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Monday, December 31, 2012

Equifax buys CSC


Credit bureau Equifax recently purchased CSC Credit Services, Inc. for the price of $1 Billion.  CSC was one of the last (if not THE last) of the affiliate bureaus to the big three credit bureaus.  Back when I started suing credit bureaus using the Fair Credit Reporting Act, there were several affiliate bureaus to the credit bureaus, including CSC and one right up the road from here called Memphis Consumer Credit Bureau.  

The affiliate bureaus basically "owned" the credit files of consumers living in certain geographical areas, even though the data comprising the credit files were stored on one of the big three bureaus' computer systems.  CSC owned consumers' Equifax credit files from Texas to Indiana (I know because I have sued them in both states and many in between).  

This led to a lot of confusion for consumers, who would buy their Equifax credit reports, find an error, then dispute the error to Equifax.  At first, Equifax would just write the consumer back and say that Equifax did not own their file and they would have to contact CSC to dispute the error.  They stopped this practice eventually, probably because lawyers (myself included) kept arguing that Equifax, when it receives a dispute, has to investigate it, particularly when the disputed data is housed on Equifax's computer system.  Equifax never did agree, but started forwarding the disputes themselves to CSC to "investigate", instead of relying on the consumer to re-send the dispute.

The Equifax/CSC relationship made for trickier lawsuits, since Equifax retained the duty to "follow reasonable procedures to assure maximum possible accuracy" of the credit reports it generated, but shifted the responsibility for performing reasonable procedures to CSC since they owned the data that Equifax was publishing for the consumers located in CSC's ownership area.  So, in some cases you would need to sue both Equifax and CSC but in some (those involving only botched investigations) you could sue just CSC.

At least the purchase of CSC will possibly do away with some of the confusion, both for consumers and lawyers suing Equifax.  

Funny side note - I got word of the purchase of CSC by Equifax a couple of weeks ago (I'm slow to blog about it thanks to the holidays and a busy work schedule).  After hearing the news, I received a call from an Equifax attorney on the other side of one of my FCRA cases.  I told him about it and he had not even heard yet.  Then, a week or so later, he calls and leaves me a message to "let me know" that Equifax had purchased CSC.  Funny, I thought I had let him know, not the other way around.  Guess even Equifax's attorneys do not follow reasonable procedures to assure maximum possible accuracy.

Thursday, December 27, 2012

Fifth Circuit affirms FCRA verdict


The United States Court of Appeals for the Fifth Circuit recently affirmed a verdict in a Fair Credit Reporting Act case from the United States District Court for the Western District of Texas against consumer finance company Santander Consumer USA.  In the lawsuit, the plaintiff alleged that Santander failed to properly investigate his disputes of its erroneous publications to the credit bureaus.  The jury agreed and found that Santander had negligently failed to properly investigate the plaintiff's disputes.  Santander did not dispute the jury's finding of liability on appeal but did dispute the sufficiency of the plaintiff's proof of the damages he suffered.  However, the Fifth Circuit found the plaintiff's proof to be sufficient to affirm the verdict.

Santander contended on appeal that the proof of the plaintiff's damages resulting from the inclusion of the erroneous listing of the Santander account on his credit report was not sufficient to support the verdit in the consumer's favor.  The consumer's damages included a lowered credit limit, increased interest rate on a refinanced mortgage, the deferment of personal expenditures due to the uncertainty of his credit situation and mental pain and anguish, embarrassment, and difficulties caused to family and business relationships.  While the Fifth Circuit found that a diminution of his credit line alone is not sufficient to support the damage award, the Court found the rest of the plaintiff's proof sufficient to support the $20,437.50 verdict in his favor.  The consumer's attorney should also be entitled to his attorneys' fees to be paid by Santander, an amount which, given the time spent trying the case and then having to defend an appeal, should dwarf the verdict.

It is good to see the Fifth Circuit affirm a verdict like this.  It even cited one of my old cases, Cousin v. Trans Union Corp., as support for the plaintiff's damage claim.  

Thursday, December 13, 2012

CFPB to release report on CRAs soon

It looks like the Consumer Financial Protection Bureau is now moving past its initial first steps and moving on to the type of topics it was created to address.  Below are the prepared remarks from its director Richard Cordray which I received ahead of the press call later today.  I can't wait to read the actual report!

Prepared Remarks by Richard Cordray
Director of the Consumer Financial Protection Bureau
Credit Reporting White Paper Press Call
December 12, 2012
The Consumer Financial Protection Bureau is releasing a report on the big three credit reporting companies – Equifax, Experian, and TransUnion – and how they manage consumer data.

The report highlights the basic systems the credit reporting companies use to collect, organize, and maintain consumer credit information.  It is based on information submitted by the three largest credit bureaus and other sources, and is one of the most comprehensive looks at the credit reporting industry to date.  And, importantly, it brings us one big step forward in understanding this industry and making it more transparent for consumers.

As you know, credit reporting plays a critical role in consumers’ financial lives.  Credit reports on a consumer’s financial history and behavior can determine eligibility for credit cards, car loans, and home mortgage loans – and they often affect how much a consumer is going to pay for that loan.  The industry is critical in our economy.  Without credit reporting, many consumers would likely be unable to get credit.
Almost every adult in America has a credit file.  Estimates are that Experian, TransUnion and Equifax each maintain files on about 200 million Americans gleaned from approximately 10,000 providers of information.  The amount of data collected and exchanged is astounding.  Each year, approximately 36 billion updates are made to consumer credit files.  There are more than 1.3 billion trade lines actively reported.  Trade lines are individual consumer credit accounts, so one person will likely have multiple trade lines, such as her car loan, bank account, and home mortgage, as well as different trade lines for each credit card she holds.

Today’s report found that credit card history makes up more than half of the information on an average credit report.  It also found that most of the information provided to the credit reporting companies comes from a few large companies, such as big banks.  This means credit cards are given great weight in credit profiles – a lesson that consumers could end up learning the hard way.  Especially around this holiday season, consumers may take out a retail credit card in order to save 20 percent off their purchases on a given day.  If they are not responsible with that one card, it could end up costing them a lot more down the line when they go to take out a mortgage and that credit card is a black mark on their credit report.

We also learned that more than a third of consumer disputes have to do with collection items.  Now, some of that may have to do with a consumer’s incentive to wipe out any negative information on their report.  But whatever the incentive, we found the information provided by the collections or debt buying industry is more likely to be questioned by a consumer than, say, the data from their mortgage lender.  In fact, the information provided by the collections industry is five times more likely to be disputed than mortgage information.

We also found that only about 44 million consumers – just one in five people with a credit history – check their report in a given year.  This is a shame because the most effective way for consumers to identify errors in their reports is to obtain copies of them and review them.  This is also a shame because – while we do not know for sure how common these errors are – we know that people do find errors.  And if consumers are not checking their reports, these errors can persist and pop up when a consumer can least afford them, blocking them for borrowing money for a larger purchase or causing them to pay a higher rate of interest than they should.

We also found that the credit reporting companies resolve an average of 15 percent of consumer disputed items internally, without getting the data furnishers involved.  The remaining 85 percent are passed on to the furnishers.  Today’s report found that the documentation consumers mail in to support their cases may not be getting passed on to the data furnishers for them to properly investigate and report back to the credit reporting company.

As a data-driven agency we believe in informational reports like this.  We believe in doing deep dives into the markets we regulate, because we think the best and most effective way to oversee an industry or market is to understand it thoroughly.  And our markets teams, such as those that authored this report, are key to this function of our mission.

I also consider today’s report a significant addition to the Consumer Bureau’s oversight of credit reporting.  You will recall that in July, we adopted a rule to begin supervising the larger credit reporting companies.  These companies had never been supervised at the federal level.  Then, in October, we began taking individual complaints about credit reporting companies.  If a consumer files a complaint with a credit reporting company and is dissatisfied with the resolution, the CFPB is available to assist.

Today’s report establishes a baseline knowledge about the industry as we embark on our regulatory and supervisory mission.  Given our supervisory role over many of the providers and distributors of credit report information, we can play a positive role in resolving accuracy issues and other risks to consumers within the system.  And given our enforcement authorities, we can make sure that consumer financial laws are being followed.  Overall, we are very interested in finding better ways to measure and improve accuracy within this system.

What consumers can do is to be smart about how they manage their own credit.  They need to know how to build up their creditworthiness, so they can take control over their credit history in a positive way.  They also need to be aware that federal law gives them the right to a free credit report once a year from each of the nationwide credit reporting companies, which they can obtain at www.annualcreditreport.com.  It is critical for each of us to exercise that right.

Keep in mind that nobody else has as much incentive to protect you as you have to protect yourself.  Checking your credit report can reveal odd entries you do not recognize, which may be signs of identity theft.  It also can uncover errors that will hurt your creditworthiness unless you dispute them and get them fixed.  I urge every consumer to perform this self-check at least once every year.  Consumers can learn more about how to check their credit reports, and fix any errors that they may find, at www.consumerfinance.gov.

Today’s study helps bring clarity to the confusing world of credit reports.  It will help educate regulators and consumers about how this important industry works.  If consumers know how these companies handle their credit histories, they can make better decisions on how to manage their financial lives.  And, as I said earlier, credit reporting is a critical market at the heart of our lending systems.  Given its enormity, given its influence over people’s lives, and given its wide impact on our overall economy, you can see that there is much at stake in ensuring that it is working properly for consumers.

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.

Tuesday, December 4, 2012

Article about new website

A very nice and almost embarrassingly flattering article written by Einstein Law about the launch of the Kittell Law Firm's new website.  Check it out here - http://www.einsteinlaw.com/2012/11/21/kittell-law-firm-announces-the-release-of-its-new-website/

Soon, I will start blogging about more than just FCRA topics on the Kittell Law Firm's website's blog but will keep on posting here as well regarding FCRA matters (and any future embarrassingly flattering articles about yours truly!).