers.

Before I discuss Experian's game playing and the best way around it, here are the addresses to use to dispute errors appearing on your Trans Union and Equifax credit reports:

Equifax Information Services
P.O. Box 740241
Atlanta, GA 30374

Trans Union
P.O. Box 2000
Chester, PA 19022

Now, for Experian's games. Experian wants consumers to send their disputes to whatever p.o. box appears on Experian's website and credit reports. However, every so often, approximately once a year, Experian changes its dispute address and closes the p.o. box that it used previously. This causes the dispute letters to either be returned or, more often, just lost in the nether regions of the postal service. This allows Experian to catch up on disputes that its behind on (because there is a time gap before consumers learn of the new p.o. box to send disputes to) and provides a defense of "we didn't get the dispute" if and when Experian is sued by the consumer whose dispute(s) are lost.

The best way around this particular game played by Experian is for consumers to send their disputes to Experian's physical address, which is 701 Experian Pkwy, Allen, TX 75013. It is much harder on Experian to move their entire building than it is to simply close a p.o. box. So send your disputes to Experian's building in Allen, Texas and thus ensure that Experian can't claim it did not receive your dispute letter.

15 U.S.C. 1681a - part 8

Here we go with part 8 of my explanation of 15 U.S.C. 1681a - the definition section of the Fair Credit Reporting Act. The next definition is subsection (p) "consumer reporting agency that compiles and maintains files on consumers on a nationwide basis".

"(p) The term 'consumer reporting agency that compiles and maintains files on consumers on a nationwide basis' means a consumer reporting agency that regularly engages in the practice of assembling or evaluating, and maintaining, for the purpose of furnishing consumer reports to third parties bearing on a consumer's credit worthiness, credit standing, or credit capacity, each of the following regarding consumers residing nationwide:

(1) Public record information.

(2) Credit account information from persons who furnish that information regularly and in the ordinary course of business."

[When thinking about consumer reporting agencies, most people only think of the big three - i.e. Experian, Equifax and Trans Union. But there are many consumer reporting agencies. There used to be hundreds until the big three started buying them up and absorbing them into themselves. Now, there are still many smaller consumer reporting agencies, but most of these do not maintain their own consumer files but instead access the big three's files and prepare 3 in 1 consumer reports for mortgage lenders, automobile finance companies, etc. One exception is CSC, which is a consumer reporting agency that "owns" the credit files compiled by Equifax regarding consumers from approximately 15 states. The credit files of these consumers reside on Equifax's computer but are "owned" and "maintained" by CSC.

The only consumer reporting agencies that fall under the definition of subsection (p) are the big three and certain non-traditional consumer reporting agencies such as Telecheck, which compiles information regarding consumers' check writing histories.]

"(q) Definitions relating to fraud alerts.

(1) The term 'active duty military consumer' means a consumer in military services who --

(A) is on active duty (as definied in section 101(d)(1) of title 10, United States Code) or is a reservist performing duty under a call or order to active duty under a provision of law referred to in section 101(a)(13) of title 10, United States Code; and

(B) is assigned to service away from the usual duty station of the consumer."

[This definition includes any active military serviceman stations away from his or her home and any reservist called up and assigned away from his or her home.]

"(3) The term 'identity theft' means a fraud committed using the identifying information of another person, subject to such further definition as the Commission may prescribe, by regulation."

[i.e. when an identity thief uses any item of the personal information (i.e. name, Social Security number, date of birth, etc.) of a consumer to commit a fraud such as opening a fraudulent credit account.]

"(4) The term 'identity theft report' has the meaning given that term by rule of the Commission, and means, at a minimum, a report - -

(A) that alleges an identity theft;

(B) that is a copy of an official, valid report filed by a consumer with an appropriate Federal, State, or local law enforcement agency, including the United States Postal Inspection Service, or such other government agency deemed appropriate by the Commission; and

(C) the filing of which subjects the person filing the report to criminal penalties relating to the filing of false information if, in fact, the information in the report is false."

[This definition includes police reports that allege identity theft but also includes reports to Federal agencies such as the Secret Service, the FBI and the United States Postal Inspector. I have found in my practice representing victims of identity theft that, many times, police departments refuse to take police reports regarding identity theft. Most of the time, consumers do not realize that they can go to the post office and also make an identity theft report that has the same force and effect as a police report.]

"(5) The term 'new credit plan' means a new account under an open end credit plan (as defined in section 103(i) of the Truth in Lending Act) or a new credit transaction not under an open end credit plan."

[Sounds to me like this means any new account or credit transaction.]

In part 9, I will move on to subsection (r) of 15 U.S.C. 1681a which defines "credit and debit related terms".

15 U.S.C. 1681a - part 7

This post explains 15 U.S.C. 1681a(o) of the Fair Credit Reporting Act, which reads:

"(o) Excluded communications. A communication is described in this subsection if it is a communication"

[A communication must meet all of the following criteria (i.e. 1 through 5) to be considered "excluded"]

"(1) that, but for subsection (d)(2)(D), would be an investigative consumer report;

(2) that is made to a prospective employer for the purpose of

(A) procuring an employee for the employer; or

(B) procuring an opportunity for a natural person to work for the employer;

(3) that is made by a person who regularly performs such procurement;

(4) that is not used by any person for any purpose other than a purpose described in subparagraph (A) or (B) of paragraph (2); and

(5) with respect to which

(A) the consumer who is the subject of the communication

(i) consents orally or in writing to the nature and scope of the communication, before the collection of any information for the purpose of making the communication;

(ii) consents orally or in writing to the making of the communication to a prospective employer, before the making of the communication; and

(iii) in the case of consent under clause (i) or (ii) given orally, is provided written confirmation of that consent by the person making the communication, not later than 3 business days after the receipt of the consent by that person;

(B) the person who makes the communication does not, for the purpose of making the communication, make any inquiry that if made by a prospective employer of the consumer who is the subject of the communication would violate any applicable Federal or State equal employment opportunity law or regulation; and

(C) the person who makes the communication

(i) discloses in writing to the consumer who is the subject of the communication, not later than 5 business days after receiving any request from the consumer for such disclosure, the nature and substance of all information in the consumer's file at the time of the request, except that the sources of any information that is acquired solely for use in making the communication and is actually used for no other purpose, need not be disclosed other than under appropriate discovery procedures in any court of competent jurisdiction in which an action is brought; and

(ii) notifies the consumer who is the subject of the communication, in writing, of the consumer's right to request the information described in clause (i)."

[This definition is a long winded way of saying that what would normally be an investigative consumer report is not one if it is regarding a prospective employee who consents to being investigated before the investigation (i.e. information gathering) is begun. The person/company creating the consumer report must not make any inquiry regarding the consumer that would violate any Federal or State equal employment opportunity law or regulation. The person generating the consumer report must also produce it to the consumer upon request.]

I will pick up with 15 U.S.C. 1681a(p) in part 8.

Monday, May 25, 2009

15 U.S.C. 1681a - part 6

Here's part 6 of my explanation of 15 U.S.C. 1681a (i.e. the definition section of the Fair Credit Reporting Act). This edition starts off with 1681a(l)'s definition of "firm offer of credit or insurance".

"(l) The term 'firm offer of credit or insurance' means any offer of credit or insurance to a consumer that will be honored if the consumer is determined, based on information in a consumer report on the consumer, to meet the specific criteria used to select the consumer for the offer, except that the offer may be further conditioned on one or more of the following:

(1) The consumer being determined, based on information in the consumer's application for the credit or insurance, to meet specific criteria bearing on credit worthiness or insurability, as applicable, that are established

(A) before selection of the consumer for the offer; and

(B) for the purpose of determining whether to extend credit or insurance pursuant to the offer."

(2) Verification

(A) that the consumer continues to meet the specific criteria used to select the consumer for the offer, by using information in a consumer report on the consumer, information in the consumer's application for the credit or insurance, or other information bearing on the credit worthiness or insurability of the consumer; or

(B) of the information in the consumer's application for the credit or insurance, to determine that the consumer meets the specific criteria bearing on credit worthiness or insurability."

[A company has to have a permissible purpose to access your credit report. One such permissible purpose is if the company is making the consumer a firm offer of credit or insurance. Companies often come up with a specific criteria for consumers to which they are willing to offer credit. They then provide this criteria to the credit bureaus, who return the names and addresses of all consumers who meet the company's criteria.]

"(3) The consumer furnishing any collateral that is a requirement for the extension of the credit or insurance that was

(A) established before selection of the consumer for the offer of credit or insurance; and

(B) disclosed to the consumer in the offer of credit or insurance."

[Obviously, if the consumer does not provide the required collateral, the credit grantor should be allowed to get out of its firm offer of credit. However, the required collateral must be established before the firm offer of credit is made, so that the company can not just use the collateral as an excuse to obtain a consumer's credit report but then not follow through with the offer.]

"(m) The term "credit or insurance transaction that is not initiated by the consumer" does not include the use of a consumer report by a person with which the consumer has an account or insurance policy, for purposes of

(1) reviewing the account or insurance policy; or

(2) collecting the account."

[This definition makes clear that a creditor can access its debtor's credit report for account review and collection purposes and that such access is not considered a credit or insurance transaction not initiated by the consumer.]

"(n) The Term 'State' means any State, the Commonwealth of Puerto Rico, the District of Columbia, and any territory or possession of the United States."

[Some provisions of the FCRA can only be enforced by the "State". This definition expands the meaning of "State" beyond the fifty states of the United States to include Puerto Rico, the District of Columbia and any other United States territory or possession.]

The definition of "excluded communications" comes next but is pretty long, so I will cover it in part seven.

Free credit reports are generally not really free

You have all seen the commercials about "free credit reports" with their jingles or catchy sayings. My son, who is only 21 months old, used to stop in the middle of whatever he was doing - playing, crying, eating - to watch the commercials about freecreditreport.com, you know, the ones with the grungy looking band singing a tale about how bad credit ruined their life. People often ask me whether these "free" credit reports advertised on TV are really free.

Unfortunately, they are not. If these "free" credit reports were really free, how would they pay for all the commercials? In reality, you are required to sign up for something (i.e. a year's worth of credit monitoring) to get your "free" credit report. So, unless you want to sign up for something that costs you money, do not use the "free" credit report sites you see advertised on TV.

When the Fair Credit Reporting Act was amended in 2003, Congress mandated that the big three credit bureaus (i.e. Experian, Equifax and Trans Union) set up a website where every consumer in the nation could get one free credit report a year from each of the big three national credit bureaus. This website is http://www.annualfreecreditreport.com/. When you visit this site, it asks for some basic identifying information about you. You then select which of the three credit reports you want to get for free. You can choose one, two or all three, but whichever one(s) you choose, you won't be able to get for another year so choose wisely.

The site then re-routes you to the credit bureaus' websites for the credit reports you chose to get. However, here's where another problem rears its ugly head. Its been reported to me that one or more of the credit bureaus' websites contain arbitration clauses to which you are required to agree to get your Congressionally mandated free credit report. I have already used my free credit reports for the year, so I can not check to see which credit bureaus require arbitration and which do not. However, I find it appalling that consumers are being forced to give away their rights to a jury trial in order to exercise their right to a free credit report. Arbitration is bad because it raises a defense to any lawsuit you might bring against the credit bureaus based upon the contents of the credit reports you receive. A trial is the only place you are on an equal footing with the credit bureaus so you should avoid giving up your right to a jury trial at all costs.

Luckily, there is another way around this. The http://www.annualcreditreport.com/ website also provides a written form that can be completed and mailed in to get your free credit report(s). This form does not include an arbitration clause. Thus, your right to a jury trial is preserved. You can download this form from https://www.annualcreditreport.com/cra/requestformfinal.pdf. You just complete the basic information on the form, fill in the circles for the credit report(s) you want to receive, and mail it to the address located above the shaded box.

Using this form is the only to get a truly free credit report with no strings attached.

15 U.S.C. 1681a - part 5

Continuing with our discussion of 15 U.S.C. 1681a (i.e. the definition section of the Fair Credit Reporting Act), the next definition is an important one in that it defines what constitutes an "adverse action" -

"(k) Adverse Action

(1) Actions included. The term 'adverse action'

(A) has the same meaning as in section 701(d)(6) of the Equal Credit Opportunity Act; and"

[701(d)(6) of th ECOA reads as follows: "For purposes of this subsection, the term 'adverse action' means a denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested. Such term does not include a refusal to extend additional credit under an existing credit arrangement where the applicant is delinquent or otherwise in default, or where such additional credit would exceed a previously established credit limit."

In other words, examples of an adverse action include where a consumer's credit application is denied, where the consumer's existing credit account is messed with by the creditor in an adverse way (i.e. lowering of the credit limit, closing of the account completely or raising of the interest rate), or where a consumer requests one amount of credit but is granted a lesser amount.]

"(B) means

(i) a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of insurance;"

[Adverse actions also include denials of insurance applications or unfavorable changes in the amount of existing insurance coverage or an increase in the cost of existing insurance (i.e. your premium goes up because of the contents of your consumer report)].

"(ii) a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee;"

[Adverse actions also include denials of employment applications, or demotions, pay reductions or other adverse changes to an employment relationship that are based upon a consumer report.]

"(iii) a denial or cancellation of, an increase in any charge for, or any other adverse or unfavorable change in the terms of, any license or benefit described in section 604(a)(3)(D) [Section 1681b]; and"

[1681(a)(3)(D) relates to licenses or other benefits granted by governmental entities where the governmental entity is required by law to consider an applicant's financial responsibility or status. I will cover this in greater detail when we get to section 1681 but I think this section relates to financial benefits like disability or welfare benefits.]

"(iv) an action taken or determination that is

(I) made in connection with an application that was made by, or a transaction that was initiated by, any consumer, or in connection with a review of an account under section 604(a)(3)(F)(ii)[section 1681b]; and

(II) adverse to the interests of the consumer."

[This is the catch all for adverse actions that do not fall under one of the usual examples of adverse actions. Basically, if a consumer applies for something and does not get it because of the contents of his or her consumer report, it is an adverse action. As indicated by this section, this also includes where existing creditors do periodic reviews of its customers' credit reports and find something that makes the creditor want to reduce its risk by lowering credit limits, closing accounts or increasing interest rates.]

"(2) Applicable findings, decisions, commentary, and orders. For purposes of any determination of whether an action is an adverse action under paragraph (1)(A), all appropriate final findings, decisions, commentary, and orders issued under section 701(d)(6) of the Equal Credit Opportunity Act by the Board of Governors of the Federal Reserve System or any court shall apply."

[This section just takes advantage of prior decisions defining adverse actions made by Courts and the Board of Governors of the Federal Reserve System. As a result, the FCRA's definition of "adverse action" did not have to start from scratch.]

The next installment will cover the definition of "firm offer of credit or insurance", another important definition in the FCRA.

Sunday, May 24, 2009

Sample FCRA lawsuits that I have handled

Below is a summary of Fair Credit Reporting Act (and some Fair Debt Collection Practices Act) cases where I have represented consumers over the past two years.

  • FCRA claim against Bank of America - filed in the United States District Court for the Eastern District of New York in September 2008; case involves the theft of the Plaintiff's identity. Identity thief opened a fraudulent checking account in the Plaintiff's name. The Plaintiff alerted Bank of America numerous times that the checking account was fraudulently opened. Despite being made aware of the fraudulent nature of the checking account, Bank of America allowed the identity thief to access the Plaintiff's legitimate home equity line of credit, stealing nearly $10,000 from the Plaintiff. Bank of America then tried to foreclose on the Plaintiff's home because of the $10,000 stolen by the identity thief.

  • FCRA claim against Wells Fargo - filed in the United States District Court for the District of Kansas in July, 2007; Case involves multiple allegations of violations of the Fair Credit Reporting Act, 15 U.S.C. 1681 et seq. committed by Wells Fargo. Wells Fargo sent a "cash and use" check to a person living in Florida with the same or similar name as our client who lives in Kansas. Our client has never lived in Florida. The Florida person cashed the check, but failed to repay the loan. Instead of collecting from the person in Florida, Wells Fargo allegedly made abusive collection attempts against our client, including reporting the erroneous debt onto our client's credit reports with Trans Union, Experian and Equifax. Despite repeated disputes to Wells Fargo and the credit bureaus, Wells Fargo allegedly refused to remove the erroneous debt from the client's credit reports, thereby violating the FCRA. Settled in September 2008.

  • FDCPA claim against Midland Credit - filed in December 2006 in Circuit Court of Marion County, Mississippi. Midland allegedly violated Fair Debt Collection Practices Act by filing a lawsuit against the client to collect fraudulent debt that, even if owed, was barred by the statute of limitations. This case was settled in July, 2007.

  • FDCPA claim against Van Ru Credit Corporation - filed December 2006 in Circuit Court of Harrison County, Mississippi. Removed to United States District Court for Southern District of Mississippi. Van Ru allegedly violated Fair Debt Collection Practices Act by repeated telephone calls to client’s job, despite client informing Van Ru that she was not allowed to receive personal calls at her place of employment. Settled in April 2007.

  • FCRA lawsuit against TransUnion - filed March 2007 in the United States District Court for the Southern District of Indiana. Case involves claims of erroneous publication by TransUnion of an account as thirty days late when in fact the account was never late. As a result, the client was charged higher interest rates on a home loan, resulting in more than $120,000 in liquidated damages. Settled in November 2008.

  • Theft of Identity FCRA lawsuit against Equifax Credit Information Services, Experian Information Solutions, Trans Union and Verizon Wireless - filed April 2007 in Circuit Court of Washington County, Mississippi. Removed to United States District Court for Northern District of Mississippi. Client is a victim of identity theft. Unknown person in Illinois used client's identity to open an account with Verizon Wireless. Despite repeated disputes, neither Equifax, Experian, TransUnion nor Verizon would remove fraudulent account from client's credit reports. Client suffered multiple credit denials, resulting in the filing of a claim under the Fair Credit Reporting Act. Settled January 2009.

  • Mixed file FCRA lawsuit against Equifax Credit Information Services - filed April 2007 in United States District Court for the Southern District of Mississippi, Southern Division. In Fair Credit Reporting Act litigation, client alleges that Equifax merged his credit file with that of his brother, causing the brother's derogatory credit to appear on the client's credit report. The client suffered multiple credit denials due to his brother’s bad credit appearing on his credit report. Settled in September 2008.

  • Mixed file FCRA lawsuit against Equifax Credit Information Services and CSC Credit Services - filed May 2007 in United States District Court for the Southern District of Indiana. Client alleges in this Fair Credit Reporting Act case that Equifax merged her credit file with that of another person with the same first and last name and a similar social security number, leading to the denial of the client's credit application. CSC, Equifax’s agent, failed to correct the errors on the client's Equifax credit report despite repeated disputes. Settled in February 2008.

  • Credit Error FCRA lawsuit against Credit Protection Association and Equifax Credit Information Services - filed May 2007 in United States District Court for District of Arizona. Fair Credit Reporting Act lawsuit arising from an account that was allegedly sent to collection in error. Client disputed erroneous collection to Equifax and Credit Protection on several occasions, yet both allegedly failed to remove the erroneous collection. Settled in January 2008.

  • FDCPA litigation against Gallas & Schultz - filed in May 2007 in Circuit Court of Forrest County, Mississippi. Gallas & Schultz allegedly violated Fair Debt Collection Practices Act by threatening to sue client on time barred debt.

  • FDCPA lawsuit against ER Solutions - filed in May 2007 in Circuit Court of Rankin County, Mississippi. Fair Debt Collection Practices Act claim arising from ER Solutions alleged violations of the FDCPA by threatening litigation against the client regarding time barred debt. Settled June 2007.

  • FDCPA litigation against Allied Interstate - filed in June 2007 in Circuit Court of Carroll County, Mississippi. Allied Interstate allegedly committed multiple violations of the Fair Debt Collection Practices Act by discussing debt with the client’s wife and parents and other third parties, as well as repeatedly calling the client at his place of employment. Settled in April 2008.

  • FDCPA Lawsuit against D.C. Brown & Associates - filed in April 2008 in the Circuit Court of Jackson County, Mississippi. This Fair Debt Collection Practices Act case involves a debt collector who allegedly threatened consumers with being arrested, having their personal property taken away and with a lawsuit over a $300 debt that was over ten years old and thus past the statute of limitations. The collection agency also allegedly cursed the Plaintiffs, calling them "lowlifes" and "deadbeats" in an attempt to embarrass them to pay this old debt.

Neep help?

Any of you need help with errors on your credit report? Are you getting the run around from the credit bureaus? Are Equifax, Trans Union or Experian reporting wrong or incorrect credit information about you? Are you a victim of identity theft? Or have the consumer reporting agencies mixing your credit report with that of another person with a similar name or Social Security number? Or do you have a creditor reporting erroneous information about you or your credit account? Do you think one of the credit bureaus or a furnisher of credit information has violated the Fair Credit Reporting Act?

If you answered yes to any of the above questions, please feel free to contact me via a comment to any post on this blog. I am here to help you.

15 U.S.C. 1681a - part 4

Part four of the summary of 15 U.S.C. 1681a (the definition section of the Fair Credit Reporting Act):

"(h) The term 'employment purposes' when used in connection with a consumer report means a report used for the purpose of evaluating a consumer for employment, promotion, reassignment or retention as an employee."

[In other words, a consumer report that is used by a potential employer when deciding whether to hire a consumer, or a consumer report used by a current employer when deciding whether to promote, reassign or keep an employee, is used for "employment purposes".]

"(i) The term 'medical information' - -

(1) means information or data, whether oral or recorded, in any form or medium, created by or derived from a health care provider or the consumer, that relates to - -

(A) the past, present, or future physical, mental, or behavorial health or condition of an individual;

(B) the provision of health care to an individual; or

(C) the payment for the provision of health care to an individual."

[If the information falls under any of these categories, it is considered "medical information" and can not be included on a consumer report.]

"(2) does not include the age or gender of a consumer, demographic information about the consumer, including a consumer's residence address or e-mail address, or any other information about a consumer that does not related to the physical, mental, or behavioral health or condition of a consumer, including the existence or value of any insurance policy."

[These items are not considered "medical information" and are thus allowed to be on a consumer report or an investigative consumer report.]

"(j) Definitions Relating to Child Support Obligations

(1) The 'overdue support' has the meaning given to such term in section 666(e) of title 42 [Social Security Act, 42 U.S.C. Section 666(e)].

(2) The term 'State or local child support enforcement agency' means a State or local agency which administers a State or local program for establishing and enforcing child support obligations."

[These definitions relate to 15 U.S.C. 1681s-1 which requires consumer reportin agencies to publish information regarding a consumer's failure to pay overdue child support if the information is less than 7 years old and reported to the consumer reporting agency by a State or local child support enforcement agency.]

Part 5 of 15 U.S.C. 1681a will pick up with subsection (k).

Saturday, May 23, 2009

15 U.S.C. 1681a - part 3

More explanation regarding the definitions found in 15 U.S.C. 1681a of the Fair Credit Reporting Act:

"(e) The term "investigative consumer report" means a consumer report or portion thereof in which information on a consumer's character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information. However, such information shall not include specific factual information on a consumer's credit record obtained directly from a creditor of the consumer or from a consumer reporting agency which such information was obtained directly from a credito of the consumer or from the consumer."

[That's a mouthful. Investigative consumer reports are really just reports about consumers that do not directly touch on a consumer's credit worthiness. One example is a report on a consumer's criminal record. Another example is a report regarding the neighborhood a consumer lives in, including the incomes of the consumer's neighbors.

While at least some of the big three credit bureaus sell investigative consumer reports (Experian jumps to mind), I have never heard of a consumer reporting agency actually directly talking to any neighbor or friend of a consumer. They certainly do not talk to anyone when investigating a consumer's dispute of an error appearing on his credit report! In reality, "investigative consumer reports" are just compilations of information about consumers that do not include credit history type information, such as criminal records, driving records, litigation records, insurance claim summaries, etc.]

"(f) The term "consumer reporting agency" means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports."

[This is an important definition. As you can see, it clearly applies to the big three credit bureaus, Experian, Equifax and Trans Union. But it is broader than just the credit bureaus. It applies to any company that compiles information about a consumer for the purpose of the compiled information to third parties. For instance, Telecheck, which keeps up with whether consumers have a likelihood to write bad checks, is a consumer reporting agency since it tracks consumers' check writing history and sells this information to merchants. So just because a company does not call itself a consumer reporting agency does not mean that the FCRA does not apply to them as such.]

"(g) The term "file", when used in connection with information on any consumer, means all of the information on that consumer recorded and retained by a consumer reporting agency regardless of how the information is stored."

[This definition, while appearing obvious at first, is important because of 15 U.S.C. 1681g, which requires a consumer reporting agency to provide a consumer, upon request, with a copy of his or her file. The big three (i.e. Experian, Equifax and Trans Union) prefer to only provide you what they contend is your credit file. But in reality, they are only providing you with part of your "file" as that term is defined by 15 U.S.C. 1681a(g). More on that when we get to 1681g. The credit bureaus also have other information about you, such as "snapshots" of your credit report as it looked at different times in the past or your credit score. Even though these snapshots are not part of what the credit bureaus say is your file, they do fall under 1681a(g)'s definition of "file" and thus should be produced on request. Also, the consumer reporting agencies maintain "audit trails" which are about you but are routinely not produced as part of your "file". Audit trails are the actual information entered by a creditor to access your credit file (i.e. name, SSN, address, date of birth) and also includes the credit score provided by the credit bureau to the creditor and the denial codes that the credit bureau suggests the creditor use if it wants to deny the credit application. These codes translate into textual reasons for denial such as "delinquent credit obligations" or "debt to income ratio too high", etc. that you see on the adverse action letters sent by creditor to denied applicants.

Note also the qualification that it does not matter how the information is stored. If its about you, its still part of your file, even if its in computer format or has not been printed yet. Thus, I think even your credit score is part of your "file" that should be produced upon request.]

I will continue on with 1681a in the next installment.

15 U.S.C 1681a - part two

"(d) Consumer Report

(1) In general. The term 'consumer report' means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer eligibility for

(A) credit or insurance to be used primarily for personal, family, or household purposes;

(B) employment purposes; or

(C) any other purpose authorized under section 604 [(1681b]."

[This means that only credit reports transmitted by a consumer reporting agency to a third party is considered a "consumer report". The credit report provided directly to the consumer by the consumer reporting agency to review is not a "consumer report" but is instead a "consumer disclosure" and thus does not fall under the definition of "consumer report". Also, a credit report is only a "consumer report" if it is either used for personal, family or household purposes, or employment purposes or one of the permissible purposes found in 1681b, which we will cover later. This means that credit reports generated for a business purpose (i.e. a business loan) are not "consumer reports" and thus do not fall under the protections of the FCRA.]

"(2) Exclusions. Except as provided in paragraph (3), the term 'consumer report' does not include

(A) subject to section 624, any

(i) report containing information solely as to transactions or experiences between the consumer and the person making the report;"

[This means that reports that only contain information regarding the dealings between the consumer and the person making the report are not consumer reports. This makes sense because its not an assembly of the overall credit history but only the experiences of that particular consumer with the particular company creating the report.]

"(ii) communication of that information among persons related by common ownership or affiliated by corporate control; or

(iii) communication of other information among persons related by common ownership or affiliated by corporate control, if it is clearly and conspiciously disclosed to the consumer that the information may be communicated among such persons and the consumer is given the opportunity, before the time that the information is initially communicated, to direct that such information not be communicated among such persons;"

[Subsections (ii) and (iii) allow the internal sharing of information between sister corporations or parent/child corporations without triggering the requirements of the FCRA.]

"(B) any authorization or approval of a specific extension of credit directly or indirectly by the issuer of a credit card or similar device;"

[In other words, the conveying of a decision to grant or deny a credit application is not a "consumer report" but is obviously often based upon a "consumer report".]

"(C) any report in which a person who has been requested by a third party to make a specific extension of credit directly or indirectly to a consumer conveys his or her decision with respect to such request, if the third party advises the consumer of the name and address of the person to whom the request was made, and such person makes the disclosures to the consumer required under section 615 [1681m]; or"

[I am not sure exactly what this section is talking about. It might be the situation where a consumer is attempting to make a purchase (i.e. a car) and the seller shops the note on the purchase to different potential lenders. The communications from these lenders to the seller regarding whether they will grant credit are not "consumer reports".]

"(D) a communication described in subsection (o) or (x)."

[We'll get to these when we cover subsections (o) and (x).]

"(3) Restriction on sharing of medical information. Except for information or any communication of information disclosed as provided in section 604(g)(3), the exclusions in paragraph (2) shall not apply with respect to information disclosed to any person related by common ownership or affiliated by corporate control, if the information is --

(A) medical information;

(B) an individualized list or description based on the payment transactions of the consumer for medical products or services; or

(C) an aggregate list of identified consumers based on payment transactions for medical products or services."

[Basically, the "consumer report" can not include medical information, even just a name of a medical provider, if that name reveals any type of private medical information about the consumer (i.e. a bill from a "Cancer Hospital").]

This concludes the definition of "consumer report" which is long but obviously important. The next post will continue the definitions section of 15 U.S.C 1681a.

Thursday, May 21, 2009

Credit Card law

I posted about the credit card bill passed by the Senate a few days ago. The underlying theme of my post was that this law was not good enough. Well, I don't know if I just read it wrong or if the House changed it, but the version passed by the House was much better than what I posted about.

The bill as passed by the House would generally bar interest rate increases on existing balances unless a cardholder has failed to make even a minimum payment for 60 days. It would outlaw double-cycle billing, require 45 days' notice before any interest rate increase and prohibit increases any time in the first year after an account is activated. The legislation would also require card companies to apply a consumer's monthly payment to the debt with the highest interest rate, or to all debts equally.

This obviously alleviates a lot of my fears. First and foremost, it bars interest rate increases on existing balances unless the consumer fails to make a minimum payment for at least 60 days. Of course, knowing the credit card industry, our minimum payments will now go way up.

I also like the provision about applying the payments to the balances with the higher interest rates. I have a credit card right now that offered me this great 0% rate for any balance I transferred to the card. I usually paid this particular credit card off every month. However, apparently before I transferred the balance but after I had paid the card off from the previous month, several transactions posted. So there was a balance on the card before I transferred the balance that the 0% rate applied to. Because this particular card applies payments to the balance subject to the lower interest rate first, my payments ever since the transfer have applied to the balance with the 0% rate, leaving the other balance accumulating finance charges every month. Luckily, its not much, but if this had occurred after the new law that was just passed by Congress, that balance would have been paid first and I would actually get the full benefit of the 0% rate.

President Obama has not signed the bill into law yet, but it shouldn't take him long. Thank you, President Obama, for once again helping to level the playing field for us consumers.

More on President Obama's preemption memo

A few of the highlights from the executive memorandum regarding preemption:
  • Heads of departments and agencies should not include in regulatory preambles statements that the department or agency intends to preempt State law through the regulation except where preemption provisions are also included in the codified regulation.

  • Heads of departments and agencies should not include preemption provisions in codified regulations except where such provisions would be justified under legal principles governing preemption, including the principles outlined in Executive Order 13132.

  • Heads of departments and agencies should review regulations issued within the past 10 years that contain statements in regulatory preambles or codified provisions intended by the department or agency to preempt State law, in order to decide whether such statements or provisions are justified under applicable legal principles governing preemption. Where the head of a department or agency determines that a regulatory statement of preemption or codified regulatory provision cannot be so justified, the head of that department or agency should initiate appropriate action, which may include amendment of the relevant regulation.

This is great news for all of us who have been fighting federal regulatory attacks our states consumer protection laws. Now, we need to get those regulatory heads to undo the terrible preemption work done over the last decade.

Don't forget...

any questions you may have regarding the Fair Credit Reporting Act, the consumer reporting agencies (i.e. Experian, Equifax or Trans Union), the credit card industry, or just consumer law or personal injury law in general, please feel free to ask via a comment to any posting on this website.

Excellent news on the preemption front!

As you may know, the Bush administration adopted a policy of including preemption provisions in federal regulations, unilaterally taking away your right to your day in court. These preemption provisions effectively circumvented any state laws designed to protect you, the consumer. They were neither voted on by you, nor passed by your representatives in Congress, nor even reviewed by the judicial branch. It was basically a terrible example of the executive branch legislating instead of governing.

Yesterday, the Obama administration took the first large step in correcting the preemption attrocities of the Bush administration. President Obama issued an executive memorandum to all federal agencies, mandating that no provisions for federal preemption shall be included in federal regulations except under extraordinary circumstances. Also, the executive memorandum requires that all preemption provisions enacted or written by any federal agency in the past ten years be rewritten to provide that state laws are not pre-empted.

This, my friends, is big. Thank you, President Obama, for leveling the playing field for consumers like us.

Tuesday, May 19, 2009

15 U.S.C. 1681a

The first "lettered" section of the Fair Credit Reporting Act is 15 U.S.C. 1681a. This is the "definition" section of the FCRA. This section of the FCRA is quite lengthy, so I am going to split up the explanation of 1681a into several posts.

15 U.S.C. 1681a is entitled "Definitions; rules of construction" and begins:

"(a) Definitions and rules of construction set forth in this section are applicable for the purposes of this title."

This means the definitions and rules of construction in the rest of the 1681a apply to the entire FCRA.

The first actual definition is found in subsection (b).

"(b) The term 'person' means any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity."

Bet you didn't know that the word "person" had to be defined. The reason behind the definition of person is to differentiate it from "consumer". The word "person" is broader than "consumer".

"(c) The term 'consumer' means an individual."

Told you "consumer" was less broad than "person". This means that a "consumer report" is only about an actual living individual, not a corporation, assoication, trust, estate, etc. Thus, a credit report about something other than a consumer is not a "consumer report" and is therefore not subject to the FCRA.

Speaking of consumer reports ... we'll discuss their definition in the next post.

New credit card law - good but not good enough

The Senate today passed a bill that has received a lot of attention all over the news and internet as being a win for consumers against the credit card industry. Unfortunately, its bark is much worse than its bite.

The bill was hyped as being aimed at preventing credit card companies from unilaterally raising your credit card's interest rate. You know, the way they do it now is to write you a letter that says "we are changing our contract to which you agreed." They then go on to say something to the tune of "deal with it or we'll cancel your card". The consumer in essence wields no power, except to not use credit cards at all. Then what would the Bank of Americas of the world do? But I digress.

The problem with the credit card law that the Senate passed today 90 to 5 is that it doesn't live up to its hype. Instead of preventing credit card companies from unilaterally changing your contract, the new law just makes the credit card companies give 45 days notice and an "explanation" before unilaterally raising your rate. I'm sure those "explanations" will be sooooo compelling. They will probably be based upon the same "explanations" given by the credit card companies when they deny your credit card application, you know - those cryptic explanations given that are actually supplied by the credit bureaus based upon the often inaccurate contents of your credit report.

Also, assuming the House passes substantially the same bill as the Senate, the law will not go into effect for at least nine months. I predict a rash of increases to credit card interest rates which, at the current stage of the recession, would be terrible for consumers. Once again, a bill is passed that is "billed" as being pro-consumer when, in reality, it does little to help the consumers and, in the short run, will hurt consumers when they are at their most vunerable.

Sunday, May 17, 2009

Finally getting to it ...

When I first started this blog, I promised to go through and explain each section of the Fair Credit Reporting Act. Its taken a while for me to start following through on that promise but here is the first installment ... finally.

The Fair Credit Reporting Act (or "FCRA" for short) is divided up into different statutes (a.k.a. sections) that all start with 15 U.S.C. 1681 (for example, 15 U.S.C. 1681a, 1681b, 1681s-2, etc.). The first section is 15 U.S.C. 1681 (with no letter). 1681 simply sets forth the findings of Congress that brought about their decision to enact the FCRA and the overall purpose of the FCRA.

1681 starts off - "(a) Accuracy and fairness of credit reporting." (emphasis in original). It is very fitting that the first word of the first section of the FCRA is "accuracy". Seems to me that means accuracy is an important part of the FCRA statutory scheme.

The next portion of subsection (a) of 1681 reads "The Congress makes the following findings:

(1) The banking system is dependent upon fair and accurate [there's that word again] credit reporting. Inaccurate credit reports directly impair the efficiency of the banking system, and unfair credit reporting methods undermine the public confidence which is essential to the continued functioning of the banking system."

In other words, Congress found that the accuracy of credit reports is crucial to the functioning of the banking system. As can be seen from the current recession, public confidence in the banking system is important for its continued functioning. Inaccurate credit reports undermine that public confidence. Thus, Congress decided that it needed to pass legislation to regulate the consumer reporting agencies and, more importantly, the accuracy of the credit reports they generate. As a result, the FCRA was born.

The next Congressional finding was as follows:

"An elaborate mechanism has been developed for investigating and evaluating the credit worthiness, credit standing, credit capacity, character, and general reputation of consumers."

This refers to the way in which potential credit grantors (and even current creditors) decide whether a consumer's business is worth the risk of lending money to the consumer. The primary basis for this decision is the consumer's credit report. Thus, if the credit report is inaccurate, the wrong decision is likely to be made. And credit reports are used in more than just decisions on whether or not to grant someone credit. Credit reports are also used by some employers when deciding whether to give someone a job and during insurance underwriting (i.e. when an insurance company determines whether to insure you and, if so, what premium to charge). Credit reports therefore affect multiple areas of consumers' lives, making their accuracy of the utmost importance.

The next finding was: "(3) Consumer reporting agencies have assumed a vital role in assembling and evaluating consumer credit and other information on consumers."

In other words, the credit bureaus decided to get into the business of credit reporting and they should therefore do it right.

The final finding was: "(4) There is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer's right to privacy."

In other words, the whole purpose of the FCRA is to regulate the consumer reporting industry.

Section (b) of 1681 reads:

(b) Reasonable procedures. It is the purpose of this title to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevance, and proper utilization of such information in accordance with the requirements of this title."

In other words, consumer reporting agencies are supposed to utilize reasonable procedures to assure the accuracy of the credit reports they create. Thus, the FCRA is not a strict liability statute but, if the credit bureaus fail to act reasonably when creating credit reports, they violate the very essence of the FCRA. Acting reasonable means either doing what a reasonable person would do under like or similar circumstances or not doing what a reasonable person would not do under like or similar circumstances.

Unfortunately, as will be discussed in subsequent postings, the consumer reporting agencies wholly and completely fail to act reasonably when it comes to the accuracy of the credit reports of consumers.

Monday, May 11, 2009

Prior lawsuits

I have been representing consumers in lawsuits via the Fair Credit Reporting Act since September 1999. In this time, I have represented consumers in litigation against pretty much all the major names in the credit industry, from the three credit bureaus (Equifax, Experian and Trans Union) to all the major banks (Bank of America, Capital One, Citibank, MBNA, Bank One, etc.). I have also sued companies like Verizon, Navy Federal Credit Union, Ford Motor Credit Company and American General.

Most of the FCRA lawsuits that I have handled arose from the theft of my client's identity. Sometimes I sue the creditors that opened the fraud accounts for what I call "negligent enablement of identity theft". Other times I simply sue the creditors and/or the credit bureaus for refusing to remove the fraudulently opened accounts from my clients' credit reports. Such lawsuits allege various violations of the Fair Credit Reporting Act, such as violations of the credit bureau's duty to perform a reasonable investigation of the disputed information pursuant to 15 U.S.C. Section 1681i or the furnisher's (i.e. the credit card company) duty to perform a reasonable investigation of the disputed information pursuant to 15 U.S.C. Section 1681s-2(b). You can't sue for violations of 1681s-2(a) as there is no private cause of action for violations of that part of 1681s-2. The FCRA also requires consumer reporting agencies to follow reasonable procedures to assure maximum possible accuracy of the credit reports they prepare.

For negligent violations of the Fair Credit Reporting Act, consumers can recover their actual damages (i.e. money lost due to increased interest rates, emotional distress, humiliation, etc.), plus reasonable attorneys' fees and court costs. For willful violations (i.e. violations committed either intentionally or with reckless disregard for the requirements of the FCRA), the consumer can also recover punitive damages. If proper representation is utilized, FCRA cases can have significant case value due to the seriousness of the damages involved, particularly the emotional damages arising from the consumer's feeling of loss of control of his or her finances.

FCRA conference in Chicago

The FCRA conference in Chicago this weekend was a very big success. Hundreds of consumer lawyers and consumer advocates learned what they need to know to go toe to toe with the credit bureaus and the credit card industry.

As I mentioned before, there were two conference "tracks", one for beginners and the other for advanced practicioners. I spoke four times, three times to the beginner track and once to the advanced track.

Chris Green (a Seattle, Washington consumer lawyer) and I taught the 150 or so "beginners" how to read credit reports. Jim Francis (a Philadelphia, PA consumer lawyer with Francis & Mailman) and I lectured the beginners regarding the responsibilities of consumer reporting agencies (a.k.a. credit bureaus), including their duties under 15 U.S.C. Sections 1681i, 1681e(b), 1681g, 1681b and 1681c. Elizabeth De Armand and I did our best to cover the very difficult topic of qualified immunity and preemption under the FCRA. Qualified immunity arises from 15 U.S.C. 1681h(e) while preemption comes primarily from 15 U.S.C. 1681t(b)(1)(F). We only had 30 minutes to cover this topic which is not near enough time, but we did our best.

Finally, I spoke to the advanced track with Oregon consumer lawyer Robert Solo, Jim Francis and Mark Mailman (both from Philadelphia) and my good friend Sonya Valentine, a Maryland/D.C. consumer attorney. Our topic was about marketing and ethical issues arising as a consumer attorney.

For those of you who attended the conference, I truly enjoyed speaking and all the insightful questions I received. For those of you who did not attend, where were you?!

Sunday, May 3, 2009

NACA's FCRA conference agenda #2

And here's the agenda for the advanced track:

FCRA Conference 2009
Advanced Agenda

Friday, May 8

Other Possible Uses of the FCRA: 1-3:00 pm
Understanding Other Databases and Specialty Consumer Reports: Employment, Tenant and Criminal Records (looking at new defendants and cases to bring)
Foreclosures, loan modifications and the Fair Credit Reporting Act

Break

FCRA – Latest Development: Case law and Strategies 3:15-3:45pm

Running a Successful and Ethical FCRA Consumer Law Practice 3:45-5:15pm
Expanding and Marketing Your Practice
Building and developing co-counsel relationships
Collaborating and assisting other NACA members

Saturday, May 9

Discovery and Settlement 8:30-10:30am
How to Effectively Use Experts
Evidence issues: credit reports – how to get them introduced
: establishing “willfulness”

Break

Discovery and Settlement 10:45-12:30
Documents- what are all the documents you need to know about
Advanced deposition practice (clients and defendants)

Lunch (12:30- 2:00pm)

Discovery and Settlement 2:00 -3:15pm
Getting significantly higher settlement in every day cases: Establishing real damages:

Information Sharing on Common Players: A Round Table Discussion 3:30-5:30pm
Understanding defense counsel
Understanding common defendants
Joint Session Agenda
Preparing for Trial

Sunday, May 10


Taking and Defending Depositions 9:00-10:15am
Real life examples

Break

Opening Statements 10:30-11:30am

Closing Arguments 11:30-12:3am

NACA's FCRA conference agenda

I mentioned in a previous post that I am speaking at this year's NACA FCRA conference in Chicago. Here's the agenda for the beginner's track

FCRA Conference 2009
Newcomer Agenda

Friday, May 8

Overview of FCRA Litigation Practice (using available resources) 1:00-1:30pm

Responsibilities of Credit Reporting Agencies 1:30-2:30pm

Responsibilities of Furnishers 2:30-3:15pm

Break

Permissible Purposes for Accessing Credit Report 3:30-4:10pm

Claims Under FACTA 4:10-4:45pm
State Causes of Action and Preemption concerns 4:45-5:15pm

Saturday, May 9

How to Read credit reports 8:30- 9:30am

Understanding Background Checks and Employment Reports 9:30-10:30am

Break

The Business of Running an Ethical FCRA Practice 10:45-11:30
Helping ID Theft Victims

Case Selection and Setup – What Makes a Good Case 11:30-12:30
Client selection
Managing the cases

Lunch

Conducting Basic Discovery 2:00-300pm

Damages: (Thinking Like a PI Lawyer) 3:00-3:45pm

Break

Motion Practice – How to Avoid Summary Judgment 4:00-4:45pm

Ethically Settling or Trying Cases 4:45-5:45pm
Multi-Defendant Strategies
What cases should we settle (and how)
What cases should we try

Joint Session Agenda
Preparing for Trial

Sunday, May 10


Taking and Defending Depositions 9:00-10:15am
Real life examples

Break

Opening Statements 10:30-11:30

Closing Arguments 11:30-12:30

Pintos v. Experian

A new ruling from the Ninth Circuit Court of Appeals regarding an impermissible pull (15 U.S.C. 1681b) case.

"Experian loses ruling that could strengthen Fair Credit Reporting Act
The U.S. 9th Circuit Court of Appeals rules in favor of a woman who had been pursued by a collection agency that used an Experian credit report to try to recover a towing fee owed by her son." - rest of story at http://www.latimes.com/business/la-fi-experian-privacy1-2009may01,0,3821982.story

Looks like a good one for consumers.

Saturday, May 2, 2009

FTC to study using credit scores to set insurance premiums

The FTC is conducting a study "on the effect of credit-based insurance scores on the availability and affordability of homeowners insurance". As you may know, most insurance companies now use your credit score as part of (1) the decision to insure you and (2) if they do insure you, the calculation of how much your premiums will be. Read more here - http://www.ftc.gov/opa/2009/04/facta.shtm.

I've never understood how missing a payment or not paying a medical collection (that you might not even know about) can predict whether you are going to have a wreck or a house fire or flood. But that's exactly what the insurance companies claim, that your payment history is an indication of whether you will have an insurance claim. Maybe this study will reveal this to be the farce that it is.

Good grief, Charlie Brown

"FTC Will Grant Three-Month Delay of Enforcement of ‘Red Flags’ Rule Requiring Creditors and Financial Institutions to Adopt Identity Theft Prevention Programs" - like creditors and financial institutions weren't aware of identity theft?!

The link to the article on the FTC website is http://www.ftc.gov/opa/2009/04/redflagsrule.shtm. Enforcement of this part of FACTA, which was only passed approximately 6 (yes 6) years ago, has now been delayed until August 1, 2009. How long does it take to adopt something that all creditors should already have, i.e. common sense?! What a joke. Thank God for common law negligence so there's at least something that can be enforced against creditors for negligently allowing theives to steal your identity!

Truly Free Credit Report

You've seen the ads for "free" credit reports, even set to funky little songs like "free credit report dot coooooom". But most, if not all, of the so called "free" credit reports you see on tv or online are not really free. They make you sign up for some service to be able to get your "free" credit report.

The only truly free credit reports are the ones you can get through http://www.annualcreditreport.com/, which is the website mandated by Congress when the FCRA was last amended. You can get one credit report from each of the three national credit bureaus (Equifax, Experian and Trans Union) per year (for a total of three). You can get them at the same time or spread them out, whatever you prefer. Your credit score does not come with the free credit reports, but you can add your score for a small fee (like $5).

You can get your free credit reports three different ways. One is by visiting http://www.annualcreditreport.com/, which then redirects you to the websites for whichever credit report(s) you want to obtain. Each bureau's website will make you jump through a few hoops to verify that you are you. Most of the time this is easy, like picking the amount of your car payment or the name of your mortgage company from a multiple choice list. This can get tricky if you are a victim of identity theft and the credit bureau asks you about an account that was opened fraudulent and, as a result, you have no or little knowledge about. The other pitfall is that the credit bureau's website might require you to agree to arbitration to get your credit report. This REALLY irks me since that means you are required to give up your right to a jury trial (and maybe other rights) in exchange for something that you are already entitled to (i.e. your Congressionally mandated free credit report).

The best way around the potential arbitration and verification issues is to request your free credit report(s) via regular mail. This takes a little longer, but just a few days. You must use the correct form, which can be found at https://www.annualcreditreport.com/cra/requestformfinal.pdf, but it does not contain any arbitration clauses to worry about. This is how I request my credit reports once a year.

The last way to get your free credit report is by calling. I have never tried this option so I can not comment on any pitfalls that might be associated with calling. The number is 1-877-322-8228 and allegedly includes some type of verification process.

Of course, you can always request your credit reports directly from the credit bureaus even if you have already gotten your free credit report. But that requires you to pay a fee to obtain the credit report unless you have been denied credit based on that credit bureau's credit report regarding you within 60 days, or you are disputing an error (the credit bureau is supposed to send a free updated credit report after its "investigation" of your dispute) or if you indicated that you believe there are errors on your credit report as a result of fraud.

Please let me know if you have any questions.

Questions, topics, comments?

If any of you have questions about the Fair Credit Reporting Act or have topics concerning the FCRA that you want covered in greater detail, just say the word and I'll be happy to give you my opinion. Just leave your question, topic or comment in a "comment" to any post and I'll address it as soon as I can. I also handle Fair Debt Collection Practices Act cases as well as general personal injury (i.e. car wrecks, slip and fall, etc.) so if you have questions concerning those areas of the law, go ahead and ask.

A little bit about me

I have been practicing law since 1999 but have worked for attorneys since my senior year in high school in 1991. My first legal experience came as a lowly runner for a very successful husband and wife law firm - the now defunct Lewis & Lewis, P.A. Mike and Pauline Lewis were excellent attorneys and quickly took me on as an apprentice. I quickly worked my way up to paralegal and got to attend many trials, first because I was good at carrying file boxes into the courthouse and later because I show an aptitude for the legal profession. Thanks to Mike and Pauline, I had witnessed several trials, including multi-million dollar verdicts, before even stepping foot into law school.

Mike and Pauline also had what was at the time the largest verdict against a credit bureau, a $4.47 million dollar verdict against Trans Union in the Northern District of Mississippi, Eastern Division in Aberdeen, Mississippi. The plaintiff in the case was a victim of identity theft when his brother allegedly stole his identity and opened several accounts and even bought a vehicle in the plaintiff's name. This was Mike and Pauline's first case (and mine too) utilizing the Fair Credit Reporting Act. Pauline initially was just trying to help the plaintiff clear up his credit by writing dispute letters on his behalf. When that didn't work, they sued Trans Union, who removed the inaccurate and fraudulently opened accounts and paid a confidential settlement. The story should have ended here but, as so often happens with the credit bureaus, the inaccurate information reappeared on the plaintiff's credit report. Mike and Pauline sued Trans Union again for the plaintiff and this time refused to settle. The case went to trial in 1996 (my first year in law school) and resulted in a $50,000 compensatory award and a $4.47 million dollar punitive verdict.

The verdict was appealed and, in my opinion, wrongly reversed by the Fifth Circuit Court of Appeals in New Orleans, Louisiana. However, the plaintiff was able to make history, get Trans Union's attention and the national press from the verdict resulted in Mike and Pauline (and eventually me) getting hired by clients all over the nation to represent them against Trans Union and the other credit bureaus.

Since then, Mike and Pauline have retired from the practice of law but I have continued to represent consumers in litigation against the credit bureaus all over the nation, from my home in Mississippi to Montana, New York, Texas, Louisiana, Indiana, Kansas, Colorado, Connecticut and Maryland, to name a few.

NACA's FCRA Conference

I am attending and speaking at the National Association of Consumer Advocates' bi-annual Fair Credit Reporting Act conference in Chicago, Illinois this coming weekend. I have spoken at this conference every year since its inception in 2000 (it was an annual conference until 2008) and have served on its steering committee the last few years.

This year's conference is May 8 through 10 at the Hyatt Regency in Chicago. The conference will be different this year, in that it will have two tracks, one for beginners and one for more advanced practicioners of the FCRA. Thus, this conference offers something for every attorney interested in representing consumers in litigation against the credit reporting agencies Experian, Equifax and Trans Union or against furnishers of inaccurate credit information (i.e. credit card companies, mortgage companies, collection agencies and public record vendors).

The only problem with this year's conference is that the Cubs are not playing at home while the conference is ongoing. Other than that very important detail, this year's conference should be excellent and boasts an excellent line up of speakers.