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Inflation in Everything – Even the FCRA

March 25, 2011 Leave a comment

Most of my FCRA experience has involved defending private civil lawsuits, in which an individual, small business, or putative class of plaintiffs sues a credit bureau, reseller, or furnisher of credit information.  But FCRA lawsuits can (and are) also brought by the Federal Trade Commission, which usually files and settles lawsuits simultaneously after some behind-the-scenes negotiations over a common industry practice that the FTC believes is unlawful.

I just learned that the FTC can seek more statutory damages for an alleged FCRA violation than a private plaintiff can seek, and the FTC’s damages increase for inflation while private plaintiffs’ damages do not.  Here’s the deal:

*  Private plaintiffs can seek statutory damages of $100 to $1000 per FCRA violation.  15 U.S.C. Sec. 1681n.

*  The FTC can seek statutory damages of $2,500 per FCRA violation.  15 U.S.C. Sec. 1681s.

* The FTC adjusts its maximum statutory damages to keep up with inflation.  The $2,500 that is written in the statute is now $3,500.  See http://www.ftc.gov/opa/2008/12/civilpenalty.shtm

Moral of the story?  If you are an FCRA defendant, it may be better to be sued by a private plaintiff than by the FTC.  (Though of course, it’s better not to be sued at all).

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FDCPA and FCRA Suits: an “explosive growth industry”

March 18, 2011 Leave a comment

I’ve defended dozens of FCRA lawsuits since I first learned about the law back in 2003.  And I thought I had a grasp of the big picture – that is, who the most prolific plaintiff’s lawyers were, what they typically sued over, how the cases got resolved, and so on.  But at no time did I consider the FCRA an “explosive growth industry.”

That term has been used – perhaps with good reason – by Jack Gordon, whose company tracks FDCPA and FCRA lawsuits nationwide so that debt collectors, credit bureaus, and creditors know which of their consumers are most likely to go to court over a misunderstanding or mistake.  See his website – which occasionally posts national data – at https://www.webrecon.com/b/homepage/

Statistics taken from his company suggest that 2010 was a record year for these sorts of consumer lawsuits, with almost 14,000 of them filed nationally.  We are down a bit so far in 2011, but the year is still young.  See http://www.collectionscreditrisk.com/news/lawsuits-against-agencies-creditors-drop-3005435-1.html

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Why settlements should include a correct credit report

March 11, 2011 Leave a comment

Judge Ambrose here in the W.D. Pa. recently issued a lengthy and thorough opinion that granted summary judgment to Equifax on claims filed by a pro se plaintiff.  Gagliardi v. Equifax Info. Servs., LLC, No. 09-1612, 2011 U.S. Dist. LEXIS 10634 (W.D. Pa. Feb. 3, 2011).  One point in it struck home immediately:  the value of having a plaintiff state that his or her current credit report is correct as a condition to settling litigation.

In this case, Mr. Gagliardi sued Equifax in June 2008 and settled in February 2009.  As part of the settlement, he stated that his Equifax credit report was accurate as of February 2009.

Mr. Gagliardi sued Equifax again in November 2009, after Columbia Gas terminated gas service to his house in April 2009 on the basis of:  1) missed payments; and 2) an Equifax credit score.  Equifax used the prior settlement to demonstrate that Mr. Gagliardi’s report was accurate in February 2009, and he stated in his deposition that aside from the Columbia Gas letter, he hadn’t had any credit declined or any other reason to think that his credit report was inaccurate.  For this reason, Judge Ambrose found that “Gagliardi cannot demonstrate that Equifax prepared a consumer report containing inaccurate information about him” and dismissed his claim for a violation of the “reasonable procedures” duty at 15 U.S.C. Sec. 1681e(b).  Id. at **27-28.

As I’ve mentioned before, courts will generally send “reasonable procedures” claims to the jury, on the basis that only a jury can say what is “reasonable” in a given situation.  Here, Equifax was able to get summary judgment on such a claim.  Equifax’s decision to have Mr. Gagliardi state that his credit report was accurate in his February 2009 settlement was a crucial component of Equifax’s success in the second lawsuit.

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Free Credit Scores Are Coming

March 4, 2011 Leave a comment

The Dodd-Frank Act of last year, best known for trying to upgrade financial regulations in the wake of the Great Recession, contained amendments to 15 USC Sec. 1681m, which requires businesses that use credit reports in evaluating applications to provide certain disclosures when they take an “adverse action.”  An “adverse action” is now generally understood as giving a consumer anything but the best possible deal.

Under Sec. 1681m, end users who took adverse actions formerly had to advise consumers that the end users had obtained a credit report, and that the consumer could obtain a free copy of that report if it contacted the entity that provided the report.  The end users also had to list any factors in the report that may have had a negative impact (e.g., too short of a credit history, too much debt given credit limits, too many inquiries, etc.).

Under the Dodd-Frank amendments, end users will have to do all this and more – they will also have to tell the consumer the credit score that was used in evaluating the application.  The FTC and Federal Reserve Board have now issued proposed regulations regarding these amendments.  After public comments are received, the final regulations will be issued and we’ll be off to the races.  So in a few months, consumers who don’t get the best rates and terms will be seeing their credit scores on the disclosures that they receive.

As to whether seeing these scores will consumers to get copies of their credit reports, request a reinvestigation, or even file suit … time will tell.

FTC document describing this:  http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110301a1.pdf

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