New Blog Series - What Are Your Rights as a Consumer?

I represent a lot of consumers in litigation using different federal laws designed to protect consumers, such as the Fair Credit Reporting Act, the Fair Debt Collection Practices Act and the Telephone Consumer Protection Act.  Because of my experience representing consumers, I have learned what rights consumers have and, as often as not, do not know they have.  So I decided to do a series of posts about various rights of consumers under these particular laws.  I hope you enjoy and learn about your rights as a consumer.

This first post in the series will focus on when a consumer is entitled to a free credit report.

So when is a consumer entitled to a free credit report?  First bombshell - no consumer is ever entitled to a free credit report.  Why?  Because, in the eyes of the law, there is no such thing as a credit report.  Instead, there are "consumer reports" and "consumer disclosures". Consumer reports are basically what most people think of as a credit report.  The Fair Credit Reporting Act ("FCRA" for short) calls them "consumer reports" because consumer reports can deal with much more than just credit. Background checks are consumer reports. Compilations of insurance claims can be consumer reports. So can a lot of other types of  "compilations of data".

15 U.S.C. 1681a(d) defines a consumer report as "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’s 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]."

15 U.S.C. 1681a(f) defines a consumer reporting agency as "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."  And the term "person" includes corporations or other businesses.

So what does all that mean?  Basically, if a company or person compiles information about a consumer not for their own use but to provide it to a third party (usually in exchange for money), then that compilation of information is a consumer report.  When a consumer applies for a loan or a credit card, and the potential lender gets the consumer's "credit report", what they are actually getting is a consumer report.  Also, when a consumer applies for insurance or, in some instances, even a job, the insurance company or prospective employer often obtains a consumer report on the consumer before agreeing to insure or hire the consumer.

So when does a consumer have the right to get a free copy of his or her consumer report?  Again the answer is never.  This is true because consumer reports, by definition, only go to third parties (i.e. the credit card company or mortgage company).

A consumer disclosure, on the other hand, is basically the same thing as a consumer report (at least its supposed to be) but the recipient of a consumer disclosure is the consumer rather than a third party.  For the most part, the content of both a consumer report and a consumer disclosure is supposed to be the same, with the exception that the consumer disclosure has both hard and soft inquiries (i.e. records of access of the consumer's credit history).  

Why the distinction between consumer reports and consumer disclosures?  Because a credit bureau can not be sued for the contents of a consumer disclosure but can be sued, under the right circumstances, for the contents of a consumer report.  The concept is similar to the tort of defamation.  You can not sue me for telling you something untrue about you but you can sue me if I tell a third person a lie about you.  Congress wanted the credit bureaus to feel free to truthfully disclose the contents of a person's credit history to the person himself so they made it where the credit bureaus can not be sued for the contents of the consumer disclosure.  But they can still be sued for the contents of the consumer report, assuming they violated the FCRA in some way.

So, when is a consumer entitled to a free copy of his or her consumer disclosure?  

First and foremost, the big three credit bureaus Experian, Trans Union and Equifax are required to provide every consumer with one free consumer disclosure a year.  But this is not an automatic process.  Instead, each consumer must request a copy of his or her consumer disclosure.  There are three different ways to request your free annual consumer disclosure.  First, you can visit www.annualcreditreport.com which, despite the name, gets you your free consumer disclosures. This website allows you to choose which of your free consumer disclosures you want and then the site re-directs you to each of the credit bureaus' websites for the disclosures you want.

Second, you can use the form found at this location -  https://www.consumer.ftc.gov/articles/pdf-0093-annual-report-request-form.pdf - to request your free consumer disclosure(s) by mail.  Takes longer than accessing them online but at least you know you are not agreeing to anything you do not want to agree to by using the credit bureaus' websites.

Lastly, you can call 877-322-8228 to request your free consumer disclosures by phone.

Consumers are also entitled to a free consumer disclosure from any credit bureau whose consumer report is used in an adverse credit decision.  If you are turned down for a credit card, a loan, insurance or a job based upon the contents of your consumer report, the "user" of the consumer report that turned you down is required to send you a letter that states that you were turned down and gives you the name of the consumer reporting agency (aka credit bureau) whose information they used as part of the basis for their decision to turn you down.  This adverse action letter is also supposed to either give you the reasons why you were turned down (i.e. too much derogatory credit) or tell you that, within 60 days, you can request the reasons for the turn down in writing.  In my opinion, you should always request the reasons why you were turned down because you might just learn something like that bad credit is wrongfully being reported on your consumer report and because you should make any user too lazy to include the reasons in the original adverse action letter have to take the extra step of having to write you a whole new letter to tell what they should have already told you.

You can also get a free copy of your consumer disclosure if you are a victim of fraud, including identity theft.  

To sum up - free credit report?  No such thing.  Free consumer report?  Not going to happen.  Free consumer disclosure?  Once a year from each of Experian, Trans Union and Equifax and also any time you suffer a credit denial or other adverse action or are the victim of fraud.

Last but not least.  If you find an error on your consumer disclosure, you should dispute it to the credit bureaus in writing using their addresses found on this page of our website - www.kittell-law.com/practiceareas/consumerprotection/faircreditreportingact.  

And, if the credit bureaus fail to correct the error, you should contact the Kittell Law Firm to seek possible representation in a Fair Credit Reporting Act lawsuit.

New firm's website

Last week, the Kittell Law Firm launched its new website.  Please visit it here - www.kittell-law.com - to read about my most recent Fair Credit Reporting Act and identity theft cases, as well as my personal injury cases.

Consumer Financial Protection Bureau

Really good article about the Consumer Financial Protection Bureau, which I think is one of the crowning achievements of the Obama administration.  The CFPB now enforces several of the consumer protection statutes formerly enforced by the FTC, who really didn't do that much enforcing.  These statutes include the Fair Credit Reporting Act ("FCRA"), Truth in Lending Act ("TILA"), Electronic Funds Transfer Act ("EFTA"), the Fair Debt Collection Practices Act ("FDCPA") and the Real Estate Settlement Procedures Act ("RESPA").

The article can be found here - http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/05/09/investopedia6687.DTL.

Credit Scores Disclosed for Free Starting Tomorrow ...

but only when you suffer an adverse action based on a credit report, such as when your credit application is denied.

Starting tomorrow, July 21, 2011, the latest amendments to the Fair Credit Reporting Act go into effect.  The new amendments require lenders or other users of credit scores to include those scores on their adverse action letters they send consumers who suffer the adverse actions.  The publication of the score will be in addition to the reasons for the adverse action and the identity of the consumer reporting agency whose report was used in the decision to deny credit already required to be part of the adverse action letter.

This is a helpful change to the law.  Before, consumers would only know what score was assigned to them during a credit application if litigation resulted and the lender's files were subpoenaed.  Scores purchased even thirty seconds later from the consumer reporting agency could bear little resemblance to the score used in the adverse action, since lenders often use their own credit scoring models, which differ from the credit scoring models used by the CRAs.  If you do buy a score, buy it directly from FICO, as that's the scoring model most lenders use.

Another Credit Repair Company Sued

According to a lawsuit filed by Colorado Attorney General John Suthers, a “credit repair” company has clearly violated federal and Colorado law by charging upfront fees and failing to disclose the total cost of its services.
The suit was filed in Denver District Court against Veracity Credit Consultants, a credit repair company that charges consumers initial fees of up to $99, and subsequent monthly fees as high as $79. Colorado law prohibits credit repair companies from charging fees until their services are complete.
The credit repair company of questionable character boasts of “results” and claims to be one of the best credit-repair outfits available.
According to the Colorado Attorney General, many of the company's claims are exaggerated at best. He specifically pointed to the company's claim that it can “optimize” consumers' credit reports by repairing or erasing bad credit as worthy of suspicion. Both the federal Fair Credit Reporting Act and Colorado Consumer Credit Reporting Act provide that credit bureaus can continue to report negative information about a consumer's credit for up to seven years.  Veracity's claimed tactics apparently fly in the face of the FCRA and Colorado's Consumer Credit Reporting Act.

Veracity's website says that the company “uses knowledge of the law and years of experience perfecting a proven formula to provide results while protecting your rights.” Once a consumer opens an account, according to the site, Veracity “investigates and works with credit bureaus and creditors” and works “to remove errors, delete negatives, and highlight good accounts.”
Despite these impressive claims, Veracity's “client-services agreement” explicitly says that the company doesn't “represent or warrant that it will achieve specific results for client.”
I have yet to meet a credit repair company that is above board.  Credit repair companies that are willing to try to remove accurate, non obsolete information from a consumer's credit report for a fee simply fly in the face of the entire credit reporting system and hurt those consumers who do pay their bills.  Just as strongly as I feel that credit bureaus should correct errors on consumers' credit reports, I also believe that consumers should have to live with their legitimately bad credit for the seven years that the FCRA allows the reporting of adverse credit items.  Credit repair companies are shady at best and those consumers who try to skirt the rules by using credit repair companies are, in my opinion, questionable as well.

New Bill to Require Free Credit Scores if Passed

Way to go U.S. Representative Steve Cohen, a Democrat from Memphis, TN.  Even though I've never met him, I feel like I know Representative Cohen, since I live and grew up just an hour or so south of Memphis and our local TV stations all come out of Memphis.  Cohen was a TN state representative but is now a freshman U.S. Representative, having won Harold Ford's old spot after he left it to unsuccessfully run for the U.S. Sentate.

Cohen has introduced H.R. 4538, a bill which would amend the FCRA to require that the credit bureaus provide consumers with their credit scores for free with their annual free credit reports.  As I have reported on many times previously, every consumer is entitled to one free credit report from each of the three main credit bureaus (Equifax, Experian and Trans Union) each year.  To get that report, consumers must use the website http://www.annualcreditreport.com/ or submit the request form via mail that can be found on that site as well as at my firm's website http://www.merkel-cocke.com/.

The primary problem with the free credit report is that it did not include your credit score.  For a consumer to get their all important credit score, the consumer must pay extra (usually around $5) directly to the credit bureau.  While the credit scores sold by the credit bureaus are not your true credit score, they are still good barometers for what your real credit score is.

Cohen's bill, if passed, would eliminate this problem with http://www.annualcreditreport.com/ and help consumers everywhere.  Mr. Cohen, if you read this, please know I congratulate you on a very good bill and offer any help I might provide through my nationwide contacts to help get the bill passed.  I know practically every attorney nationwide that handles FCRA litigation on a regular basis and would be happy to help drum up support for your bill.

New case law out of the Seventh Circuit Court of Appeals

According to a recent ruling by the United States Court of Appeals for the Seventh Circuit, sovereign immunity does not apply to protect the federal government from credit reporting violations.

The federal government is protected against individual lawsuits in all cases except where Congress explicitly states the immunity has been lifted. The question in the case, Talley v. United States Department of Agriculture, was whether Congress waived the federal government’s immunity in the Fair Credit Reporting Act.


The FCRA was amended in 1996 to apply to all "persons", with no mention either way as to whether its definition of a "person" included the federal government.  The U.S. Department of Agriculture argued that Congress did not intend to do away with sovereign immunity when it amended the FCRA.

“You are asking us to presume that Congress is a bunch of blithering idiots,” responded Chief Judge Frank Easterbrook. He added that “Congress is presumed to know what is in the statute books when it amends them.”  He added that “because Congress need not add ‘we really mean it!’ to make statues effectual, and because courts don’t interpret statues to blot out whole phrases, that line of argument has poor prospects.”

Experian kills off another consumer

What's with these credit bureaus?  One of the many recurring problems with the credit bureaus is that they often report consumers as deceased when they are very much still alive.  But don't let a little thing like a pulse contradict a credit bureau's pronouncement of death!  Here's a quote from an article about yet another "deceased" consumer with a heart beat -

"They said, 'I'm really sorry, but we can't process this loan any further because we have a report declaring you deceased," Julie Kerr recalled.


No one was more surprised to hear the report of Julie's mother's death than Julie's mother herself, Ann Howe of Bothel, Washington.

"I just said, 'What? What are they talking about?' I said, 'I'm certainly alive. My doctor knows I'm alive," Howe said.

Howe indeed is alive and well, but she could not get anybody to believe her even though she goes into Bank of America all the time.

"Everybody knows my mom there," said Kerr. "My mom's this happy-go-lucky chatterbox."

"Bank of America knew that I was coming in there. I have automatic deposits that go in there," Howe said.

However, seeing was not believing. So, Howe sent an official notarized letter to Bank of America saying, "The report of my demise is inaccurate information."

"We understand she's alive. We understand it's a mistake, but because we can't get a credit score from Experian, there's nothing we can do," Kerr said.

SO even though the lender knew this "happy-go-lucky chatterbox" was alive, they believed Experian's claim she was dead over the lady's own beating heart.  And, of course, Experian refused to fix the problem, thereby violating the Fair Credit Reporting Act, which is a pretty common occurrence at Experian. 

Kerr was finally able to resurrect her mother after a local TV station got involved and put some heat on the situation.  Good for the tv stations, but, really folks, it shouldn't take the threat of bad press to get a simple to fix error fixed.  Guess she should have use the magic words "its only a flesh wound"!

Here's a link to the full article - http://abclocal.go.com/kgo/story?section=news/7_on_your_side&id=7270195

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.

Red Flag Rules do not include attorneys

As I have reported before, the FTC's Red Flag Rules regarding prevention of identity theft go into effect (allegedly) tomorrow, November 1.  The Red Flag Rules have been supposed to go into effect multiple times before, only to be delayed.  But since tomorrow is almost here, maybe they will indeed go into effect this time.

Another development is that Judge Reggie B. Walton of the United States District Court for the District of Columbia has ruled that the Red Flag Rules do not apply to law firms.  The D.C. Court agreed with the American Bar Association, finding that the Federal Trade Commission's interpretation of the Fair and Accurate Credit Transactions Act (FACTA - the amendment to the FCRA passed a few years ago) was overreaching and its application to lawyers and law firms unreasonable.

The decision turned on FACTA's definition of creditor.  Only creditors, as defined by FACTA, have to comply with the Red Flag Rules' requirements to attempt to prevent identity theft.  The Red Flag Rules require creditors to adopt written identity theft prevention procedures. 

The FTC argued that lawyers and law firms fall under the definition of "creditor" and thus have to comply with the Red Flag Rules.  Unfortunately for the FTC's argument, it was a stretch to call a law firm a creditor and Judge Walton agreed.  As a result, Judge Walton granted the ABA's motion for partial summary judgment.  This also means I don't have to write identity theft prevention procedures by tomorrow.

Part 2 of explanation of 15 U.S.C. 1681d

Yesterday, I began explaining the provisions of 15 U.S.C. 1681d of the Fair Credit Reporting Act.  This post will complete that explanation, starting with subsection (d) of 15 U.S.C. 1681d.

"(d) Prohibitions

(1) Certification. A consumer reporting agency shall not prepare or furnish investigative consumer report unless the agency has received a certification under subsection (a)(2) from the person who requested the report."

[Or unless the CRA has reasonable procedures, followed or not, to this effect.  See part 1 of 1681d's explanation for the reason why.]

"(2) Inquiries. A consumer reporting agency shall not make an inquiry for the purpose of preparing an investigative consumer report on a consumer for employment purposes if the making of the inquiry by an employer or prospective employer of the consumer would violate any applicable Federal or State equal employment opportunity law or regulation."

[I do not think this is referring to the inquiry section found at the bottom of most credit reports. I believe this section actually refers to "inquiries" that occur as part of the process of gathering the information needed to prepare the investigative report. So any such investigation that would violated Federal or State EEOC laws would is prohibited.]

"(3) Certain public record information. Except as otherwise provided in section 613 [1681k], a consumer reporting agency shall not furnish an investigative consumer report that includes information that is a matter of public record and that relates to an arrest, indictment, conviction, civil judicial action, tax lien, or outstanding judgment, unless the agency has verified the accuracy of the information during the 30-day period ending on the date on which the report is furnished."

[This is an interesting subsection. It requires the CRA to investigate, or have investigated within the last 30 days before the investigative consumer report is furnished to the user, the accuracy of any arrests, indictments, convictions as well as lawsuits, tax liens or outstanding judgments. Apparently, it does not include bankruptcies or satisfied judgments. So if the CRA has maintained an investigative report on a consumer that includes the above types of public record information, the CRA must re-verify that information in the thirty day window before providing the investigative consumer report to the user.]

"(4) Certain adverse information. A consumer reporting agency shall not prepare or furnish an investigative consumer report on a consumer that contains information that is adverse to the interest of the consumer and that is obtained through a personal interview with a neighbor, friend, or associate of the consumer or with another person with whom the consumer is acquainted or who has knowledge of such item of information unless

(A) the agency has followed reasonable procedures to obtain confirmation of the information, from an additional source that has independent and direct knowledge of the information; or

(B) the person interviewed is the best possible source of the information."

[Basically, a provision to keep out unsubstantiated rumor and trash talk. Unless the person providing the rumor or trash talk is the best possible source of such trash talk.]

This concludes 1681d. I will move on to explaining 15 U.S.C. 1681e soon.

Part one of explanation of 15 U.S.C. 1681d

Today I finally get back to disecting and explaining each section of the Fair Credit Reporting Act.  I completed my explanation of 15 U.S.C. 1681c-2 a while back, so I will move on to 15 U.S.C. 1681d, which deals with investigative consumer reports.

"1681d.  Disclosure of investigative consumer reports.

(a)  Disclosure of fact of preparation.  A person may not procure or cause to be prepared an investigative consumer report on any consumer unless

(1)  it is clearly and accurately disclosed to the consumer that an investigative consumer report including information as to his character, general reputation, personal characteristics and mode of living, whichever are applicable, may be made, and such disclosure

(A)  is made in a writing mailed, or otherwise delivered, to the consumer, not later than three days after the date on which the report was first requested, and

(B)  includes a statement informing the consumer of his right to request the additional disclsoures provided for under subsection (b) of this section and the written summary of the rights of the consumer prepared pursuant to section 609(c) [1681g]; and

(2)  the person certifies or has certified to the consumer reporting agency that

(A)  the person has made the disclosures to the consumer required by paragraph (1); and

(B)  the person will comply with subsection (b)."

[First, this section only applies to investigative consumer reports, not regular ol' generic credit reports.  Subsection (a) requires a user of a investigative consumer report (i.e. the person requesting that the investigative consumer report be prepared by the CRA - this could be anyone with a permissible purpose to obtain an investigative consumer report, such as a potential employer) to disclose in writing to the consumer within 3 days of the request for the investigative report the fact that an investigative consumer report may be made about the consumer and also inform the consumer of his rights under 1681d(b), which I will get to in a moment, and provide the written summary of rights required by 1681g, which at my current pace I won't get to in a long while.

Subsection (a)(2) requires to user to certify to the CRA preparing the investigative report that the user has made the (a)(1) disclosures to the consumer and will comply with 1681d(b).  Speaking of (b), here it is.]

"(b)  Disclosure on request of nature and scope of investigation.  Any person who procures or causes to be prepared an investigative consumer report on any consumer shall, upon written request made by the consumer within a reasonable period of time after the receipt by him of the disclosure required by subsection (a)(1) of this section, make a complete and accurate disclosure of the nature and scope of the investigation requested.  This disclosure shall be made in a writing mailed, or otherwise delivered, to the consumer not later than five days after the date on which the request for such disclosure was received from the consumer or such report was first requested, whichever is the later."

[This provision gives the consumer the right to request information about the nature and scope of the investigation being requested by the user.  The consumer must request this information within a reasonable period of time after receiving the 1681d(a)(1) notice that the investigative consumer report has been requested.  The section does not define what a "reasonable period of time" is.  Upon receipt of the request, which must be in writing, the user has until the longer of 5 days from when it first requested the investigative report or 5 days from when it received the request from the consumer requesting the nature and scope of the investigation to provide the "complete and accurate" dislcosure of the nature and scope of the investigation to the consumer.]

"(c)  Limitation on liability upon showing of reasonable procedures for compliance with provisions.  No person may be held liable for any violation of subsection (a) or (b) of this section if he shows by a preponderance of the evidence that at the time of the violation he maintained reasonable procedures to assure compliance with subsection (a) or (b) of this section."

[This is a pretty crappy portion of 1681d.  It should be labeled "what one hand giveth, the other taketh away".  Read literally, a user can completely avoid doing what it is required by 1681d(a) and 1681(b) as long as it "maintains" reasonable procedures to comply with these subsections.  This contrasts with at least one other section of the FCRA, which requires that reasonable procedures be "followed", not just maintained.  So, if a court strictly applies this "limitation on liability", all the user must do to avoid its duties is to "maintain", but not actually follow or use, reasonable procedures to comply with 1681(a) and (b).  Crazy.  Hopefully, no court is that naive.]

I will conclude my explanation of 1681d in the near future.

Pretty good summary of FCRA's seven year reporting rule

Here's a pretty good summary of the seven year reporting rule I found at - http://www.live-pr.com/en/fcra-seven-year-credit-reporting-period-r1048325078.htm.  Beware of the information in the last paragraph, which is pretty much completely wrong.  I'll explain after the quote:

A good credit report increases your financial credibility and makes you eligible for loan approvals. But at times there are some mistakes in the credit report which hampers your financial status in a big way.

Sometimes you can become a victim for the misleading information in your credit report. In such cases there is a stipulated time for the reporting period, which is generally seven years. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place. But there are a few exceptions to this rule too.

Any delinquent account placed for collection both internally or by reference to a third-party debt collector, whichever is earlier-charged to profit and loss or subjected to any similar action. The seven-year period is calculated from the date of the delinquency that occurred immediately before the collection activity. For example, assume that your payments on a loan were late in January, but that you caught up in February. You were late again in May, but caught up in July. You were again late in September, but did not catch up before the account was turned over to a collection agency in December. You made no more payments on the account and it is charged to profit and loss in July of the following year.

Under the FCRA, each of the January and May late payments can be reported for seven years. The collection activity and the charge to profit and loss can be reported for seven years from the date of the September payment, which was the delinquency that occurred immediately before those activities.

However there are exceptions to this seven years reporting act. There is no time limit in cases of bankruptcy, criminal conviction, student loan, information on a lawsuit or unpaid judgment and in case of credit information in response to a job application.

As I said above, the information in the last paragraph is pretty much completely wrong.  There is a time limit for bankruptcies.  They can stay on a credit report for 10 years from the date of entry of the order for relief or the date of adjudication.  See 15 U.S.C. 1681c(a)(1). 

The author was correct that criminal convictions have no time limit on their inclusion on a credit report (see 15 U.S.C. 1681c(a)(5)), but civil suits (i.e. lawsuits), civil judgments and records of arrests (i.e. arrests with no conviction) can only stay on your report for the longer of seven years or until the governing statute of limitations expires.  See 15 U.S.C. 1681c(a)(2). 

Student loans are given no special treatment under the FCRA and thus fall under the usual 7 year limitiation on reporting found in 15 U.S.C. 1681c(a)(5).  There may be other laws that I am not aware of that lengthen their reporting period since that's typically money owed to the government and the government tends to have special rules that the rest of us don't get to benefit from. 

Finally, credit reports used in job applications are only exempted from the reporting time limits IF the job being applied for has an annual salary that either exceeds, or is reasonably expected to exceed, $75,000.  See 15 U.S.C. 1681c(b)(3).

Not sure why the author got the first part right but totally flubbed the last paragraph.  I hope I set the record straight.

New FCRA case - McDonald v. Equifax

It is quite difficult to lose an FCRA case via summary judgment.  As long as you can show an inaccuracy appeared on your credit report, you should be able to survive summary judgment since, once an inaccuracy is shown, the question becomes whether or not the credit bureau's procedures and/or actions were reasonable, which is almost always a jury question.  Thus, as long as there is an inaccuracy, losing via summary judgment is difficult to do.  But this pro se plaintiff was able to lose via summary judgment not once but three times.  This is yet another example of why consumers need to hire attorneys experienced in FCRA litigation to represent them and never, ever, should consumers represent themselves.

In the case styled Michael L. McDonald v. Equifax, Experian and Trans Union pending in the United States District Court for the Northern District of Texas, Dallas Division, McDonald filed claims against all three national credit bureaus for violations of unspecified sections of the Fair Credit Reporting Act.  While he did not identify the statutes in his Complaint, his case appeared to claim garden variety 1681e(b) claims for failing to follow reasonable procedures to assure the maximum possible accuracy of the credit reports regarding McDonald and 1681i for failing to conduct reasonable investigations of the disputed information.

According to the opinion penned by U.S. District Judge Jane J. Boyle, McDonald learned of various inaccuracies on his Equifax credit report when he was denied a loan.  He then obtained copies of his credit reports from Experian and Trans Union and learned of additional errors appearing on his credit reports published by those companies.  He lodged several disputes regarding the inaccurate credit information with all three credit bureaus.  However, the CRAs failed to correct the errors.  McDonald then filed litigation against Equifax, Experian and Trans Union.

Apparently, McDonald failed to correctly serve Experian with the Complaint.  The opinion does not indicate how McDonald messed up service of process, as Experian had already been dismissed from the case prior to the motions before the Court.  Trans Union and Equifax both filed motions for summary judgment, arguing that McDonald failed to present any evidence of any inaccuracies on his credit report.

All McDonald had to do was come up with some type of sworn testimony or documentation that his credit reports contained inaccuracies.  It could have been as simple as an affidavit from McDonald himself swearing that the reports contained inaccurate information.  Or he could have produced some type of documentation that demonstrated the inaccurate nature of the information.  Any competent attorney could have easily beaten the credit bureaus' motion for summary judgment in this case.  However, lawyerless McDonald failed to provide any documentation or any sworn testimony.  As a result, Judge Boyle was correct in dismissing McDonald's claims.

Informative article about car dealers pulling your credit report

Jeff Blyskal with http://www.consumerreports.org/ wrote an interesting article about car dealers not needing your SSN to pull your credit report.  Here's the article:

Considering all the time we spend fretting about protecting our Social Security numbers, this may come as a shock: Your SSN isn’t necessary for a car salesperson to surreptitiously peek at your credit report. He or she has the technological ability to unlock your file using only the information on your driver’s license.

“An auto dealership checking a consumer’s credit through TransUnion is not required to have the individual’s social security number (SSN) in order to submit the request,” says Steven Katz, a TU spokesman. Does the dealer need your permission to do that? “The dealer does not need ‘permission’; rather, it needs only certify a permissible purpose (such as extension of credit),” says Katz.

Equifax told us the same thing about the ability to get your credit report without your SSN, but stressed that anyone who pulls your file must get your permission to do so.

Experian did not respond to our query.

TransUnion prefers to get the SSN, because it more reliably helps locate your exact credit file, but it’s not absolutely necessary. The credit report access keys on the license are your name, address, and date of birth, all of which are essentially public information. The driver’s license number itself is not relevant, since the credit bureaus don’t use that as an identifier.

Car dealers commonly ask for and photocopy your driver’s license before they’ll let you take one of their cars out for a test drive, says Charles Cyrill, a spokesman for the National Automobile Dealers Association. If you encounter this situation and are worried that your privacy may be compromised, explicitly tell the salesperson that you are not authorizing use of your license to pull your credit report.

Under the federal Fair Credit Reporting Act, a car dealer must always get your permission to look at your credit report. He or she can get that permission in writing—when you sign a release or a loan application—or by implication, without your signature, if there is a “legitimate business need.”

What does that mean? According to the FTC, simply shopping around, checking deals, and even taking test drives does not constitute a legitimate business need by itself. Rather, it’s only when you’ve gone further along into an obvious purchase transaction that your actions qualify as business that possibly involves a need to check your credit, according to a 1998 FTC staff opinion letter.

“Only in those circumstances where it is clear both to the consumer and to the dealer that the consumer is actually initiating the purchase or lease of a specific vehicle and, in addition, the dealer has a legitimate business need for consumer report information may the dealer obtain a report without written permission,” says the FTC opinion.

Whoever Jeff Blyskal spoke to at Equifax was completely misinformed or being untruthful.  Equifax allows companies to pull consumers' credit reports all the time without their express permission.  This is allowed by the FCRA as long as there is a permissible purpose, as laid out in 15 U.S.C. 1681b. 

Car dealers are the worst about not following the law in multiple ways, the FCRA being but one of them.  While all car dealers know that they can not pull your credit report without either your permission or a permissible purpose such as you actually applying for financing to purchase the vehicle, many pull your report anyway. 

Not having a permissible purpose arise until the consumer actually applies for financing makes sense.  For instance, what if the buyer is paying cash?  In that instance, his or her credit history matters not so there's no permissible reason for the car buyer to pull the credit report.  Or if the potential buyer is just test driving or walking the lot "kicking tires".  At that point, there is no legitimate need to pull the person's credit report.  But it is all too easy for the car dealer to simply indicate either consent or a "legitimate business need" even when one does not exist yet (and may never exist).  The credit bureaus simply "trust" their customers, whether they are credit card companies, banks, car dealers or bottom feeding collection agencies.  The CRAs even trust them after being informed of a pattern of impermissibly pulling credit reports.  But why should the CRAs care when they make more money by turning a blind eye to impermissible pulls (i.e. sales of credit reports)?  Selling your credit information is what CRAs do best.  Why let a little thing like 15 U.S.C. 1681b get in the way of that?!

New FCRA case - Eller v. Experian and Trans Union

A new case was released on August 20, 2009 in the United States District Court for the District of Colorado.  The case was filed pro se by Gerald Hansen Eller but he apparently hired attorney Steven T. Nolan after Trans Union moved to dismiss his Complaint as not containing sufficient facts to support his claims that Trans Union violated the FCRA. 

Since attorney Nolan did not have sufficient time to review the complaint or determine whether the complaint should be amended, the court viewed the motion to dismiss using the standard applied to pro se filed complaints, i.e. very liberally.

While the Court did find that Eller did not provide sufficient facts to establish his claims of violations of the FCRA, the Court found that amendment of the complaint was the appropriate remedy, not dismissal.  As a result, the Court granted Trans Union's motion in dismiss in part (the part that claimed lack of sufficient facts) but denied dismissal, instead opting to give plaintiff and his new counsel an opportunity to amend the complaint to allege sufficient facts.

I agree that amendment is appropriate, however, I do not think it is required.  The Federal Rules of Civil Procedure merely require "notice" pleadings, i.e. pleadings sufficient enough to put the defendant on notice of the claims filed against it.  The plaintiff's complaint provided sufficient notice to Trans Union for Trans Union to discern the types of claims lodged against it.  Trans Union could then have used the discovery period of the litigation to flesh out the facts supporting the claims against it.  That's what discovery is for.  Fortunately, the Court avoided a complete injustice by giving the plaintiff an opportunity to amend his complaint.

That's my opinion, at least.  But what do you think of the Court's ruling?

Another new FCRA case - Shurland v. Bacci Cafe & Pizzeria

Can't say I've ever sued a pizzeria before.  But one of the latest FCRA cases involves a lawsuit against a pizzeria - Christopher Shurland v. Bacci Cafe & Pizzeria.  The case comes to us from the United States District Court for the Northern District of Illinois, District Judge Rebecca R. Pallmeyer presiding.

The plaintiff purchased a pizza from Bacci Cafe & Pizzeria and paid with a credit card.  His receipt, however, contained his full credit card number and expiration number, a big no no under the FCRA.  Shurland then sued Bacci Cafe & Pizzeria in a class action lawsuit on behalf of everyone else that received receipts with non-truncated credit card numbers.

The pizzeria moved to dismiss the plaintiff's claims via summary judgment, arguing that their violation of the FCRA was not willful (the defendant admitted violating the FCRA) because it did not know of the requirement to truncate credit card numbers.  A willful violation is one committed knowingly or with reckless disregard for the law. 

The Court correctly did not buy the pizzeria's argument that its alleged lack of knowledge of the law gives it a pass.  First, ignorance of the law is no excuse.  Second, the evidence shows that the pizzeria was called by at least three employees of the company that sold it the credit card machine and told that it needed to update its software to comply with the FCRA's requirement to truncate credit card numbers.  Further, the credit card machine company's monthly bill to the pizzeria indicated that truncation was required.  Yet, the pizzeria did nothing (except bake pies). 

The Court correctly denied the pizzeria's motion for summary judgment and granted class certification.

New FCRA case - Hamilton v. DirecTV

A new FCRA opinion was handed down on August 14, 2009 by District Judge W. Harold Albritton in the United States District Court for the Middle District of Alabama, Northern Division.

The case is styled Annie Hamilton v. DirecTV, but includes claims against Experian, Equifax and Trans Union.  Hamilton claimed that DirecTV had placed seven fictitious accounts on her credit reports with Experian, Equifax and Trans Union.  Hamilton disputed the accounts to the credit bureaus, who all removed the accounts only to reinsert one of the accounts back onto all of her credit reports.  NOTE TO PLAINTIFF'S ATTORNEY - that's a claim right there - violation of 1681i's requirement that the credit bureaus inform the consumer before reinserting an account that was previously deleted.  After the reinsertion of the account, Hamilton disputed the account to the credit bureaus again, who refused to remove it.  Equifax did remove the account for a while, only to reinsert it again.

The issue before Judge Albritton was a motion for partial dismissal filed by Trans Union and joined by Experian and Equifax.  The motion sought to dismiss Hamilton's claim for injunctive relief, namely seeking a declaratory judgment that she did not owe DirecTV and enjoining the CRAs from publishing the account on her credit reports. 

The problem is that the FCRA does not provide for injunctive relief as only the FTC can "enforce" the FCRA while private consumers can only receive compensation for their injuries caused by violations of the FCRA.  The Plaintiff tries to do an end run around the FCRA by claiming that she can get injunctive relief via her defamation claim.  While I agree that the Plaintiff's defamation claim is not preempted by 15 U.S.C. 1681h(e) of the FCRA, a defamation claim is not a means to get injunctive relief. 

Based on this. Judge Albritton correctly granted the Defendants' motion for partial dismissal, thereby eliminating Hamilton's claims for injunctive and declaratory relief. 

While this is a correct decision, what does it really get the CRAs?  Are they really going to reinsert the fictitious account again and just subject themselves to more litigation and liability to the Plaintiff?  Surely not.  The only reason to even file such a motion was to run up attorneys' fees for the defense lawyers and to make the plaintiff's attorney work harder to get justice for his client.  I can tell you for a fact that the CRAs lawyers do this to lawyers new to suing the credit bureaus to try to dissuade them from filing more litigation in the future.  They no longer file such frivilous motions in cases where I am involved, probably because they realize that I'm too stubborn (or stupid) to run off.  Unfortunately, the CRAs' motion in this case was a waste of the Court's resources, even though it was correctly granted.

Class action against check verifiers reinstated

From http://www.courthousenews.com/ - 

"The 6th Circuit revived a class action accusing foreign check-verification companies of ignoring a numbering change in Tennessee's driver's license system, making it appear as if 'hundreds of thousands, if not millions' of consumers were first-time check writers.


Cheryl Beaudry filed the class action in 2007 against TeleCheck Services, TeleCheck International and First Data Corp., alleging violations of the Fair Credit Reporting Act (FCRA).

U.S. District Judge Aleta Arthur Trauger dismissed the case, saying Beaudry failed to allege injury - namely, that she had a check rejected or transaction canceled because of the error.

But the Cincinnati-based appellate panel said she didn't need to prove actual injury under the law.

'FCRA's private right of action does not require proof of actual damages as a prerequisite to the recovery of statutory damages for willful violations of the Act,' Judge Sutton wrote.

'The district court and the defendants suggest that, if we read the law to allow statutory damages without proof of injury, we would be creating a strict liability regime,' Sutton added. 'Not so. The existence of a willfulness requirement proves that there is nothing 'strict' about the state of behavior required to violate the law' (emphasis in original).

Sutton said Beaudry simply had to show that the defendants used unreasonable procedures in preparing her credit report.

'Under these circumstances,' the court concluded, 'Beaudry's claim should not have been dismissed.'"

The reason that actual injury is not required for a willful violation of the FCRA is because 15 U.S.C. 1681n provides for statutory damages of not less than $100 but not more than $1000.  15 U.S.C. 1681o, on the other hand, does not allow the recovery of statutory damages for a negligent violation of the FCRA.  Thus, a negligent violation must cause actual damage to the consumer for the consumer to be able to recover.

Eventually, I will get around to explaining 1681n and o in detail but, currently, I am bogged down with work and, as a result, stuck at 1681d.  But I'll get there, I promise.

Dr. Doom .... I mean Experian ... wins another round against LifeLock

In the battle of anti-consumer giants (I likened it to a battle between Dr. Doom and the Joker among others in a previous post, see here - http://fcralawyer.blogspot.com/2009/08/ruling-on-way-in-experian-v-lifelock.html), Experian has won another round against LifeLock.  Here's the press release directly from the mouth of Galactus... I mean Experian [with my pithy thoughts in brackets]:

"COSTA MESA, Calif., Sept. 2 /PRNewswire/ -- Experian((R)) today announced that a federal court in California denied a motion by LifeLock Inc. to reconsider the court's prior ruling which found that LifeLock's practice of setting 90-day fraud alerts for consumers with the three main credit bureaus is unlawful. Experian filed the lawsuit in 2008 alleging that LifeLock activities were contrary to certain provisions of the Fair Credit Reporting Act (FCRA). Experian has requested a permanent injunction, for which a decision is pending.


'Experian is pleased the court continues to recognize the unfair business practices of LifeLock which Experian believes has resulted in a false sense of security and unnecessary costs to consumers,' said Kerry Williams, Group President, Experian Credit Services and Decision Analytics. 'Experian will continually seek [sic.] to ensure that consumers understand their rights and opportunities regarding their credit histories and have access to a variety of services to help protect their personal information.'

The Experian group of companies has been safeguarding consumer credit data for decades [I didn't realize "safeguarding" meant the same as "ruining", guess I need a new thesaurus] and is a trusted provider of both free and fee-based services for consumers to protect and monitor their credit information and ensure their personal data is not compromised. More than 9 million consumers benefit from the companies' credit monitoring services, which is the most widely used for data breach protection. [i.e. you have to buy our monitoring services because heaven forbid we acutally comply with the FCRA and monitor it ourselves]

'Identity theft continues to be a threat to consumers,' said Williams. 'We encourage consumers to take an active approach to their personal information and, as such, Experian companies offer the ability to place free fraud alerts [you mean the free fraud alerts that the FCRA requires Experian to provide?], dispute issues [again, that's not something Experian 'offers' but is something the FCRA requires Experian to receive (and investigate) from consumers] and subscribe to services such as ProtectMyID.com(TM).'

Credit reporting companies like Experian are uniquely positioned to protect the consumer's credit information. [that's true, too bad they don't take advantage of that position].  Consumers have trusted ProtectMyID.com since it was introduced more than a year ago to safeguard their identities. ProtectMyID.com is an identity theft detection, protection and fraud resolution product used by consumers to prevent damages caused by identity theft. [Why is this a service consumers have to pay for, instead of receive automatically, when the FCRA requires that Experian to use reasonable procedures to assure maximum possible accuracy of the credit reports it generates?]  It monitors Experian, Equifax and TransUnion credit reports on a daily basis to see if key information has changed, if new data has been added to a member's credit profile, or if personally identifiable information is detected that could indicate fraud or suspicious activity. [So you have to pay for Experian to do what it is already legally required to do?!]"

For the record, while I believe Experian is right in this particular instance, I also know that Experian is not pursuing this case because of any desire to help consumers.  Quite the contrary.  Experian is only out to protect itself from the hassle of LifeLock's illegal fraud alerts.  Fortunately, Experian's interests coincide for once with the good of consumers.