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Wednesday, November 25, 2009

Part 1 of explanation of 15 U.S.C. 1681e

Here's part one of my explanation of 15 U.S.C. 1681e.

"`Section 607.  Compliance procedures [15 U.S.C. 1681e]

(a)  Identity and purposes of credit users.  Every consumer reporting agency shall maintain reasonable procedures desinged to avoid violations of section 605 [Section 1681c] and to limit the furnishing of consumer reports to the purposes listed under section 604 [Section 1681b] of this title.  These  procedures shall require that prospective users of the information identify themselves, certify the purposes for which the information is sought, and certify that the information will be used for no other purpose.  Every consumer reporting agency shall make a reasonable effort to verify the identity of a new prospective user and the uses certified by such prospective user prior to furnishing such user a consumer report.  No consumer reporting agency may furnish a consumer report to any person if it has reasonable grounds for believing that the consumer report will not be used for a purpose listed in section 605 [section 1681b] of this title."

[This section requires the credit bureaus to have reasonable procedures to prevent impermissible accesses to consumers' credit reports.  Unfortunately, the CRAs procedures are not that good.  Other than the initial investigation of a new user before the CRA will start selling reports to it, the CRAs only require a "certification" that the user is getting the credit report for a permissible purpose.  The problem is that the user can "certify" any reason it wants that permissible whether its really the reason why its getting the credit report or not.  Only after the user gets caught will the CRA be on notice that the user is not on the up and up, which then causes the last sentence of 1681e(a) to kick in.]

"(b)  Accuracy of report.  Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates."

[This is by the far the most important section I have explained yet, at least to my practice.  Virtually every lawsuit I file against a credit bureau includes alleged violations of 1681e(b) (called "e(b)" claims for short).  My FCRA cases typically fall under two categories - those arising from identity theft and those arising from mixed files.  Identity theft cases almost always involve disputes by consumers of the inclusion of the fraudulently opened accounts which are then "investigated" by the credit bureau.  A significant number of the so called "investigations" are botched by the credit bureaus.  These botched investigations violate 1681i of the FCRA.  However, the botched investigations also arguably lead to violations of 1681e(b) when the CRA generates credit reports containing the disputed but not reasonably investigated accounts.

A clearer violation of 1681e(b) happens in mixed file cases.  In mixed file cases, the CRAs generate credit reports using their matching logic which does not use an exact match between the SSN on the account to the SSN of the consumer before putting the account on the consumer's credit report.  This results in accounts of someone with a similar name and SSN showing up on the consumer's credit report.  The argument is that utilizing a matching logic to create a credit report where the SSN is not even required to match is not a reasonable procedure to assure the maximum possible accuracy of the report.]

"(c)  Disclosure of consumer reports by users allowed.  A consumer reporting agency may not prohibit a user of a consumer report furnished by the agency on a consumer from disclosing the contents of the report to the consumer, if adverse action against the consumer has been taken by the user based in whole or in part on the report."

[Once upon a time, a consumer would ask his bank for a copy of his credit report and the bank would tell the consumer that it was not allowed by its contract with the CRA to give the consumer a copy of his credit report.  Now, a consumer asks his bank for a copy of his credit report and, guess what, the bank still tells the consumer that the CRA does not allow it to give the consumer the report.  While I am sure its not in writing anywhere, I would be willing to bet that CRAs still tell its users not to give out copies of the credit reports it obtains.  Regardless, at least the consumer can now tell the bank that what its saying is not true.]

I will continue my explanation of 15 U.S.C. 1681e with part (d) in part 2 of the explanation.

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