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FCRA Reporting Limits Don't Violate 1st Amendment: Judge

Law260
By Sean McLernon
Wednesday Nov. 7, 2012

A Pennsylvania federal judge on Tuesday rejected a consumer reporting agency's argument that the Fair Credit Reporting Act is unconstitutional, keeping alive a putative class action accusing the company of giving prohibited criminal information to employers.

General Information Services Inc. had asserted that the FCRA violated the First Amendment because it prevents reporting agencies from providing adverse information, except for criminal convictions, that predates the information request by more than seven years. Documents like arrest records are truthful commercial information protected by the U.S. Constitution, GIS told the court.

In its motion for judgment on the pleadings, GIS pointed to the June 2011 U.S. Supreme Court decision in Sorrel v. IMS Health Inc., in which the court struck down a Vermont law that prohibited pharmacies from selling doctors' prescribing information to pharmaceutical marketers. U.S. District Judge Petrese B. Tucker, however, said the instant case was different because it did not involve a matter of public concern, and denied GIS' motion.

"The federal government enacted section 1681c of the FCRA to provide businesses with the most accurate and relevant information while simultaneously protecting the privacy rights of consumers," the judge said. "More important, section 1681c's speech restriction is appropriately justified. The Sorrel Court did not take issue with Vermont's law merely because it imposed a content- and speaker-based restriction on commercial speech, but because its restriction could not be justified on neutral grounds."

Plaintiff Shamara T. King sued GIS in November 2010, claiming violations of the FCRA. King contends that when she applied for a job at the U.S. Postal Service in 2010, GIS performed a background check that included details about her arrest for car theft in 2000, a violation of the FCRA's seven-year limit on such information.

GIS argued that the FCRA prohibition on most adverse information more than seven years old was a "content- and speaker-based restriction on speech," noting the law didn't forbid employers to consider such information but forbade reporting agencies to provide it. The company also said the limits of the provision were arbitrary in that it allowed the disclosure of adverse information more than seven years old when the potential employee would earn $75,000 a year or more.

Judge Petrese said the high court stopped short of "overhauling nearly three decades of precedent" in the Sorrel decision, noting that the opinion cites commercial speech precedence for support.

"If the court wished to disrupt the long-established commercial speech doctrine as applying intermediate scrutiny, it would have expressly done so," the judge said. "Absent express affirmation, this court will refrain from taking such a leap."

As commercial speech, the provision can survive if it directly advances a governmental interest without enacting excessive restrictions on speech, according to the ruling. Judge Petrese found that the disclosure requirements of the FCRA properly "embodies the dual interests of meeting business needs and protecting consumer privacy."

The judge also upheld the law's exceptions for reports on job applicants for positions with an annual salary of more than $75,000.

"Congress carves out these limited exceptions based on a proper balance between competing yet equally important interests," the judge said. "Mere disagreement with the balance that is struck will not lead this court to second-guess a congressional decision."

James A. Francis of Francis & Mailman PC, who represents King, said GIS simply clung to "one or two loose sentences" in the Sorrel opinion when making its argument.

"It's the right decision; we hope that this chills defendants' desires to raise this argument in other cases," Francis said.

Francis said he expected to file a motion for class certification in the next few months. According to the complaint, the proposed class includes anyone in the U.S. who since November 2008 had been the subject of an employment consumer report prepared by GIS that included adverse criminal or public information. The suit seeks payment of between $100 and $1,000 per class member.

Counsel for GIS were not immediately available for comment Wednesday.

King is represented by James A. Francis, Erin A. Novak and John Soumilas of Francis & Mailman PC, by Noah I. Axler of Donovan Axler LLC, and by Janet F. Ginzberg and Michael G. Hollander of Community Legal Services.

GIS is represented by Richard D. Dietz, Cindy D. Hanson and John P. Jett of Kilpatrick Townsend & Stockton LLP as well as by Michael O. Kassak of White and Williams LLP.

The case is King v. General Information Services Inc., case number 2:10-cv-06850 , in the U.S. District Court for the Eastern District of Pennsylvania.

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Dead Man Suing — Death and taxes may be certainties, but a Parsippany credit-reporting service manages to mix up the dead with the living, a federal suit charges.

NJ Law Journal
Monday Oct. 15, 2012

Dead Man Suing — Death and taxes may be certainties, but a Parsippany credit-reporting service manages to mix up the dead with the living, a federal suit charges.

Chanse Maykut, 41, of Lagrangeville, N.Y., was turned down for an auto loan and for cable TV because Experian Information Solutions declared him dead in his credit report. His lawyer, Mark Mailman of Francis & Mailman in Philadelphia, says the company apparently confused him with a relative or other namesake.

Not taking it lying down, Maykut sued on Oct. 3, claiming Experian disregarded a Fair Credit Reporting Act requirement to take steps to ensure record accuracy. He contends that a credit checker can easily verify a consumer's death by requesting a death certificate or checking with the Social Security Administration, but instead, Experian merely marks "deceased" in the report.

Maykut seeks statutory, actual and punitive damages and attorney fees. Mailman notes that the FCRA allows for assessment of emotional-distress damages in such cases, an element that can be "very, very significant."

A call and an email to Experian were not returned.

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FCRA Provision Unconstitutional, Background Check Co. Says

A provision of the Fair Credit Reporting Act prohibiting the release of some job applicants' criminal histories should be declared an unconstitutional violation of commercial speech, an attorney defending consumer reporting agency General Information Services Inc. against a putative class action told a Pennsylvania federal judge Tuesday.

During a hearing in Philadelphia, Richard Dietz, an attorney with Kilpatrick Townsend & Stockton LLP representing GIS, told U.S. District Judge Petrese Tucker that it was violation of the company's First Amendment rights to keep it from sharing publicly available information about the criminal backgrounds sought by companies looking to screen job applicants.

"This court would be the first in the nation to say the government can punish private citizens for sharing information that's contained in public documents," Dietz said.

According to court documents, the plaintiff, Shamara T. King, sued GIS in Pennsylvania federal court in November 2010, claiming violations of the FCRA. King claimed that when she applied for a job at the U.S. Postal Service in 2010, GIS performed a background check that included details about her arrest for car theft in 2000, a violation of the FCRA's seven-year limit on such information. GIS, raising its constitutional challenge, filed a motion for declaratory judgment in the case in September 2011.

Dietz said that the U.S. Supreme Court's 2011 ruling in Sorrell v. IMS Health Inc. marked a substantial increase in the protection afforded to commercial speech, rendering unconstitutional many existing laws limiting the disclosure of truthful commercial information.

In Sorrell, the court struck down a Vermont law that prohibited pharmacies from selling doctors' prescribing information to pharmaceutical marketers.

He said that FCRA would have to survive a strict scrutiny analysis by the court in order to prove there was a significant governmental interest in allowing the provision to stand.

Gerald Kell, an attorney for the U.S. government, which intervened in the case in November after GIS first raised its constitutional challenge to the law, told Judge Tucker that challenging the constitutionality of the law was an act of desperation on the part of GIS in its attempts to have the case against it thrown out.

"Suddenly, although the statute's been on the books for more than 40 years, suddenly a light comes on above the defendant's head and he asks the court to declare the statute unconstitutional," Kell said, adding that the Sorrell case did not change the definition of or the level of protection afforded to the type of commercial speech at issue in the case.

While Dietz pointed out that the FCRA only forbade consumer reporting agencies from releasing criminal information and did not prevent employers from finding the information themselves and considering it as part of a prospective employee's application, Kell noted that reporting agencies make it much easier for employers to access such information.

"It is the aggregate nature and the ease with which consumer reporting agencies can disseminate this information that so impacts the privacy that citizens expect," he said.

Judge Tucker, who said she would issue a ruling on GIS' motion as soon as possible, asked few questions during the hearing but said she wasn't inclined to believe that Sorrell changed the case law related to protection of commercial speech.

"I don't think it changed the law at all," she said.

  • The case was argued on behalf of General Information Services Inc. by Richard Dietz of Kilpatrick Townsend & Stockton LLP.
  • The case was argued on behalf of the United States by Gerald Kell with the U.S. Department of Justice.
  • The case was argued on behalf of Shamara King by Jim Francis of Francis & Mailman PC.
  • The case is King v. General Information Services Inc., case number 2:10-cv-06850, in the U.S. District Court for the Eastern District of Pennsylvania.

-- Additional reporting by Rachel Slajda. Editing by Jeremy Barker.

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Old Statute Put to New Use in Challenging Screening Practices

New England In-House
By Sylvia Hsieh

There has been an uptick in class actions over employment screening practices that use consumer reports as grounds for making decisions about job applicants or employees.

The weapon of choice for lawyers who represent employees is a statute that has been around for years but is just beginning to be used in the employment context.

The Fair Credit Reporting Act has been a fixture in the consumer law context when consumers are denied housing or credit because their credit or consumer report contains errors that were not properly disclosed to them.

Employment attorneys say that the use of the same type of consumer reports has skyrocketed among employers and is driving lawsuits against them for running afoul of the FCRA.

"When I first started my practice 13 years ago, only very high-level jobs with security clearance required background checks. Now a cashier at McDonald's or Wendy's [will get] a background check," said James Francis, a consumer attorney at Francis & Mailman in Philadelphia, who has settled dozens of cases against both employers and credit reporting agencies.

Management-side attorneys complain that some big settlements — including a $6.8 million settlement by Walmart and a $5.9 million settlement by FirstGroup with class-action plaintiffs for violating the FCRA — have fueled other lawsuits against employers for violating the act's somewhat technical provisions.

"We've seen a dramatic increase in these claims over the last three to four years. When plaintiffs' lawyers see that there's been a large settlement in a case, they begin looking for other cases to bring," said Craig Berschi, a partner at Kilpatrick, Townsend & Stockton in Atlanta, who defends class actions.

But plaintiffs' attorneys say the reason for the spike in lawsuits is that lawyers who advise employers and write their policies are experts in employment law, not on statutes like the FCRA, which traditionally have been utilized by consumer attorneys.

"Employment lawyers are generally not as up to speed on the FCRA as they should be," said E. Michelle Drake, a partner at Nicholas Kaster in Minneapolis.

Drake has filed two class actions in federal court against employers Capital One and Domino's Pizza for violating the FCRA based on the way they used consumer reports to make employment decisions.

Read more...

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Rejected for Credit? It Could Be Because You're Dead

CreditCards.com
By Kelly Dilworth

Rejected for a loan because your credit history was shut down? It could be because the credit bureaus think you're dead.

About 1,000 people per month get mistakenly declared dead by the Social Security Administration every year, according to government estimates. Many more get falsely reported as deceased by their bank, credit card issuer or by one of the big three credit bureaus -- Experian, Equifax or TransUnion.

Often, when victims find out that they have been accidentally declared dead, they assume that proving they're alive and well will be an easy fix. Instead, they find they will have to wait a month or more before lenders will acknowledge their living, breathing, bill-paying status.

Or, in more extreme cases, they're told before 30 days have passed that they must be mistaken. They can't possibly be alive right now because investigators have looked into their case and records show they've passed away.

"There's a sense of powerlessness, a sense that you are disenfranchised," says James Willis, a journalist and professor based in California who was mistakenly declared dead by Capital One two years ago. Willis had just started a new job and was getting ready to buy a new house when he learned that, according to the credit reporting agency Experian, he had apparently just died.

"The news of my demise came in the form of a credit alert from Experian," Willis recalls. "It said a potentially negative item had just been posted to my credit report."

When Willis followed up, he learned that one of his lenders, Capital One, had written off his charges as uncollectible because they believed that he was dead. Experian then froze his report, shutting out the mortgage company that Willis had enlisted to help him buy his house.

"When a credit card company declares you dead, then they send that notice on to the credit reporting agencies and then your credit history gets locked down," explains Willis. "You cannot access it. Nobody can access it because of the fact they assume you're dead."

At that point, getting mistakenly declared dead shifts from being a minor annoyance to potentially becoming a big and costly problem, says Jim Francis, a consumer lawyer in Philadelphia who has represented multiple clients who have been killed off on paper.

"The real problem with being marked as deceased on a credit account is you can't get a credit score," says Francis. "It's impossible to get credit to the extent that most banks, mortgages, car dealerships require a credit score to assess risk. They have no possibility of getting that and so there's no way of getting credit."

"That's the real problem and the real harm," he adds.

Read more...

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TransUnion Hit With FCRA Suit Over Disclosure Omissions

Law360
By Dan Packel
Editing by Richard McVay
August 28, 2012

Philadelphia (August 28, 2012, 8:45 PM ET) -- A Pennsylvania man filed a putative class action against consumer reporting agency Trans Union LLC in federal court Tuesday, contending that the firm violated the Fair Credit Reporting Act by not providing consumers a section from reports that discloses potential criminal activities.

Ronald Miller alleges that TransUnion violated an FCRA mandate requiring the disclosure of all the information it collects on a consumer, specifically "OFAC alerts," which purportedly inform creditors whether a consumer's name matches one that is on an Office of Foreign Assets Control list identifying terrorists, money launderers, drug traffickers, and other enemies of the U.S.

According to Miller, TransUnion — one of the "big three" credit-reporting agencies — appends incomplete information about these alerts to the reports it provides to consumers, rather than including the full details in the formal report. OFAC alerts check consumer's names against the Office of Foreign Assets Control's specifically designated nationals and blocked persons list.

"Because defendant states that OFAC alerts are 'information' provided only as a 'courtesy,' consumers such as plaintiff are misguided into believing that they have no rights or recovery under the FCRA against the defendant when it mistakenly reports them as OFAC criminals and they cannot dispute, and have corrected, inaccurate OFAC information that defendant alone is attributing to them," said the complaint.

Miller claims that a credit report he received from TransUnion in October 2011 included an appendix following the heading "End of Credit Report" that specified that the name on his credit file was a potential match to a name in the OFAC database.

Miller — in addition to arguing that he was not a match to the list — contends that the information provided by TransUnion is misleading and incomplete, as it does not actually reveal the exact details the company shared about him to third parties in their reports.

Miller argues that OFAC reports are clearly part of an individual's credit report, referencing a 2007 ruling by the Third Circuit that found TransUnion was guilty of not providing a consumer with her complete file, which the appeals court deemed to include OFAC reports.

He seeks to represent a class of all individuals residing under the jurisdiction of the Third Circuit who have received credit reports from TransUnion containing similar statements about potential OFAC matches.

"It's obvious that their motivations are to increase their profits," said James Francis, an attorney representing Miller. "This product allows creditors to avoid giving credit to people on the OFAC list. There's a desire for the service — but our concern is that TransUnion isn't doing what they're legally obligated to do."

Representatives for TransUnion could not be reached for comment Tuesday.

Miller is represented by James Francis, John Soumilas and David Searles of Francis & Mailman PC and Andrew Ogilvie of Anderson Ogilvie & Brewer LLP.

The case is Miller v. Trans Union LLC, case number 3:12-cv-01715, in the U.S. District Court for the Eastern District of Pennsylvania.

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New Regulation of Credit-Reporting Agencies Could Help Consumers

The Inquirer
By Jeff Gelles
August 5, 2012

For a generation, conservative politicians have complained about "job-killing regulation" as if the words were fused at the hip - a linkage that works better as rallying cry than as rational argument. Sensible rules of the road can help markets as well as traffic. Ill-conceived ones can cause economic harm or crashes - of either type.

But last week, I caught up with one person whose business may truly suffer because of regulation by the new Consumer Financial Protection Bureau: Jim Francis, a Philadelphia lawyer who specializes in fighting credit-reporting agencies over practices that have caused nightmarish problems for his clients.

Next month, the CFPB will start overseeing the largest of the agencies - including the Big Three: Equifax, TransUnion and Experian; and others you've probably never heard of - more closely than anyone has before. And if it does its job well, Francis' seven-lawyer firm, Francis & Mailman, could lose a sizable chunk of work that has brought in millions of dollars in court verdicts and settlements.

Is he upset? Not at all, he says - there are lots of other battles to fight. But it's fair to say that, more than most outsiders, Francis knows why this poorly understood industry can plunge innocent consumers or job-seekers into surreal circumstances that would do Franz Kafka proud.

Before I share more of Francis' perspective with you, a quick update on where things stand.

For the first time, regulators will be able to examine and supervise the inner workings of vast data repositories that have come to play a critical role in our markets and our lives. Last I checked, consumers were not offered a choice on whether to do business with these data companies. But since their main customers are businesses that buy reports about us, we have no choice but to deal with them if anything goes wrong.

If the CFPB finds practices that violate the Fair Credit Reporting Act, or other federal laws or rules, it will be able to insist on changes without having to take the more drastic step of filing a lawsuit, as the companies' former chief regulator, the Federal Trade Commission, has done in the past.

The CFPB will also have traditional enforcement tools at its disposal, as it showed last month in a case against Capital One, which was required to pay $210 million in restitution and penalties over mysterious, add-on charges on credit-card bills.

Read more...

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Consumer Data, but Not for Consumers

The New York Times
By NATASHA SINGER
July21, 2012

I recently asked to see the information held about me by the Acxiom Corporation, a database marketing company that collects and sells details about consumers' financial status, shopping and recreational activities to banks, retailers, automakers and other businesses. In investor presentations and interviews, Acxiom executives have said that the company — the subject of a Sunday Business article last month — has information on about 500 million active consumers worldwide, with about 1,500 data points per person. Acxiom also promotes a program for consumers who wish to see the information the company has on them.

As a former pharmaceuticals industry reporter who has researched all kinds of diseases, drugs and quack cures online, I wanted to learn, for one, whether Acxiom had pegged me as concerned about arthritis, diabetes or allergies. Acxiom also has a proprietary household classification system that places people in one of 70 socioeconomic categories, like "Downtown Dwellers" or "Flush Families," and I hoped to discover the caste to which it had assigned me.

But after I filled out an online request form and sent a personal check for $5 to cover the processing fee, the company simply sent me a list of some of my previous residential addresses. In other words, rather than learning the details about myself that marketers might use to profile and judge me, I received information I knew already.

It turns out that Acxiom, based in Little Rock, Ark., furnishes consumers only with data related to risk management, like their own prison records, tax liens, bankruptcy filings and residential histories. For a corporate client, the company is able to match customers by name with, say, the social networks or Internet providers they use, but it does not offer consumers the same information about themselves.

Jennifer Barrett Glasgow, Acxiom's chief privacy officer, said that the company kept consumer data in different databases and that its system was not designed to assemble all the information it had amassed on a single person.

"We do not have the capability to look up an individual's data in the system," Ms. Barrett Glasgow said. "We don't have a search-by-name capability."

Data brokers like Acxiom have developed advanced techniques to collect and collate information about consumers' offline, online and mobile behavior. But they have been slow to develop innovative ways for consumers to gain access to the information that companies obtain, share and sell about them for marketing purposes.

Read more...

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Goode v LexisNexis

In this putative class action, plaintiffs allege that defendant's system for conducting employment-related background checks violates the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1618 et seq. Plaintiffs are employees who were fired by their em-ployers, and potential employees who were denied employment, based on background checks that de-fendant conducted for those employers.

On March 22, 2012, the Court granted in part and denied in part defendant's first Motion to Dis-miss. Thereafter, the Court granted plaintiffs leave to amend their Class Action Complaint ("First Com-plaint"). Plaintiffs filed an Amended Class Action Complaint ("Amended Complaint") on April 23, 2012, and defendant filed a second Motion to Dis-miss under Federal Rules of Civil Procedure 12(b)(6) and 12(f) seeking dismissal of the new counts in the Amended Complaint and asking the Court to strike the class action allegations in Count I of the Amended Complaint. For the reasons stated below, the Court denies defendant's second Motion to Dis-miss.

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Overcharging Case Certified by Federal Court

Jean LaRocque is an 85-year-old woman. She lives independently in Kennebunkport, Maine, drives, shops, and pays some of her bills. She has also given her daughter, Deidre Spang, a power of attorney to handle her financial affairs and reviews bill-paying with her once a week.

LaRocque independently purchased prescription medicine at a Rite Aid pharmacy in Kennebunk on March 2, 2010. As was her custom, she paid with a paper check ($30.34) drawn on her credit union checking account. She had more than sufficient funds in the account to cover the check, and the check cleared the account successfully on March 4, 2010. At the time of the transaction, Rite Aid "scanned" the check and sent relevant information electronically to the defendant TeleCheck Services, Inc. TeleCheck provides electronic check processing services. It advises Rite Aid and other merchants whether to accept a check, then guarantees a check whose acceptance it recommends. By contract, TeleCheck requires a merchant using its services to post decals at points of sale. The decals mention TeleCheck (but not its co-defendant, TRS Recovery Services, Inc.) and notify consumers of a $25 returned check fee that can be collected by drafts drawn on their bank accounts. TeleCheck also requires the merchant to obtain the consumer's signature on a receipt that authorizes collection of the debt and a returned check fee by drafts on the consumer's account. TeleCheck obtains from merchants like Rite Aid a contractual assignment of the merchants' rights against the check writers. TeleCheck authorized LaRocque's paper check electronically at the time of her Rite Aid transaction.

On March 15, 2010, TRS, an affiliate of TeleCheck, wrote LaRocque an initial collection letter (the defendants call this the "RECR3 letter") stating that her check had been returned for "Non-sufficient funds." The letter also said that TeleCheck had purchased the check and turned the debt over to TRS for collection. The letter went on to say that LaRocque's original check ($30.34) had been resubmitted to her bank, and it demanded an additional $25 "returned check fee," which TRS said it would also present to LaRocque's bank as a draft. The resubmitted $30.34 check then cleared LaRocque's account a second time on March 16, 2010—i.e., LaRocque paid twice. After LaRocque received this collection letter, her daughter wrote the defendants two letters signed by LaRocque, disputing the debt, and protesting TRS's collection efforts. Even though both of these letters provided LaRocque's credit union account statement—proving the original payment—the defendants continued to treat LaRocque as if she had bounced the original check. In addition to the duplicate payment, TRS collected the $25 fee by draft from LaRocque's credit union account as well. The defendants subsequently refused to refund the overpayments. As a result of her experiences, LaRocque, through the power of attorney to her daughter, filed this class action lawsuit against TeleCheck and TRS. LaRocque challenges their check collection procedures as contrary to federal and Maine statutes. Only after she filed the lawsuit did the defendants confess error and offer to refund her overpayments. Mem. Law Opp'n Pl's Mot. Class Certification and Req. Oral Argument at 1 (ECF No. 44); Pl.'s Reply Br. Further Supp. Her Mot. Class Certification at 1 (ECF No. 51).

Read more...

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Colo. Grandma's Credit Report Falsely Labeled Her a Terrorist

ABC News
By Lyneka Little

Sandra Cortez went to a Denver dealership in 2005 to purchase a car. But she drove off with the knowledge that her credit report had falsely flagged her as a terrorist or narcotics trafficker, setting off a seven-year effort to clear her name.

Cortez was expecting a good finance deal for a new vehicle after running her credit prior to her visit to the dealer. During a routine credit check, Cortez found herself detained at the dealership with the finance manager threatening to call the FBI after her TransUnion credit report mistakenly identified her as the purported Colombian narcoterrorist Sandra Cortes Quintera.

"The credit reporting agencies are making horrible matching mistakes because they're not using identifying criteria to make sure it's the right person," her attorney James Francis told ABC News. For individuals with a common name, "they're not doing anything to eliminate the positive matches," he added. Sandra's "name does not appear on the OFAC list. TransUnion was the only credit reporting agency that."

On the same day, Cortez received an apology from the dealership about the mistake and did drive off with her dream car, but she would spend years fighting to correct the inaccurate information.

When she requested her personal credit report, the US Treasury's Office of Foreign Assets Control alert did not appear on the copy she received. But, in her hands from the dealership was the report seen only by businesses, which had the alert.

Just how many times this has happened and to how many people is unclear because the consumer is typically unaware of these added alerts that only the credit-grantor sees.

"This was the first case that we had seen like that and that made sense because it was 2005 and the Patriot Act was passed in 2001," said Francis, the consumer law attorney who represented Cortez.

Since he filed suit and won a judgment against TransUnion, Francis says his law office has been contacted by more than 10 people who have experienced similar problems.

"It's a growing problem," said Francis. "They're selling this product to the credit reporting industry for an additional fee and they're not doing anything to be careful to make sure the person on this list matches."

He says credit agencies must do a better job of comparing data. "What's ironic here if there's anything you don't want to [mistakenly] describe someone as being a terrorist or narcotics trafficker," said Francis.

The OFAC says it doesn't track false positives made by third parties for placement on the government's list for terrorists, international drug traffickers and others associated with weapons of mass destruction.

"The Office of Foreign Assets Control's (OFAC) Specially Designated Nationals List (SDN List) is a publicly available resource that is intended to aid financial institutions and the general public in compliance with U.S. sanctions," a Treasury official told ABC News.

On its website, the Treasury department offers ways for those using the SDN to avoid "false positives." It also seeks to answer why OFAC Information is on your credit report.

"In some cases outside parties have been known to incorrectly identify persons as being on the SDN List. If someone feels they have been incorrectly identified they can contact OFAC," a Treasury official told ABC News.

Cortez, after failing to get the error fixed, took the credit reporting agency, TransUnion, to court alleging that it was "reporting derogatory and inaccurate statements and information" and had "repeatedly disputed the inaccurate information."

The suit states, "the inaccurate information consists of statements that cannot be attributed" to Cortez. In the suit obtained by ABC News, Cortez alleged defamation, negligence and invasion of privacy.

A spokesperson for the credit agency told ABC News in an email, "TransUnion does not comment on litigation matters."

Cortez was awarded $150,000 after fighting out her battle in court for years, according to court papers. The grandmother still had the alert mistakenly attached to her file up to a week before the trial, says her attorney.

"I didn't want to sue anybody," said Cortez. "I went directly to TransUnion and gave them three opportunities to fix this [problem]. I just wanted it off my credit report."

She continued, "they ignored me, they called me frivolous, and they wanted me to just leave them alone."

"I'm not satisfied with OFAC. I'm not happy with the credit bureau. I'm happy there was a precedent that was set," Cortez told ABC News. "I don't feel people should have to sue to get correct information on their credit report."

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NCLC FCRA: Spokeo to Pay $800,000 to Settle FTC Charges Company Allegedly Marketed Information to Employers and Recruiters in Violation of FCRA

Federal Trade Commission
June 12, 2012

Spokeo, Inc., a data broker that compiles and sells detailed information profiles on millions of consumers, will pay $800,000 to settle Federal Trade Commission charges that it marketed the profiles to companies in the human resources, background screening, and recruiting industries without taking steps to protect consumers required under the Fair Credit Reporting Act. This is the first Commission case to address the sale of Internet and social media data in the employment screening context.

The FTC alleged that Spokeo operated as a consumer reporting agency and violated the FCRA by failing to make sure that the information it sold would be used only for legally permissible purposes; failing to ensure the information was accurate; and failing to tell users of its consumer reports about their obligation under the FCRA, including the requirement to notify consumers if the user took an adverse action against the consumer based on information contained in the consumer report.

The FTC also alleged that Spokeo deceptively posted endorsements of their service on news and technology websites and blogs, portraying the endorsements as independent when in reality they were created by Spokeo's own employees.

In addition to imposing the $800,000 civil penalty, the FTC's settlement order bars Spokeo from future violations of the FCRA, and bars the company from making misrepresentations about its endorsements or failing to disclose a material connection with endorsers.

According to the FTC, Spokeo collects personal information about consumers from hundreds of online and offline data sources, including social networks. It merges the data to create detailed personal profiles of consumers. The profiles contain such information as name, address, age range, and email address. They also might include hobbies, ethnicity, religion, participation on social networking sites, and photos.

The FTC alleges that from 2008 until 2010, Spokeo marketed the profiles on a subscription basis to human resources professionals, job recruiters, and others as an employment screening tool. The company encouraged recruiters to "Explore Beyond the Resume." It ran online advertisements with taglines to attract employers, and created a special portion of the Spokeo website for recruiters. It created and posted endorsements of its services, representing those endorsements as those of consumers or other businesses.

The case against Spokeo is part of the FTC's ongoing enforcement of the FCRA, a law passed by Congress to promote the accuracy, fairness, and privacy of information in the files of consumer reporting agencies, and to regulate the use and dissemination of consumer reports. The FTC alleges that Spokeo failed to adhere to three key requirements of the FCRA: to maintain reasonable procedures to verify who its users are and that the consumer report information would be used for a permissible purpose; to ensure accuracy of consumer reports; and to provide a user notice to any person that purchased its consumer reports. It also charges that Spokeo's misleading "endorsements" were a violation of the FTC Act.

The Commission vote to authorize the staff to refer the complaint to the Department of Justice and to approve the proposed order was 4-0-1, with Commissioner Maureen K. Ohlhausen not participating. The DOJ filed the complaint and proposed order on behalf of the Commission in the U.S. District Court for the Central District of California. The proposed order is subject to court approval.

NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. This stipulated order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Stipulated orders have the force of law when signed by the district court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

MEDIA CONTACT:
Claudia Bourne Farrell
Office of Public Affairs
202-326-2181

STAFF CONTACT:
Jamie Hine or Mark Eichorn
Bureau of Consumer Protection
202-326-2188 or 202-326-3053

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Judge Rejects 'Unorthodox' Plea to Permit Service by Facebook

New York Law Journal
By Mark Hamblett
June 12, 2012

A federal judge has rejected using Facebook as an alternative method of serving process on a party in a lawsuit who has been hard to find.

Southern District Judge John Keenan (See Profile) told Chase Bank it could not use the social media website to track down and serve a woman with a history of providing fake or out-of-date addresses and who allegedly obtained a credit card in her mother's name and then made numerous purchases.

Instead, Keenan authorized service in Fortunato v. Chase Bank USA, 11 Civ. 6608, to Nicole Fortunato by publication in four local newspapers to cover four areas where Fortunato had listed addresses and a fifth area listed on her Facebook page as her current location.

Chase Bank secured a default judgment in New York Supreme Court in 2009 against Nicole's mother, Lorri Fortunato, for $1,243 in unpaid credit card bills and recovered the money by garnishing her wages.

Lorri Fortunato then brought claims against the bank for violation of the Fair Credit Reporting Act, abuse of process and conversion, claiming that another person fraudulently opened up an account using her name.

In November 2011, Keenan gave Chase leave to implead Nicole Fortunato for contribution, indemnification, breach of contract, account stated, fraud and unjust enrichment.

The bank hired an investigator who was unable to locate Nicole or an address where she might live. It then asked the judge to authorize service of process by e-mail, Facebook message, publication and delivery to Lorri.

Under N.Y. CPLR 308, service of process may be effected by (1) personal service; (2) delivery to "a person of suitable age and discretion at the actual place of business, dwelling place or usual place of abode of the person to be served; (3) service on an agent; or (4) so-called "nail and mail service," nailing service to a person's door and then mailing them a copy.

Section 308(5) allows a court to direct another method of service where service by these means is "impracticable."

After being unable to locate Nicole at addresses she had given in the New York localities of Shandaken, Patterson, Wingdale and Newburgh, the investigator found what she believed to be Nicole's Facebook profile that included her personal e-mail address and listed her location as Hastings, N.Y.

Keenan was satisfied that service by normal means was impracticable, but he could not agree that service by private Facebook message, e-mail to the address listed on her Facebook profile and a third alternative, delivery of the summons and complaint to Lorri, were reasonably calculated to notify Nicole.

"Service by Facebook is unorthodox to say the least, and this court is unaware of any other court that has authorized such service," Keenan said. "Furthermore, in those cases where service by email has been judicially approved, the movant supplied the Court with facts indicating that the person to be served would be likely to receive the summons and complaint at the given email address."

He said Chase had set forth no facts that would "give the Court a degree of certainty that the Facebook profile its investigator located is in fact maintained by Nicole or that the email address listed on the Facebook profile is operational and accessed by Nicole."

"Indeed, the Court's understanding is that anyone can make a Facebook profile using real, fake or incomplete information, and thus, there is no way for the Court to confirm whether the Nicole Fortunato the investigator found is in fact the third-party Defendant to be served."

The judge said he was "similarly skeptical" of effecting service on Lorri Fortunato.

"By all accounts, Lorri and Nicole are estranged (unsurprising in light of the fact that Nicole allegedly stole her mother's identity), Lorri has not been in touch with her daughter for years, and Lorri does not have any recent contact information for her daughter."

Moreover, he said, such service is not appropriate given that Lorri and Nicole "are essentially counter parties in this suit."

Gregory Gorski, Mark Mailman and John Soumilas of Francis & Mailman in Philadelphia and Brian Bromberg of Manhattan represent Lorri Fortunato.

Soumilas in an interview faulted Chase for garnishing his client's wages even though she presented proof of her identity and maintained accounts at the bank in good standing.

"We wish they had taken that level of care in determining who the proper debtor is—they continue to hold her garnished funds," he said. "It's very ironic they are so diligent about trying to track down the daughter now, but seemed to be not at all diligent in determining who they should have sued in the first place."

Thomas Stagg and Brian Lacoff of Stagg, Terenzi, Confusione & Wabnik in Garden City represent Chase. Stagg did not return a call for comment.

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Background Check Firms Could Use a Background Check

Report says errors are common on background checks on job applicants

The Watchdog
By Paul Muschick

With jobs still scarce, employers can be choosier than ever before when deciding whom to hire. Many use background checks to help them make wise choices. But who's checking on the background check companies to make sure they are doing a good job?

Several job seekers have sued background check companies, alleging that outdated or inaccurate information on their reports cost them precious jobs.

A consumer rights agency, the National Consumer Law Center, said in a recent report that erroneous background reports are routine. The industry's trade association, the National Association of Professional Background Screeners, told me it will issue its own report soon that shows a low error rate.

Such competing contentions are hard to reconcile and the reason why I don't always buy into reports like these. But I know for sure that background check companies make mistakes because an error nearly cost a Weisenberg Township woman a job a few years ago, until the Watchdog straightened things out.

Considering how precious jobs are these days, any bad report is unacceptable, and I want to make sure you know what your rights are in case you encounter a problem.

In a study released in April, the National Consumer Law Center said criminal background screening companies routinely mix up people's records; omit critical information; reveal sealed or expunged information; provide misleading information; and misclassify offenses.

"Background screening companies routinely cut corners to improve their profits and then they wipe their hands of any responsibility for producing an inaccurate or misleading report that can cost a worker his or her job," one of the authors, attorney Persis Yu, said in a statement.

The report cited several examples, including a man who allegedly was denied a job after a background check mixed him up with a man by the same name — though a different middle initial — who had been convicted of rape in 1987. The job applicant was 4 years old in 1987.

However, the report doesn't cite any statistics about just how common errors are, pointed out Judy Gootkind, an executive with a Massachusetts background check firm and chairwoman-elect of the National Association of Professional Background Screeners.

"We find that they make broad assumptions," she said.

Gootkind said the association's pending report will note a "very, very high rate of accuracy." She declined to cite specifics until the study is released, but said the data for her company, Creative Services Inc., showed that .079 percent of its background reports were challenged in 2011, with an even lower percentage needing to be corrected.

She said the industry already is heavily regulated by the federal agencies that oversee the Fair Credit Reporting Act. The National Consumer Law Center called for federal and state authorities to get more involved.

Three agencies — the Consumer Financial Protection Bureau, Department of Justice and Federal Trade Commission — have intervened in a Pennsylvania case.

Last month, two of those agencies filed a legal brief in support of a Philadelphia woman, Shamara King. She alleges in a lawsuit that General Information Services improperly included outdated information on her background report when she applied for a post office job.

The agencies have asked a federal judge in Philadelphia to uphold a provision of the Fair Credit Reporting Act that in many instances prohibits arrests, judgments and other "adverse" items that are more than 7 years old from being included on background reports.

King alleged General Information Services improperly included in a 2010 background check several criminal charges against her that had been dropped in 2000.

In court papers, lawyers for the company denied violating the law and said the information it reported about King was accurate. It argued the information it provided to the post office is protected free speech under the First Amendment, per a recent Supreme Court decision.

In the local case that I wrote about two years ago, a woman had been offered a job on the condition that she pass a background check. The offer was rescinded after a screening report by Sterling Infosystems of New York reported she had pleaded guilty to attempted forgery in another state, a state the woman told me she'd never even visited.

Using readily available public records, it didn't take me long to determine Sterling Infosystems had mixed her up with another woman with the same name and same birth date. After my inquiries, Sterling cleared her name and she got the job.

There's also other evidence that this could be a broad problem.

Late last year, a federal judge in Virginia approved the $28 million settlement of three class-action lawsuits against HireRight Solutions, formerly known as USIS Commercial Services, and several of its affiliates.

One of those lawsuits was filed by a Philadelphia man who alleged background checks on him that were given to several trucking companies where he had applied for work included expunged criminal records.

HireRight did not admit to any of the allegations in the settlement and declined to comment on the lawsuits.

"Company leadership is committed to providing products and services that fully satisfy our customers' expectations, while at the same time, taking all necessary measures to ensure compliance with all applicable laws and regulations, particularly those designed to protect the privacy interests of individual consumers," HireRight said in the statement.

If a mistake is made, it's up to you to fight it.

Under the Fair Credit Reporting Act, you are entitled to a copy of any background report that a potential employer may use against you. You can challenge the record if you believe it is incorrect. If it is incorrect, it must be corrected or removed, usually within 30 days.

You can find more information on my blog at http://blogs.mcall.com/watchdog/.

The Watchdog is published Thursdays and Sundays. Contact me by email at watchdog@mcall.com, by phone at 610-841-2364 (ADOG), by fax at 610-820-6693, or by mail at The Morning Call, 101 N. Sixth St., Allentown, PA, 18101. Follow me on Twitter at mcwatchdog and on Facebook at Morning Call Watchdog.

Background check companies must:

  • Give you its files on you
  • Allow you to dispute incomplete or inaccurate information
  • Remove or correct inaccurate information, usually within 30 days
  • Not report negative information that is more than 7 years old, in most cases

Source: Fair Credit Reporting Act, Federal Trade Commission

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Jim Francis: One of the Top 100 Superlawyers in Pennsylvania and Philadelphia for 2012

SuperLawyers.com

To view more on this topic, please click here.

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Consumer Financial Protection Bureau in Filing Brief Supporting the Constitutionality of the Fair Credit Reporting Act

Federal Trade Commission

The Federal Trade Commission has joined the Department of Justice and the Consumer Financial Protection Bureau in filing a memorandum brief in support of the constitutionality of the Fair Credit Reporting Act (FCRA), the 1970 law that is designed to protect the privacy of credit report information and ensure that the information supplied by consumer reporting agencies (CRAs) is as accurate as possible. In the filing, the CRAs urge a federal district court to uphold an important provision of the FCRA, which has protected consumers' privacy for more than 40 years.

The brief was filed in the case of Shamara T. King vs. General Information Services, Inc. (GIS). It specifically addresses a provision of the FCRA that balances the Act's dual purposes – to protect consumers from privacy invasions caused by the disclosure of sensitive information by CRAs and to ensure a sufficient flow of information to allow the CRAs to fulfill their vital role. The provision in question bars CRAs, in most cases, from disclosing individuals' arrest records or other adverse information that is more than seven years old.

The brief refutes GIS's argument that this FCRA protection is an unconstitutional restriction of free speech. The brief points out that the recent U.S. Supreme Court case GIS cites to support its argument, Sorrell v. IMS Health Inc., "does not change the settled First Amendment standards that apply to commercial speech, nor does it suggest that restrictions on the dissemination of data for commercial purposes [such as those by CRAs] must satisfy stricter standards." Therefore, the brief concludes, the court should not invalidate the FCRA provision, as it "directly advances the government's substantial interest in protecting individuals' privacy," while also accommodating the interest of businesses.

The Commission vote authorizing the FTC to join in filing the brief was 5-0. The brief can be found on the FTC's website and as a link to this press release. It was filed on May 3, 2012, in the U.S. District Court for the Eastern District of Pennsylvania. (FTC File No. P082105; Docket No. 2:10-cv-06850-PBT; the staff contact is John F. Daly, Office of the General Counsel, 202-326-2244)

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's website provides free information on a variety of consumer topics. Like the FTC on Facebook and follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

MEDIA CONTACT:
Office of Public Affairs
202-326-2180

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Credit Scars: Car-buyer flagged as terrorist

The Columbus Dispatch
By Mike Wagner

Sandra Cortez went to buy a new car on her lunch break, and about an hour later, the Denver dealership staff was threatening to call the FBI to haul her away as a suspected terrorist.

The dealership's routine check of Cortez's credit report turned up something unusual on that day in 2005. It was an alert indicating that the woman was on a government list of suspected terrorists, international drug traffickers and others associated with weapons of mass destruction.

Cortez, now 68, was really just an accountant who wanted a new silver Subaru to better navigate the mountain roads she traveled to reach her favorite hiking trails.

The credit report Cortez had seen long before she walked into the dealership was clean. She had excellent credit, and she had no inkling that she was linked to a Colombian woman with a similar name wanted for drug trafficking. But like so many other consumers, Cortez didn't realize that the credit reports issued to businesses are not the same as those given to consumers.

The ordeal engulfed the grandmother for the next five years. Her many attempts to fix the problem with TransUnion and the federal government on her own all failed. Cortez pleaded with the credit-reporting agency to correct her credit history but received no help.

She eventually hired Jim Francis, a consumer-law attorney in Philadelphia, and sued TransUnion. Cortez endured a grueling legal battle that included a trial and years of appeals. She originally was awarded $750,000 by a jury, but that later was reduced to $150,000. And the government took about a third of it in taxes.Officials for TransUnion's lobbying group, which speaks for the company on all matters, declined to comment on the case. Current owners of what was then the John Elway Subaru dealership were unfamiliar with the case and declined to comment.

But it was that day in the auto showroom that Cortez realized how powerless Americans are to defend themselves against significant flaws in the credit-reporting system.

"I thought I would be driving my new car back to work after lunch," said Cortez, who is now retired and living in La Mesa, Calif. "I couldn't imagine what would happen next."

Here's how it unfolded on March 31, 2005:

1 p.m. — Cortez turns into the Subaru dealership parking lot in her old, red Ford Taurus. The Ford had been good to her, but it was no match for snow-covered roads in Colorado. A friendly saleswoman greets Cortez and tells her the new silver Subaru Forester will be ready shortly. They just need to go through the financing process.Cortez is expecting a good interest rate on the $18,000 vehicle because she had checked a week earlier and her credit score was 761.

1:45 p.m. — Cortez is sitting in the finance manager's glass-walled office wondering why it's taking so long for him and the saleswoman to return. Her lunch hour is passing quickly.

2 p.m. — The finance manager returns, and this time, there is no friendly greeting — only a stern look for the customer born in Chicago. Then a series of strange questions:

"Were you born in the United States? Have you always lived in the U.S.? When is the last time you left the country?" the manager asks.

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Medical Debts Can Leave Stains on Credit Scores

The New York Times
By TARA SIEGEL BERNARD
Published: May 4, 2012

When Ray White's son was about 9 years old, he struck a tree branch while riding his bike. Within minutes, an ambulance whisked him off to the emergency room. The boy recovered, but many months and phone calls later, Mr. White's insurance company still had not paid the $200 ambulance bill, even though the insurer had assured him it was covered. He finally decided it was easier to pay it himself.

But by then, it was already too late. Unbeknown to Mr. White, the debt had been reported to the credit bureaus. It was only when he and his wife went to refinance the $240,000 mortgage on their home in Lewisville, Tex., last month — nearly six years after the accident — that he learned the bill had shaved about 100 points from his credit score. Even with no other debts, a healthy income and otherwise pristine credit, the couple had to pay an extra $4,000 to secure a lower interest rate.

"It wasn't like I ignored it," said Mr. White, 47, an executive in Internet advertising. "It's not like I'm a credit risk in any way, shape or form."

Even people with good insurance coverage know how hard it can be to figure out how much they owe after a visit to the doctor or, even worse, the emergency room, which can generate multiple bills. But as patients become responsible for a growing share of costs — not just co-payments, but also deductibles and coinsurance — bill paying is becoming ever more complex.

On top of that, more medical providers are using collection services and turning to them more quickly than they have in the past, some experts say.

"It used to be that the mantra was 'gentlemen and physicians rarely discuss matters of money,' " said Dr. Jeffrey Hausfeld, an otolaryngologist and plastic surgeon who now co-owns FMS Financial Solutions, a collection agency that specializes in medical debts. "But that has changed now."

The reason is that the portion of the bill that patients owe has become a larger percentage of medical practices' and hospitals' revenue, said Mark Rieger, chief executive of National Healthcare Exchange Services, which offers software to help providers manage billing. "They are getting increases in their fee schedule amounts, but their revenue is declining because more of the responsibility is being shifted to patients," he said.

Medical providers collected no more than 8 percent of their revenue from patients about 10 years ago, he said. Now, it is closer to 20 percent, or even 30 percent, in some markets.

Like Mr. White, people who fail to pay or respond to a medical collection agency in time — whether intentionally or not — may be surprised to learn, often much later, that it left a black mark on their credit record.

FICO, which produces one of the most popular credit scores used by lenders, said it viewed different types of collection agency accounts — medical-related or otherwise — as equally damaging. For someone with a spotless credit history, "it wouldn't surprise me if their score dropped by 100 points or more," said Frederic Huynh, a principal analytic scientist at FICO. And the blemish does not entirely disappear for seven years.

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Credit Scars: Mixed and Marred

The Columbus Dispatch
By Mike Wagner and Jill Riepenhoff

Judy Thomas crumpled in her seat as the banker behind the big wooden desk said she couldn't refinance her home. The nurse from northern Ohio was rejected for the loan because, in the financial world, she was also Judith Kendall from Utah who had bad credit.

Barbara Sowers tossed a rejection letter for a government loan onto a pile with so many others. The disabled central Ohio woman — living in a 200-year-old house with holes in the ceiling and rotting walls — couldn't get a loan to make repairs because credit reports confused her with her daughter, who has a similar name.

Brenda Campbell was certain she would be fired by the Missouri governor if he learned that a collection agency was going to garnish her wages. The personal financial records of the state's director of senior and disability services were mixed with those of two other women named Brenda Campbell.

The smallest error on a credit report can cause hardship. But when a consumer's file is mistakenly mixed with one from someone who has questionable credit, whether a stranger or even a family member, the consequences can be devastating.

Suddenly, through no fault of their own, they assume another person's financial identity and personal history. Those new identities can label them as a financial deadbeat or even a felon.

"It nearly destroyed my life, and then fixing the problem consumed my life," Campbell said. "And it's not just about money. There is so much time spent dealing with the fear and anxiety of how much damage this is going to cause you."

A yearlong Dispatch investigation found that thousands have been scarred by errors on their credit reports, but no one is hurt more than those whose credit histories are blended with another's, because they can take years to untangle. And in some cases, a lawsuit is required to separate the files. In the time it takes to clear it up, the consumer's credit score and financial life suffer.

The mistaken identity can cause the consumer to lose out on credit cards, home and car loans, jobs and helping their kids pay for college.

When consumers request their credit report, they must provide at least their full name, Social Security number, date of birth and address.

But creditors don't have to follow the same rules when they request consumers' reports. They can simply search for account information by name only, or maybe just by a Social Security number.

That's how the mixed-file nightmare begins and how Melissa became Lisa, Myra became Maria and Angela morphed into Angelina, as seen in federal complaints and lawsuits filed against credit-reporting agencies. The credit-reporting computers do not recognize gender, so the files of one woman named Robin, for example, were mixed with a man's named Robin.

In an extreme case, a man from Virginia with good credit was mixed with a financial deadbeat who shared his name, lived in the same town and had a similar Social Security number.

After a futile two-year battle to clear his name, the man crafted a letter to his family explaining that credit reporting had "destroyed his life." He then committed suicide. His survivors detailed the man's ordeal in a lawsuit.

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LexisNexis Can't Escape Claims It Misreported Workers' Info

Law360
By Greg Ryan

Law360, New York (March 23, 2012, 8:34 PM ET) -- LexisNexis Risk Solutions Inc. failed Friday to dismiss a proposed class action in Pennsylvania claiming it illegally distributed damaging information about retail workers to current and potential employers, though it did extinguish the plaintiffs' ability to recover punitive damages on one claim.

U.S. District Judge Jan E. DuBois granted in part and denied in part a dismissal bid from the Reed Elsevier PLC unit. The judge sustained the plaintiffs' two claims in the suit, for violation of the Fair Credit Reporting Act, but limited their potential recovery under the first FCRA claim to actual damages, costs and attorneys' fees.

The suit, brought by plaintiffs Keesha Goode and Victoria Goodman in May, claims LexisNexis classified retail workers as thieves in a proprietary database called Esteem and distributed damaging information from the database to current and prospective employers without complying with the statutory requirements of the FCRA.

The classification was based on admission statements furnished by employers that subscribe to Esteem, and when other subscribers submit inquiries regarding pending employment applications, LexisNexis disseminates standardized Esteem theft reports, according to the suit.

The first FCRA claim centers on a provision of the law holding that when using a consumer report for employment purposes, an entity planning to take an adverse action based on the report must first give the consumer a copy of the report and a written description of his or her rights.

Goode and Goodman allege LexisNexis failed to meet that requirement, but the company argued that its classification of the duo was not an adverse action; that responsibility to share the report with the consumer belongs to the employer, not the consumer reporting agency; and that as the employer's agent it cannot be held liable for the report-sharing requirement.

Judge DuBois ruled not only that LexisNexis' classification of the plaintiffs was an adverse action, but that under controlling precedent its sharing of the plaintiffs' information with the employers was as well.

"The member employers did not conduct any review of the adjudication, and thus the adjudication of plaintiffs is, quite literally, a 'decision for employment purposes that adversely affects' plaintiffs," Judge DuBois said.

The judge also held that LexisNexis was responsible for sharing the report with the plaintiffs under the FCRA, since "any person intending to take such adverse action" has that responsibility.

However, LexisNexis is not liable for statutory and punitive damages under the FCRA's reportsharing provision because it did not violate the law willfully, according to the judge.

The second FCRA claim deals with a provision that consumer reporting agencies must, on request, share with consumers all of the information in their file. The plaintiffs claim LexisNexis failed to meet this requirement when it did not fulfill plaintiffs' request to see the admission statements.

Judge DuBois said LexisNexis was required to turn over the admission statements and that the plaintiffs had properly pled that the failure was willful, opening the company up to punitive damages on the second FCRA claim.

Attorneys for the plaintiffs and LexisNexis could not be immediately reached for comment on the ruling.

Goode was denied employment with the Family Dollar Stores Inc. chain, while Goodman lost out on a promotion and was then fired from a Rite Aid Corp. store because of information in the Esteem database, the suit says. Goodman has been reinstated as a Rite Aid cashier but faces "continuing impediments to future promotions or hiring," according to the suit.

The plaintiffs are represented by Irv Ackelsberg of Langer Grogan & Diver PC, James A. Francis of Francis & Mailman PC, Sharon M. Dietrich of Community Legal Services Inc., and Leonard A. Bennett of Consumer Litigation Associates PC.

LexisNexis is represented by Andrew J. Soven and Mark S. Melodia of Reed Smith LLP. The case is Goode et al. v. LexisNexis Risk & Information Analytics Group Inc., case number 2:11-cv-02950, in the U.S. District Court for the Eastern District of Pennsylvania.

--Additional reporting by Ben James.

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Consumer Financial Protection Bureau Issues First Report on Debt Collection

Consumer Financial Protection Bureau
CFPB Annual Report 2012

The Consumer Financial Protection Bureau ("CFPB" or "the Bureau") is pleased to submit to Congress its first annual report summarizing its activities to administer the Fair Debt Collection Practices Act ("FDCPA" or "the Act"), 15 U.S.C. §§ 1692 et seq., during the past year. These activities represent the Bureau's inaugural effort to curtail deceptive, unfair, and abusive debt collection practices in the marketplace prohibited by the FDCPA. Illegal collection practices cause substantial harm to consumers, who may pay amounts not owed, unintentionally waive their rights, suffer emotional distress, and experience invasions of privacy. Such practices can even place consumers deeper in debt.

The Bureau's program to administer and enforce the FDCPA has only just begun. The Bureau came into existence on July 21, 2011. On January 4, 2012, the President appointed Richard Cordray as the Bureau's first Director.

The Federal Trade Commission ("FTC") has prepared this report annually since enactment of the FDCPA in 1977. The Dodd-Frank Act transferred that responsibility from the FTC to the Bureau.1 The FTC has provided the Bureau with a letter summarizing its debt collection activities during the past year. As in past years, the FTC took significant steps in 2011 to curtail illegal debt collection practices. Information about the FTC's activities is incorporated into this report, and the FTC's letter is included in this report as Appendix A. See 15 U.S.C. § 1692m(b) (providing that the Bureau may obtain for the annual report the views of any other federal agency which exercises enforcement functions under the FDCPA). The Bureau is grateful to the FTC for its assistance with this first annual report.

Under the Dodd-Frank Act, the Bureau has primary government responsibility for administering the FDCPA. The Bureau shares overall enforcement responsibility with the FTC and other federal agencies. In addition, the Bureau has the authority to prescribe rules with respect to debt collection; issue guidance concerning compliance with the law; collect complaint data; educate consumers and collectors; and undertake research and policy initiatives related to consumer debt collection.2 Significantly, pursuant to its supervisory authority over nonbanks, the Bureau has proposed a rule that if finalized as proposed would allow it to supervise and examine larger debt collectors, the first federal supervision program for the debt collection industry.3

This report (1) provides background on the FDCPA and the debt collection market; (2) summarizes the number and types of consumer complaints the FTC received in 2011; (3) describes the Bureau's supervision program as it relates to debt collection; (4) presents recent developments in FTC law enforcement and the Bureau's advocacy program; (5) discusses recent research and policy initiatives; and (6) discusses plans for coordination and cooperation between the Bureau and the FTC in the administration of the FDCPA.

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Imprisoned Beam Subject of Federal Lawsuit by Former Tenant

The Shippensburg News-Chronicle
By Dale Heberlig, Managing Editor
Published: February 27, 2012

Man claims Beam made derogatory and inaccurate credit reports

While attorneys for convicted tax-evader Troy Beam continue to argue that their client has undergone a "transformation" and should receive a light sentence for his federal felony convictions, a new civil suit filed in federal court attacks Beam's credibility.

A lawsuit filed in U.S. Middle District Court in January by Jonathan Gray, a Harrisburg man, and his Philadelphia attorneys seeks statutory, punitive and actual damages from Beam, the credit reporting agency Trans Union and Latrobe Leasing – one of 24 phony trusts identified in Beam's tax evasion prosecution as a sham trust used to conceal real estate and earnings.

The suit contends that Beam and Latrobe made "derogatory and inaccurate" credit reports and that Trans Union then distributed that information on credit reports.

The suit goes on to contend that Beam, Latrobe and Trans Union have refused to "conduct timely and reasonable investigations" of Gray's counter claims, and that Trans Union failed to note on its credit reports that negative credit information is in dispute.

The suit contends that Beam, Latrobe and Trans Union have "deliberately, willfully, intentional, recklessly and negligently" failed to perform reasonable investigations despite "exhaustive efforts" by Gray to get a reexamination of the claims.

Gray's attorney, Erin Novak, of Francis and Mailman, says her client is a 2007 graduate of Shippensburg and a former tenant at one of Beam's rental properties in the Shippensburg area. She says Gray discovered the damaging information on his credit history when he sought a mortgage to buy a home recently.

In January, Beam attorneys in his tax-evasion case petitioned Judge Christopher Conner of U.S. Middle District Court to depart from sentencing guidelines that call for a prison term of 10 years for Beam on his convictions of failure to file tax returns and pay income tax and obstructing the Internal Revenue Service.

The defense motion asks for Beam to be released with a "time-served" sentence. He has been incarcerated since August 2011, when he was jailed after cutting a monitoring bracelet off his ankle. The bracelet was part of his conditions of release pending sentence after a May 2011 guilty verdict.

Beam's argument is that he began a "transformation" since his incarceration and that his acceptance of guilt and accompanying rehabilitation entitles him to a reduced sentence.

Prosecutors oppose the reduction.

A federal jury of eight women and four men convicted Beam, now 48, on six felony charges in May 2011 after just five hours of deliberation. Sentencing was originally scheduled for August 2011, but has been delayed several times at the request of Beam's lawyers, and is now set for April 10.

In their most recent motion, Beam attorneys say their client has acknowledged his guilt and begun a "transformation" since he was incarcerated after cutting off the monitoring bracelet.

The defense also argued that Beam's family, including nine children, would become "wards of the state" if he is imprisoned for a lengthy period since he is the family's sole means of support.

Prosecutors reject those arguments, arguing, "having nine children is not a get out of jail free card." Both sides have cited case law to support their arguments.

The federal probation department recommends a prison sentence of 10 years.

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Under FTC Settlement, Debt Buyer Agrees to Pay $2.5 Million for Alleged Consumer DeceptionFirm Also Will Notify Consumers with "Time-Barred" Debt That It Will Not Sue to Collect

One of the nation's largest consumer debt buyers has agreed to pay a $2.5 million civil penalty to settle Federal Trade Commission charges that it made a range of misrepresentations when trying to collect old debts. In addition, the company, Asset Acceptance, LLC, has agreed to tell consumers whose debt may be too old to be legally enforceable that it will not sue to collect on that debt.

The proposed settlement order resolving the agency's charges also requires that when consumers dispute the accuracy of a debt, Asset Acceptance must investigate the dispute, ensuring that it has a reasonable basis for its claims the consumer owes the debt, before continuing its collection efforts. The proposed order also bars the company from placing debt on consumers' credit reports without notifying them about the negative report. The U.S. Department of Justice filed the proposed settlement order this week at the FTC's request.

"Most consumers do not know their legal rights with respect to collection of old debts past the statute of limitations," said David Vladeck, Director of the FTC's Bureau of Consumer Protection. "When a collector tells a consumer that she owes money and demands payment, it may create the misleading impression that the collector can sue the consumer in court to collect that debt. This FTC settlement signals that, even with old debt, the prohibitions against deceptive and unfair collection methods apply."

The FTC's action – alleging that Asset Acceptance violated the FTC Act, the Fair Debt Collection Practices Act, and the Fair Credit Reporting Act – is part of the FTC's continuing efforts to protect consumers adversely affected by the struggling economy. The agency today also issued a new publication for consumers, "Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts".

Michigan-based Asset Acceptance buys unpaid debts from credit originators such as credit card companies, health clubs, and telecommunications and utilities providers, as well as other debt buyers, and attempts to collect them. Asset Acceptance has purchased tens of millions of consumer accounts for pennies on the dollar. It targets accounts that other collectors have pursued and are more than a year past due, and in some cases attempts to collect debt that is more than 10 years old. Some of this debt is too old to be legally enforceable – state statutes of limitations cut off the right to sue to collect the debt after some period of time has passed, depending on the state and the type of debt. And many consumers do not know that making a partial payment of a debt may reset the state law's clock on the collector's ability to take legal action.

The FTC's nine-count complaint charged Asset Acceptance with:

  • Misrepresenting that consumers owed a debt when it could not substantiate its representations;
  • Failing to disclose that debts are too old to be legally enforceable or that a partial payment would extend the time a debt could be legally enforceable;
  • Providing information to credit reporting agencies, while knowing or having reasonable cause to believe that the information was inaccurate;
  • Failing to notify consumers in writing that it provided negative information to a credit reporting agency;
  • Failing to conduct a reasonable investigation when it received a notice of dispute from a credit reporting agency;
  • Repeatedly calling third parties who do not owe a debt;
  • Informing third parties about a debt;
  • Using illegal debt-collection practices, including misrepresenting the character, amount, or legal status of a debt; providing inaccurate information to credit reporting agencies; and making false representations to collect a debt; and
  • Failing to provide verification of the debt and continuing to attempt to collect a debt when it is disputed by the consumer.

The proposed settlement requires that when Asset Acceptance knows or should know debt may not be legally enforceable under state law – often referred to as "time-barred" debt – it must disclose to the consumer that it will not sue on the debt and, if true, that it may report nonpayment to the credit reporting agencies. Once it has made that disclosure, it may not sue the consumer, even if the consumer makes a partial payment that otherwise would make the debt no longer time-barred.

The order also prohibits the company from:

  • Making any material misrepresentation to consumers and making any representation that a consumer owes a particular debt, or as to the amount of the debt, unless it has a reasonable basis for the representation. To ensure it has such a basis, the order requires Asset Acceptance to investigate consumer disputes before continuing collection efforts;
  • "Parking" – or placing – debt on a consumer's credit report when it has failed to notify the consumer in writing about the negative report, and;
  • Violating the Fair Credit Reporting Act and the Fair Debt Collection Practices Act, in the ways alleged in the complaint.

The FTC has issued a new publication to help consumers understand how debt collectors attempt to collect old debts, along with their rights in these cases. "Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts" provides information on when a debt is too old for a collector to sue, what consumers should do if a debt collector calls about a time-barred debt, and whether a consumer should pay a debt that's considered time-barred. It also provides advice on what consumers should do if they are sued for a time-barred debt, including defending themselves in court and asserting their rights under the Fair Debt Collection Practices Act. Finally, it has links to other FTC publications and videos about dealing with debt.

The Commission vote authorizing the staff to refer the complaint to the Department of Justice was 4-1, and the vote to approve the proposed consent decree, was 3-1, with Commissioner J. Thomas Rosch voting no for both. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the Middle District of Florida today. The proposed consent decree is subject to court approval.

NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's website provides free information on a variety of consumer topics. Like the FTC onFacebook and follow us on Twitter.

MEDIA CONTACT:
Mitchell J. Katz,
Office of Public Affairs
202-326-2161

STAFF CONTACT:
J. Reilly Dolan,
Bureau of Consumer Protection
202-326-3292

Tracy S. Thorleifson,
FTC Northwest Region
206-220-4481

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State Brings Hammer Down On Another Debt Collector

Star Tribune - Business
By Maya Jennifer Bjorhus
Updated: February 17, 2012

Minnesota regulators have smacked a debt collection company for employing felons and failing to notify regulators when it fired agents for harassing people and swearing at them.

NCO Financial Systems Inc., a Pennsylvania company doing business in Minnesota, didn't admit to wrongdoing but agreed to a $250,000 fine and orders to overhaul its employee screening process, according to a consent order the state Department of Commerce released Friday.

According to the agreement, NCO Financial didn't inform the Commerce Department when it fired registered debt collectors for violations such as vulgar language, swearing at and harassing debtors or failing background checks. In one instance, a management team member was fired after allegedly stealing company funds from a debt collector incentive program.

"Turning loose convicted felons on vulnerable Minnesota consumers is a dangerous recipe for fraud and financial abuse," Commerce Commissioner Mike Rothman said in a statement.

The consent order is the latest in the state's sweep of the collections industry after a 2010 Star Tribune investigative series, "Hounded," that revealed debt collectors' pattern of hiring criminals. NCO Financial Systems was one of the companies highlighted in the series.

The Commerce Department has taken formal actions against eight other debt collection companies, including six that allegedly employed convicted felons as debt collectors. Several of the companies were based in Minnesota.

NCO Financial had more than 5,000 registered debt collectors around the country and 49 collection agency locations, including one in Mendota Heights, according to the department, which described NCO as one of the nation's largest debt collection companies. When the department started investigating the company last year, about 160 debt collectors were operating out of NCO's Mendota Heights location, it said.

NCO Financial did not return phone calls Friday.

Collections expert Robert Hobbs, a deputy director of the National Consumer Law Center in Boston, lauded Minnesota regulators for checking on what he described as a fairly widespread problem. It's not uncommon for ex-convicts to work in debt collections, he said, which can pose problems because they handle sensitive private financial information such as Social Security and credit card numbers. Some ex-felons have anger management issues, he said, and "this is not a job for angry people."

A major industry trade group described the sweep as unique to Minnesota.

"This is not a national issue, this is something that's centered around Minnesota," said Mark Schiffman, spokesman for Minneapolis-based ACA International, which represents third-party debt collection companies. "We are working with regulators in Minnesota and in every state ... to create as balanced a system as possible to be able to collect our debts that are duly owed, and balance consumer rights."

Earlier this month NCO Financial settled with 19 states to resolve accusations of unfair debt collections practices. Wisconsin is part of the agreement, but not Minnesota.

Without admitting wrongdoing, the company agreed to pay $575,000 to the group, provide its agents with additional training and monitoring and set up a $50,000 fund in each state to reimburse consumers who were affected. Consumers may be eligible for refunds if they paid NCO for a debt they didn't owe, overpaid interest or paid more than what NCO agreed to settle the account.

Mark Mailman, partner at the consumer law firm of Francis & Mailman, P.C. hailed Minnesota regulators for taking action against debt collectors, including NCO for hiring convicted felons which leads to unfair debt collection practices. Specifically, not informing regulators when collection companies such as NCO fire employees for harassing and abusing consumers is a major problem, especially when these people can just work somewhere else and start the illegal behavior all over.

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Debt Collectors, Credit Bureaus Face the Spotlight

Wall Street Journal - Money
By Maya Jackson Randall

WASHINGTON—A new federal consumer watchdog unveiled plans to police the nation's three major credit bureaus, as well as dozens of other firms that collect detailed information on consumers, in a move that would bring these entities under U.S. supervision for the first time.

The three largest reporting bureaus maintain information on 200 million American consumers and produce files that increasingly determine who gets hired where and who can access credit in the banking system. Critics have long argued that it is too difficult for consumers to correct mistakes in their files.

The bureaus have largely avoided government scrutiny, and the head of Experian Information Solutions Inc. recently told investors his company didn't appear to be in the cross hairs of the new Consumer Financial Protection Bureau. The CFPB on Thursday also proposed regulating large debt collectors.

"This oversight would help restore confidence that the federal government is standing beside the American consumer," said CFPB Director Richard Cordray. Congress created the agency through the Dodd-Frank financial regulatory law to curb deceptive financial practices and to examine corners of the financial marketplace that had largely escaped federal scrutiny. The CFPB is charged with scrutinizing the inner workings of banks and thousands of other firms that offer financial services to consumers.

The three major credit bureaus—Equifax Inc., Trans Union LLC and Experian—provide make-or-break credit reports that banks and other firms use to decide whether to extend a loan or that employers may use when deciding whom to hire.

Consumer groups including as the Public Interest Research Group have contended that it is too difficult for consumers to correct mistakes or remove serious errors on files that have such a great influence over their financial health.

The credit-bureau industry may not have been completely prepared for heightened scrutiny by the CFPB under Mr. Cordray: Experian Chief Executive Don Robert said in a January call with analysts that "credit information industry doesn't really appear to be high on his radar screen as a target," according to a transcript of the call.

An Experian spokesman said the company is committed to meeting the needs of its consumers and clients within any new regulatory guidelines and added that the CFPB has said it envisions "a supervisory role that may be more cooperative and beneficial to all parties than the current model of strict enforcement."

The Federal Trade Commission has authority over consumer reporting agencies and has brought enforcement actions against at least one firm. But the CFPB's new supervisory program goes a step further because for the first time, federal examiners will be dispatched to credit reporting agencies to review their books and records and meet with key executives.

Equifax spokeswoman Demitra Wilson on Thursday said the company "looks forward to working with the CFPB in ensuring that we continue to provide the most accurate and complete information in a timely way."

According to the Consumer Data Industry Association, each year there are 36 billion updates to consumer files, and three billion reports are issued. The CFPB estimates that its proposal would give it supervisory authority over about 30 consumer-reporting firms that together account for about 94% of the annual receipts from consumer reporting.

The proposal is the first in a series of rules it's seeking to propose to determine which firms it will supervise. The proposed rule is open for comment for 60 days after publishing in the Federal Register.

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Your Credit History Is More Revealing Than You Think

Time - Moneyland
By Martha C. White
November 1, 2011

The information in your credit report has long been used to predict how likely you are to pay credit card bills on time or remain current on your mortgage. But now credit information companies say they can figure out everything from how much discretionary income you have to how likely you'll be to take medication as prescribed. It's the next logical step for companies intent on finding new and lucrative ways to sell your personal data to marketers — but it's also kind of creepy.

"Any time companies collect information and put it in databases to make decisions about consumers, there is a privacy question," Ed Mierzwinski, consumer advocate at US-PIRG, says via email. He urges financial regulators to take a harder look at some of these strange new scores.

Credit bureau Equifax offers a product called a "discretionary spending index" that's designed to help marketers ferret out consumers who have some extra money with which they could be persuaded to part. The 1,000-point scale "enables marketers to rank customers and prospects by spending power," the company's website says.

With this information, companies know which customers are the best candidates to target for marketing opportunities.

The webpage for the index also says it can tease out how much money low- and middle-income households have to spare. This could be a boon to bill collectors, since they would know which customers legitimately don't have enough money to pay their debts versus those who just say they can't pay up. A related product, the "ability to pay index," makes similar claims. "[A] leading collections firm was able to identify over $14 million in collections, representing close to 40% of all outstanding balances from just 21% of delinquent accounts," a testimonial on the site says.

Equifax and rival credit bureau Experian both offer products that claim to offer detailed information about a person's income, including wages along with other income streams like investments. As with the discretionary spending index, this would give marketers a lot more insight into which consumers are worth the resources to pursue, and which ones aren't as valuable.

The Wall Street Journal describes how Fair Isaac Co. — the company behind the ubiquitous FICO score — has developed what it calls a "medication adherence score" designed to tell doctors which patients are most and least likely to follow the directions on their prescriptions. The marketing materials on FICO's website promise that with only a name and address, and either a healthcare company's own records or "publicly available third-party data," the company can predict whether or not a patient will take medication as directed.

"FICO has unlocked the predictive power of other data sources, such as retail purchase behavior, geo-credit profiles and income/wealth indicators," the site says. Your shopping habits might seem like a strange thing to evaluate in connection with your health, but the Journal says seemingly unrelated factors like whether or not the person has a car or a spouse are factored into the analysis.

In the Journal, creators of these developments defend them. "[T]hey say credit-based scores increase economic efficiency, improving people's access to loans and cheaper insurance," the article says. But they also claim that these alternative yardsticks for measuring everything from how much extra cash people have at the end of the month to how much they earn in investment income don't fall under all of the regulations that pertain to regular credit scores.

But PIRG's Mierzwinski disagrees. "We … expect both the FTC and the CFPB to take a hard look at these new databases to determine whether consumers have full Fair Credit Reporting Act rights when this information is collected or sold," he says. "We think they do."

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New Oversight for Nonbanks

By Jeff Gelles
Inquirer Business Columnist

If something goes wrong with your account at a bank and you can't seem to straighten it out, you know where to turn for backup - or can at least figure it out by sorting through the confusing array of bank regulatory agencies.

But what if something goes wrong with your credit report - say an error that keeps coming back no matter how many times you report it? What about a problem with a debt collector repeatedly demanding money you don't believe you owe, or a problem with money inexplicably vanishing from a prepaid debit card?

Financial woes like these, persistent problems for many consumers, have long been beyond the radar of most federal and state regulatory agencies, even if state attorneys general and the Federal Trade Commission sometimes get involved. Thanks to the FTC's efforts more than a decade ago, for instance, the main national credit reporting agencies - TransUnion, Equifax, and Experian - at least must eventually answer consumers' phone calls.

But if complaining to one of the credit bureaus doesn't solve a problem, consumers have few options beyond hiring a lawyer. Most just feel powerless, unable to cope or even comprehend what went wrong in one of these large and mysterious companies that collect and sell data about us.

Before you cue the refrain from Ghostbusters - "Who you gonna call?" - and bemoan the fact that Bill Murray and Dan Aykroyd aren't available, here's some good news: The new Consumer Financial Protection Bureau may step into the breach.

As it implements 2010's Dodd-Frank financial reforms, the bureau is considering whether to begin supervising credit reporting, debt collection, the prepaid-card industry, and other important nonbank financial services. Loan servicers, check cashers, debt-relief services, and money transmitters are also in its sights.

Why the new oversight? Nonbank financial institutions took much of the blame for the housing bubble and the 2008 financial crisis it spurred, which three years later still has us mired in a painfully slow recovery, weighed down by underwater homeowners and a moribund housing sector.

To prevent something similar from happening again, Congress established the new bureau and told it to extend the kind of oversight already directed at banks to nonbank financial institutions, specifically to payday lenders, mortgage lenders, and private education lenders, but also to other "larger participants" in the financial markets.

In part, the goal is to level the playing field. But the new authority is also aimed at addressing various pitfalls that have developed as the financial industry has evolved in unanticipated directions.

What will supervisory authority do? The key is that a regulator with authority to supervise and examine a nonbank financial institution will be much better equipped to understand how it functions and determine what kind of consumer protection is needed.

The FTC has never had that power. Unless it files suit and initiates discovery - a difficult and costly process - it has no way to get inside and explore the workings of, say, a credit bureau or debt collector.

It's hard to anticipate what might come of the new authority, aside from giving consumers with a complaint the ear of an agency that, unlike the traditional banking regulators, promises to make consumer protection a priority. That alone is no small matter.

But it's easy to identify some things that often go wrong for consumers, and that should interest a supervising agency, says Jim Francis, a Philadelphia lawyer whose firm, Francis & Mailman, specializes in credit reporting, debt collection, and other consumer matters.

For instance, Francis says a common problem with credit bureaus involves a so-called mixed file, in which consumers are plagued by data mistakenly included with their credit reports.

One client is a Dover nurse who shares first and last names with another Doverite - a woman with an ugly credit file, including court judgments and a tax lien.

Francis' client and her counterpart have different middle names, different dates of birth, different addresses. They are, indeed, completely different people. But unfortunately, their Social Security numbers are similar - seven of the nine digits match.

The result? One of the major credit bureaus continually lumps the ne'er-do-well in with the nurse when it issues credit reports. The mistake has prevented her from getting credit, stopped her from cosigning a loan for her son, and caused a succession of similar headaches.

"Our woman has disputed it for years, and it keeps coming back," Francis says.

Francis says all the major credit bureaus make similar mistakes, as do the specialty bureaus that sell reports to potential employers or landlords. The Fair Credit Reporting Act ensures that consumers can dispute errors, but some never manage to quash them.

"We only bring a lawsuit after they've tried self-help and it doesn't get them anywhere," he says. And Francis has no shortage of clients.

If the bureau does its job well, Francis may have less work. But that's one kind of unemployment that might actually be good news for the consumer economy.

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The Impact of Differences Between Consumer- and Creditor-Purchased Credit Scores

Consumer Financial Protection Bureau - Report to Congress
July 19, 2011

EXECUTIVE SUMMARY

A credit score is a numerical summary of a consumer's apparent creditworthiness, based on the consumer's credit report, and reflects the relative likelihood that the consumer will default on a credit obligation. Credit scores can have a significant impact on a consumer's financial life. Lenders rely on scores extensively in decision making, including the initial decisions of whether to lend and what loan terms to offer, for most types of credit, including mortgages, auto loans, and credit cards.Credit scores also influence the marketing offers that consumers receive, such as offers for credit cards. Further, credit scores affect account-management decisions, like raising or lowering credit limits or changing interest rates. A good credit score can mean access to a wide range of credit products at the better rates available in the market, while a bad credit score can lead to greatly reduced access to credit and much higher borrowing costs.

Lenders use credit scores that are produced by many different scoring models. The most widely used scores are the "FICO scores" sold by FICO (the brand used to identify the Fair Isaac Corporation). There are a number of FICO score models in use by lenders, and many other credit score models besides the FICO scores. Consumers can also purchase a wide range of credit scores. Some scores sold to consumers are used by lenders, but others, referred to as "educational scores," are either not used by lenders at all or are used only infrequently. It is important to note that many of the credit scores sold to lenders are not offered for sale to consumers.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Consumer Financial Protection Bureau (CFPB) to "conduct a study on the nature, range, and size of variations between the credit scores sold to creditors and those sold to consumers by consumer reporting agencies (CRAs) that compile and maintain files on consumers on a nationwide basis,... and whether such variations disadvantage consumers." Consumers can purchase scores from the CRAs in several ways. They can purchase scores when they request copies of their credit reports directly from the CRAs, or with their annual free credit file disclosure available through annualcreditreport.com. The CRAs or their marketing partners also sell scores as part of "credit monitoring" or "identify theft" products.

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Little-Known Firms Tracking Data Used in Credit Scores

The Washington Post
By Yian Q. Mui
July 16, 2011

Atlanta entrepreneur Mike Mondelli has access to more than a billion records detailing consumers' personal finances — and there is little they can do about it.

The information collected by his company, L2C, comes from thousands of everyday transactions that many people do not realize are being tracked: auto warranties, cellphone bills and magazine subscriptions. It includes purchases of prepaid cards and visits to payday lenders and rent-to-own furniture stores. It knows whether your checks have cleared and scours public records for mentions of your name.

Pulled together, the data follow the life of your wallet far beyond what exists in the country's three main credit bureaus. Mondelli sells that information for a profit to lenders, landlords and even health-care providers trying to solve one of the most fundamental questions of personal finance: Who is worthy of credit?

The answer increasingly lies in the "fourth bureau" — companies such as L2C that deal in personal data once deemed unreliable. Although these dossiers cover consumers in all walks of life, they carry particular weight for the estimated 30 million people who live on the margins of the banking system. Yet almost no one realizes these files exist until something goes wrong.

Federal regulations do not always require companies to disclose when they share your financial history or with whom, and there is no way to opt out when they do. No standard exists for what types of data should be included in the fourth bureau or how it should be used. No one is even tracking the accuracy of these reports. That has created a virtually impenetrable system in which consumers, particularly the most vulnerable, have little insight into the forces shaping their financial futures.

Arkansas resident Catherine Taylor didn't learn about the fourth bureau until she was denied a job at her local Red Cross several years ago. Her rejection letter came with a copy of her file at a firm called ChoicePoint that detailed criminal charges for the intent to sell and manufacture methamphetamines. The information was incorrect — she says the charges were for another woman with the same name and birth date — but it has haunted her ever since.

Taylor said she has identified at least 10 companies selling reports with the inaccurate personal and financial information, wrecking her credit history so badly that she says she cannot qualify to purchase a dishwasher at Lowe's. Taylor must apply for loans under her husband's name and has retained an attorney to force the firms to correct the record. She has settled one case, and a trial in another is expected next week.

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9th Circ. Turns to Texas Courts On Insurer Bias Case

Law360
April 12, 2011
New York

A federal appeals panel has asked the Supreme Court of Texas to declare whether state law allows insurers to base their rates on racially discriminatory factors, saying the answer will decide the fate of a putative class action against Farmers Group Inc.

The U.S. Court of Appeals for the Ninth Circuit on Friday certified to Texas' highest court the question of whether state law lets insurance companies determine policyholders' credit scores using methods that have disparate impacts on certain races.

Plaintiff Patrick Ojo, an African-American Texas resident, leads a proposed class in a suit accusing Farmers of discriminating by determining premiums based on factors that have a disproportionate effect on black policyholders.

While such practices are barred by the federal Fair Housing Act, it remains unclear what the Texas Insurance Code says on the issue, according to an 11-judge panel rehearing the case en banc.

If indeed the TIC allows disparate impact discrimination, it would reverse-preempt the FHA pursuant to the federal McCarran-Ferguson Act of 1945, which holds that, in the event of conflict, state insurance laws preempt any federal laws not directly related to insurance, according to the court.

"On the other hand, if Texas law prohibits the use of credit-score factors that could violate the FHA on the basis of a disparate-impact theory, then the FHA would complement — rather than displace and impair — Texas law, and Ojo's FHA disparate-impact suit would not be reverse-preempted," the court said.

The ambiguity is rooted in legislation passed by Texas lawmakers in 2003 allowing insurance companies to use credit scoring to determine rates but prohibiting basing those scores on factors that constitute unfair discrimination.

Race discrimination is included in the TIC's definition of unfair discrimination, but the code does not say whether the prejudice must be intentional, or whether disparate impact discrimination also counts.

To Sanford Svetcov, an attorney for the plaintiffs, the answer is a bit clearer, though he acknowledged room for debate.

"I think it's a fairly open question, but I think we have the better of the arguments, in the sense that if the Texas legislature wanted to limit it to intentional, it should have expressly said, 'intentional,' instead of just 'unfair,'" Svetcov of Robbins Geller Rudman & Dowd LLP said Monday.

Ojo filed the underlying suit in 2005, when Farmers told him his shoddy credit was responsible for a 9 percent hike in his homeowner's policy premium, despite his never having filed a claim.

Ojo asserted a violation under the FHA, which bars both intentional and disparate impact race discrimination in matters related to housing.

But five years later, courts have yet to address the merits of Ojo's claim — let alone tackle the issue of class certification — due to contentious debate over whether his FHA claim is adjudicable in relation to the TIC.

The U.S. District Court for the Central District of California initially tossed the suit for reverse-preemption, but the Ninth Circuit reversed in May 2009, holding in a split decision that the TIC indeed barred disparate impact discrimination.

The court granted Farmers' petition for en banc rehearing in October, notifying parties it would likely call on the Texas Supreme Court for guidance.

Svetcov admitted a hint of frustration at the suit's deliberate pace.

"The wheels of justice proceed slowly," he said.

An attorney for Farmers did not return a call Monday.

Robbins Geller Rudman & Dowd LLP, James Hoyer Newcomer & Smiljanich PA, Litt Estuar Harrison & Kitson LLP, Bonnett Fairbourn Friedman & Balint PC and Francis & Mailman PC represent the plaintiffs.

Skadden Arps Slate Meagher & Flom LLP represent Farmers.

Judges Alex Kozinski, Pamela Ann Rymer, Michael Daly Hawkins, Susan P. Graber, M. Margaret McKeown, William A. Fletcher, Ronald M. Gould, Richard R. Clifton, Milan D. Smith, Jr., Sandra S. Ikuta and N. Randy Smith sat on the panel for the Ninth Circuit.

The case is Ojo v. Farmers Group Inc. et al., case number 06-55522, in the U.S. Court of Appeals for the Ninth Circuit.

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LexisNexis Faces Class Action Over Worker Database

Law360
Editing by Andrew Park
May 9, 2011
New York

Two women filed a putative class action in Pennsylvania last week claiming that LexisNexis Risk & Information Analytics Group Inc. labeled thousands of retail workers as thieves and distributed their personal data from a database in violation of federal law.

LexisNexis classified retail workers as thieves in a proprietary database called Esteem and distributed damaging information from the database to prospective employers without complying with the statutory requirements of the Fair Credit Reporting Act, according to a complaint filed by Keesha Goode and Victoria Goodman on May 3.

The classification was based on admission statements furnished by employers that subscribe to Esteem, and when other subscribers submit inquiries regarding pending employment applications, LexisNexis disseminates standardized Esteem theft reports, according to the plaintiffs.

"Because so many of the nation's retailers subscribe to Esteem, the practical consequence of an inaccurate entry within Esteem is effectively to preclude employment or promotion for the seven years the alleged theft incident is reported to Esteem members," the suit said.

Goode was denied employment with the Family Dollar Stores Inc. chain while Goodman lost out an a promotion and was then fired from a Rite Aid Corp. store because of information in the Esteem database, the suit claims.

Goodman, however, has been reinstated as a Rite Aid cashier, but faces "continuing impediments to future promotions or hiring," according to the suit.

Neither plaintiff received the "pre-adverse action notice" required by the FCRA, and both plaintiffs have been denied copies of the admission statements that Esteem theft reports are based on, though they have never been charged with theft, the suit claims.

Consumer reports covered by the FCRA are not just reports used to establish eligibility for credit, but also those used for employment purposes, according to the suit.

Before any adverse action on an employment application takes place, a consumer must be advised of any report used in that action and provided an explanation of their rights under the FCRA, the plaintiffs argue. But LexisNexis sends out pre-adverse action notices to consumers after it has reported them as thieves to a potential employer, according to the plaintiffs.

The defendant is willfully violating the FCRA by taking adverse employment actions relating to pending applications before it sends out sends out pre-adverse action notices on behalf of Esteem employer-subscribers, according to the complaint.

In addition, the defendant is supposed to give requesting consumers all information in that consumer's file at the time of request, but those who request copies of their Esteem files are denied copies of the admission statements that underlie the theft reports, the complaint contends.

The plaintiffs propose two overlapping subclasses, one based on the pre-adverse action notice allegation, and another based on the disclosure claim.

A Lexis Nexis spokesman declined to comment on the suit Monday. An attorney for the plaintiffs also declined to comment.

The plaintiffs are represented by Irv Ackelsberg, Howard Langer, John Grogan and Edward Diver of Langer Grogan & Diver PC, James Francis and Mark Mailman of Francis & Mailman PC, Sharon Dietrich and Nadia Hewka of Community Legal Services Inc., and Leonard Bennett of Consumer Litigation Associates PC.

The case is Goode et al. v. LexisNexis Risk & Information Analytics Group Inc., case number 2:11-cv-02950, in the U.S. District Court for the Eastern District of Pennsylvania.

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Our view: Credit reports stacked against consumers

USA Today
June 5th, 2011

The nation's three credit reporting companies have quite a grip on consumers' lives.

Credit reports can determine whether you get a mortgage and what the rate is; whether you qualify for a car loan, a credit card, a rental apartment or insurance; and, in recent years, even whether you get a job. About 60% of employers check credit histories when people apply for jobs; with the latest unemployment rate edging up to 9.1%, this alone makes credit reports pivotal in job-seekers' lives.

OPPOSING VIEW: Credit reports data show few errors

Because credit reports have taken on such outsized influence, it's essential that there be a fair system for addressing errors. That's not now the case.

How often mistakes occur is a matter of heated dispute between consumer advocates and the industry. But this much is clear: Correcting a serious error can be a nightmare.

Consider the case of Carmen Dixon-Rollins, a Philadelphia police officer who settled a dispute with a landlord in 2004 by paying $530, but couldn't get TransUnion, one of the Big Three reporting agencies, to remove the debt from her credit report. The erroneous data came back to bite her when she applied for a mortgage and was given a higher rate.

Dixon-Rollins filed disputes and provided evidence, but all TransUnion did was forward a routine error form to a collection agency — the original source of the inaccurate report — and take the agency's word that the debt was still owed.

In fact, a TransUnion "team leader" testified at Dixon-Rollins' trial that "as a matter of policy," TransUnion "never forwards material submitted by consumers to the original source." Last September, a federal judge upheld the jury's verdict against TransUnion, ruling that the company "negligently and willfully failed to reinvestigate" the officer's claim and allowed an award of $270,000 in punitive damages. The judge underscored a 1997 ruling by a higher court, which warned that reporting bureaus are responsible "for more than merely parroting information received from other sources."

Parroting, however, appears to be the widespread policy. When consumers seek to correct an error, credit reporting employees reduce most complaints to a two-digit code and leave the outfit that filed the incorrect information as the sole judge of whether it's correct.

Instead of putting its money into better dispute resolution, the industry is more interested in trying to prove that error rates are small. The industry maintains that just half of 1% of reports contain errors substantial enough to push a consumer into a higher score-tier. That's the finding of a recent study paid for by the Consumer Data Industry Association, which represents Equifax, Experian and TransUnion. Even taking that number at face value would mean there are substantial errors in the reports of 1 million consumers — quite a large number of lives to be affected by inaccuracies.

No one would expect businesses dealing with billions of bits of data to get everything right. But it's fair to expect the industry to provide a reliable dispute process — especially when the credit bureaus make millions of dollars each year exploiting the fears of consumers that there are errors on the reports.

Currently, consumers have little recourse but to complain to the Federal Trade Commission, which about 30,000 do each year, or to go to court, a difficult and trying route that more than 4,600 consumers have taken in the past five years.

Next month, a new federal agency, the Consumer Financial Protection Bureau, is set to gain authority to police credit reporting companies. Perhaps then, more than 200 million consumers will finally have the clout to force better conduct from the Big Three that now have all the leverage.

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Punitives Can Only Exceed Compensatories by 9-1 Ratio, Court Says

The Legal Intelligencer
By Shannon P. Duffy

Slashing a jury's punitive award of $500,000 down to $270,000, a federal judge has ruled that the constitutional maximum for punitive awards is ordinarily no more than nine times the compensatory award -- even in cases where the defendant is a repeat violator.

In his 22-page opinion in Dixon-Rollins v. TransUnion , U.S. District Judge Timothy J. Savage was harshly critical of the credit reporting agency, noting that it has repeatedly violated the Fair Credit Reporting Act by failing to investigate complaints of wrong information on credit reports.

As a result, Savage said the evidence supported a punitive award at the highest level allowed under recent rulings by the U.S. Supreme Court.

But since the jury's compensatory award was just $30,000, Savage said, the maximum punitive award would be $270,000.

"TransUnion had been warned repeatedly that its reinvestigation obligation in verifying a disputed account requires more than parroting the original source's response. Nevertheless, it continues to ignore these judicial edicts and refuses to change the way it does business," Savage wrote.

"This refusal to follow judicial direction convinces us that 'strong medicine is required to cure the defendant's disrespect for the law,'" Savage wrote, quoting from the U.S. Supreme Court's 1996 ruling in BMW of North America Inc. v. Gore .

In a separate, 17-page opinion, Savage awarded the plaintiff more than $110,000 in attorney fees and costs.

In the suit, plaintiff Carmen Dixon-Rollins claimed that TransUnion ignored her repeated complaints about an error on her credit report stemming from a dispute with a landlord.

TransUnion argued that it investigated the complaint and that the landlord confirmed that the debt remained unpaid.

But Dixon-Rollins said she had come forward with proof -- including a canceled check and a lawyer's letter that showed the debt had been settled -- and that TransUnion continued to refuse to correct the error, causing her to suffer a lower credit rating.

At trial, plaintiffs attorneys John Soumilas, Geoffrey H. Baskerville and Mark D. Mailman of Francis & Mailman argued that TransUnion has a duty under the law to reinvestigate claims of errors, and cannot rely on a creditor's first response that confirms a debt.

Savage, in the portion of the ruling that upheld the jury's verdict, agreed with the plaintiff and found that TransUnion was asking the court to ignore both statutory mandates and the binding rulings of the 3rd U.S. Circuit Court of Appeals.

TransUnion's lawyers -- Bruce S. Luckman, Christopher N. Jones and Timothy P. Creech of Kogan Trichon & Wertheimer -- argued that amendments to the FCRA had shifted the burden to investigate onto the original creditor that had supplied the allegedly incorrect data.

But Savage disagreed, saying, "The fact that Congress chose to impose a higher duty to investigate on original sources does not mean that it intended to diminish the reinvestigation obligations of consumer reporting agencies."

Savage also emphasized that the 3rd Circuit's 1997 decision in Cushman v. TransUnion Corp. remains good law.

"There is nothing in the statute or legislative history that supports a conclusion that the 1996 amendments to the FCRA diminished the credit reporting agencies' reinvestigation duties. Courts in this district have consistently applied Cushman 's requirement that consumer reporting agencies may be required to go beyond the original source of credit information," Savage wrote.

For lawyers, Savage's ruling may prove to be more interesting for its discussion of the punitive damages.

Under the recent decisions from the U.S. Supreme Court, Savage said, trial judges must consider several "guideposts" when deciding whether an award of punitive damages is "grossly excessive."

The most important, he said, is the "degree of reprehensibility of the defendant's misconduct," but judges must also weigh any disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award, as well as the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.

In analyzing the question of reprehensibility, Savage focused on evidence that TransUnion is a repeat violator of the FCRA.

"TransUnion's failure to properly reinvestigate Dixon-Rollins' dispute was not an isolated incident. Indeed, it has repeatedly failed to carry out its statutory duty despite the rejection of the same argument it now repeats and admonishments that its reinvestigations were deficient," Savage said.

In the 1997 Cushman decision, Savage noted, the 3rd Circuit "instructed TransUnion that it may not just repeat information it receives from the original source, but must do more to verify the credit information."

But Savage found that "since Cushman was decided, TransUnion has been repeatedly warned of its statutorily required obligation in conducting a reinvestigation."

Nonetheless, Savage found that the jury's $500,000 punitive award was excessive in light of the $30,000 compensatory award.

"The ratio of punitive to compensatory damages awarded to Dixon-Rollins is 16.67-to-1," Savage wrote. "Because this exceeds the single-digit ratio appropriate for most punitive awards, we must carefully evaluate the facts of the case to assure that due process concerns are addressed."

Savage focused on TransUnion's repeat violations and found that the punitive award should be adjusted to the upper end of the constitutional limit.

"Based on its repeated conduct, it appears that TransUnion has made a risk-benefit analysis, concluding that it is worth the risk to continue doing business as usual and to ignore its obligations under the FCRA," Savage said.

Any punitive award, Savage said, "must be of sufficient size to deter TransUnion from disregarding its legal obligations."

Weighing all the factors, including the jury's "modest compensatory award," TransUnion's relative size and wealth and its repeated FCRA violations, Savage concluded that "a more appropriate ratio of punitive to compensatory damages should be 9-1."

Luckman, the lead defense lawyer for TransUnion, did not return a call seeking comment.

Soumilas, in a brief interview, said the plaintiffs team has not yet decided whether to appeal the reduction of the punitive award, but that he was pleased by Savage's analysis of the legal duty of credit reporting agencies to reinvestigate any claim of error by consumers.

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Credit Report Agencies Liable if They Pass On Bad Watch List Data

Plaintiff claims she was falsely branded as a Colombian drug dealer

In a significant setback for credit reporting agencies, the 3rd U.S. Circuit Court of Appeals has ruled that consumers have the right to sue if a credit report includes inaccurate information drawn from a government watch list.

The ruling in Cortez v. Trans Union comes in the case of a woman who claimed she was falsely branded as a Colombian drug dealer when she was confused with someone on the U.S. Treasury Department's watch list of known narcotics traffickers and terrorists.

The 91-page opinion marks the first time that a federal appellate court has held that such information is regulated by the federal Fair Credit Reporting Act, and could force Trans Union and other credit reporting agencies to overhaul their policies for handling such information in order to guarantee its accuracy.

But the ruling also includes a setback for plaintiffs because the appellate court refused to consider whether the trial judge was too harsh in slashing a punitive award of $750,000 down to $100,000 on the grounds that the plaintiff had opted to "accept" the trial judge's remittitur rather than opt for a new trial.

Although the appellate court said it was "troubled" by the severity of the trial judge's reduction, the unanimous three-judge panel concluded that such remittitur orders cannot be reviewed once the plaintiff accepts the reduced award.

Lawyers for Trans Union had argued that information gleaned from the Treasury Department's watch list of known terrorists and narcotics traffickers -- known as the OFAC List, for the Office of Foreign Assets Control -- simply wasn't covered by the Fair Credit Reporting Act.

But the 3rd Circuit disagreed, saying the statutory language was explicit, broad and clear, and showed that Trans Union's "OFAC Alert," which is added to some credit reports when customers pay an added subscriber fee, is subject to the FCRA.

"Trans Union's argument that the OFAC alert somehow manages to avoid the reach of the FCRA ignores the breadth of the language that Congress used in drafting that statute," Chief Judge Theodore A. McKee wrote.

"In order to conclude that the OFAC alert is not subject to that remedial statute even though the rest of the report clearly falls within the definition of 'consumer report,' we would have to conclude that Congress did not mean what it said when it unequivocally defined 'consumer report' to include 'any ... communication of any information by a consumer reporting agency,'" McKee wrote.

Trans Union argued that since the 3rd Circuit was the first court to address the question, it should recognize that the law was not settled and therefore decline to impose liability on the first offender.

McKee was unimpressed, saying: "The credit agency whose conduct is first examined under that section of the act should not receive a pass because the issue has never been decided. The statute is far too clear to support any such license."

In the suit, plaintiff Sandra Cortez, 64, claimed that Trans Union's error created humiliating ordeals when she was trying to buy a car and later when she was renting an apartment, but that Trans Union ignored her repeated pleas to have the erroneous information taken off her credit report.

After a three-day trial, a jury found that Trans Union had violated four provisions of the FCRA and awarded Cortez $50,000 in compensatory damages and $750,000 in punitive damages.

The jury also apparently wanted to make sure that its verdict sent a clear message. On the verdict form, below the monetary awards, the jury wrote: "The Trans Union business process needs to be completely revamped with much more focus on customer service and the consumer."

Senior U.S. District Judge John P. Fullam later slashed the verdict in a remittitur order, saying Cortez must accept a punitive award of $100,000 -- double the compensatory award -- or take a new trial.

Plaintiffs attorneys James A. Francis and John Soumilas of Francis & Mailman tried to take an immediate appeal of Fullam's ruling, but the 3rd Circuit dismissed that first appeal on the grounds that Fullam's remittitur order was not a final order.

Now, in a second appeal, the plaintiffs lawyers tried again to challenge Fullam's reduction of the punitive award, but the 3rd Circuit refused to consider the arguments on the grounds that the plaintiff had accepted the remittitur and therefore forfeited any right to challenge it.

Francis, in an interview, said the ruling on the scope of the statute is a major victory for consumers and will force the credit reporting agencies to modify their procedures in order to avoid false matches between drug dealers and terrorists on the watch list and innocent consumers whose lives are "turned upside down" by such mistakes.

Significantly, Francis said, companies like Trans Union will now be forced to disclose all such information to a consumer who lodges such a complaint. In Cortez's case, Francis said, the company repeatedly provided Cortez with copies of her credit report that did not include any OFAC alert, but nonetheless continued to include the alert when potential creditors asked for the report.

Francis said he was disappointed in the ruling on the remittitur issue and was hoping that the appellate court would recognize that such remittitur orders present the plaintiff with a Hobson's choice and effectively shield a trial judge's decision from any appellate review.

In the appeal, Francis argued that Fullam's ruling was premised on his view of a constitutional question, namely the upper limit, under the Due Process clause, for an award of punitive damages, and that Fullam was too stingy when limiting the award to double the compensatory award.

Since the ruling was constitutional, Francis said, the appellate court should have had jurisdiction to reach it.

But McKee found that the U.S. Supreme Court squarely addressed and rejected that argument in its 1977 decision in Donovan v. Penn Shipping Co.

"Cortez may be correct in claiming that she was on the horns of a dilemma and that the practical result of dismissing her challenge to the court's remittitur will be to place it beyond appellate review," McKee wrote in an opinion joined by Judges Thomas M. Hardiman and Franklin S. Van Antwerpen.

"Nevertheless, the court held in Donovan that a plaintiff cannot challenge a remittitur s/he has agreed to, even if the plaintiff has only agreed under protest or pursuant to a purported reservation of rights," McKee wrote.

Trans Union spokesman Steven Katz said the company never comments on pending litigation.

In the appeal, Trans Union was represented by attorneys Bruce S. Luckman, Mark E. Kogan and Timothy P. Creech of Kogan Trichon & Wertheimer in Philadelphia.

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Cortez v. Trans Union, LLC, 08-2465

Third Circuit Court of Appeals Affirms Punitive Damages Verdict Against Trans Union Credit Reporting Agency for Misreporting Woman as Being on Government's OFAC List —Finding Its Conduct "Reprehensible"

Court Finds Credit Reporting Agencies Must Treat Government OFAC Data Same as Regular Credit Information

August 17, 2011
Philadelphia, PA

On Friday, August 13, 2010, the United States Court of Appeals for the Third Circuit upheld a punitive damages verdict against the Trans Union credit reporting agency in a fair credit reporting case based upon Trans Union's misreporting an innocent woman as being on the U.S. Treasury Department's "OFAC" list. The 91 page precedential decision is the first of its kind in cases brought under the Fair Credit Reporting Act which involve the reporting of such data.

Trans Union, LLC is one of the country's "Big Three" credit reporting agencies, and has one of its main operations in Crum Lynne, Pennsylvania. Trans Union reported information belonging to a suspected narcotics trafficker named Quintero, who was on the Treasury's "OFAC List", on consumer-plaintiff Sandra Cortez's credit report, and failed to fix the serious error despite several disputes. The jury awarded $50,000 in emotional distress damages, and $750,000 in punitive damages, which the trial court reduced to $100,000.

The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) created the OFAC list to identify suspected terrorists and narcotics traffickers, and prevent them from obtaining credit from American businesses and lenders. After September 11, 2001, the Patriot Act issued new rules and obligations regarding lenders' use of the OFAC list. Lenders face serious penalties and fines if they extend credit to anyone on the OFAC list. In connection with the credit reports they sell, and for an additional fee, credit reporting agencies such as Trans Union sell lenders information regarding whether an applicant is on the OFAC list.

The decision is significant for several reasons. First, it is the first decision by any appellate court to find that the sale of OFAC data is covered by the Fair Credit Reporting Act, and that credit reporting agencies must observe the same duties they are required to follow with ordinary credit data when selling OFAC date. The information must be reported with "maximum possible accuracy", it must be disclosed to the consumer that it is being reported about, and if the consumer disputes such data, the credit reporting agency must investigate that dispute and remove the information from the consumer's credit report if inaccurate.

Second, if a credit reporting agency fails to observe these duties as Trans Union did it may be liable for punitive damages. Trans Union's deliberate failure to comply with these duties led the Third Circuit to find that its conduct was "reprehensible" and willful, and that trial court's award of $100,000 in punitive damages did not even begin to approach the constitutional limit for cases like this one.

Plaintiff Sandra Cortez was represented by the law firm of Francis & Mailman, P.C. (www.consumerlawfirm.com). Trans Union was represented by the law firm of Kogan, Trichon & Wertheimer, P.C. Both law firms are located in Philadelphia, PA. The decision of Cortez v. Trans Union, LLC, Civ. No. 08-2465, 08-2466 was authored by Chief Judge Theodore McKee.

Information regarding the case and verdict may be obtained by contacting Jim Francis, Mark Mailman or John Soumilas at the address and telephone number listed above, or by emailing any inquiries to jfrancis@consumerlawfirm.com.

Full text of Cortez v. Trans Union, LLC, 08-2465

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Credit Bureaus Wouldn't Cut It On 'CSI'

Forbes.com

Ever wonder how credit reporting companies like Equifax dig up dirt on overextended consumers? In many cases the credit bureaus don't do their own legwork—they pay public records vendors to do it for them.

These hired sleuths troll through records rooms in local courthouses in search of financial judgments against delinquent consumers and homeowners. Whatever evidence they find is passed along to the credit bureau, which adds the details to the person's file, potentially sinking his or her chances for a mortgage, a car loan or even a job.

But those research outfits don't exactly employ CSI-grade personal identification techniques. So, for example, if there's more than one person with the same name in a particular municipality, a negative credit event can end up in the wrong consumer's file.

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Equifax is now facing federal class action lawsuits in New Jersey and Pennsylvania over claims files were mistakenly tagged with negative info. One suit is set to go to trial in a Philadelphia federal courthouse this spring.

"There may be thousands of consumers who are denied credit or denied a job because of one of these mistakes,'' says Ed Mierzwinski, director of the consumer program at the U.S. Public Interest Research Group. But, he adds, most of these unfortunate folks aren't represented by attorneys and can find it difficult to get the credit bureaus to correct their records. Says Mierzwinski: "The credit bureaus' routine answer is, 'It's not our fault if the public record wasn't accurate.'"

The plaintiffs in the pending actions against Equifax claim the company violated the federal Fair Credit Reporting Act by failing to fully investigate complaints that it had mistakenly assigned them negative credit events. In both cases, Equifax is said to have trusted its public records vendor whenever it was accused of getting something wrong—instead of double-checking the info on its own.

Lewis Perling, a defense attorney for the Atlanta-based credit bureau, declined to comment on the litigation. But in court papers, Equifax insists it "maintained reasonable procedures to ensure maximum accuracy in its credit reports" and that any harm that might have been suffered by the plaintiffs wasn't the company's fault.

That's not the way Bruce A. Summerfield of Blackwood, N.J., sees it. He was surprised to learn in 2007 that Equifax was reporting he hadn't paid $1,075 owed to AT&T. What Equifax's investigation system had missed was that the real debtor was the retired machinist's son, Bruce R. Summerfield, who shared his father's address but was serving in the military in Iraq. Equifax's public records vendor at the time, ChoicePoint, had failed to make that distinction when it discovered a judgment against "Bruce Summerfield" in a Camden County, N.J., courthouse.

After the elder Summerfield contacted Equifax about the discrepancy, Equifax asked ChoicePoint to investigate and ChoicePoint responded that, according to its records, the $1,075 judgment was valid. Equifax relayed that information to Summerfield, although it didn't name ChoicePoint as the source of its information, or provide him with a copy of the original judgment record. Instead, Equifax provided Summerfield with the address of a Camden County municipal building where he could supposedly check the records for himself. (As it happened, Equifax directed Summerfield to the wrong county building.)

Credit reporting mistakes can also occur when public records vendors don't supply updated information. Several years ago, would-be creditors filed an involuntary bankruptcy against Richard Chakejian of Chester Springs, Pa., after a business deal he was involved in went sour. Chakejian fought the bankruptcy action. In May 2006, a bankruptcy judge ruled in his favor and ordered that the filing not adversely affect future credit reports on Chakejian. But in 2007 Equifax was still reporting that Chakejian was the subject of an involuntary bankruptcy. He's now the lead plaintiff in the Pennsylvania class action suit against Equifax.

Philadelphia attorney John Soumilas, who's representing the plaintiffs in both pending suits against Equifax, says there are at least 20,000 consumers in New Jersey and Pennsylvania who disputed a credit report and got the same misleading boilerplate responses from Equifax.

What can you do if you're turned down for credit and suspect there's bad information in your report? Ask to see the full report, and find out which credit bureau generated it. If you spot any spurious information, demand that the credit bureau investigate and correct it. Should you happen to get the run-around, you may just have to troop down to the courthouse and play detective yourself—or join a class action suit.

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Class Certified In Equifax Consumer Records Suit

Law360
By Hilary Russ
October 1, 2009
New York

Consumers who say the credit reporting agency Equifax Information Services LLC did not rigorously investigate their disputes over the accuracy of their public records have won class certification.

Judge Joseph H. Rodriguez said in his ruling on Wednesday in the U.S. District Court for the District of New Jersey that named plaintiff Bruce A. Summerfield was suitable to represent the rest of the class.

"We're pleased with the decision," said Jim Francis, partner at Francis & Mailman PC, co-counsel for the plaintiffs.

"We obviously think it's the correct decision and it follows the Pennsylvania decision" cited in the arguments, he said.

Summerfield and other plaintiffs sued Equifax in March 2008, alleging that the company willfully violated the Fair Credit Reporting Act.

The dispute arose after Summerfield challenged a public records notification in 2006 on his credit report that a Camden court had entered judgment against him.

He said the judgment was against his son, Bruce R. Summerfield. But there was no birth date, social security number or any other indicator in the court record to distinguish the two men, according to Judge Rodriguez's ruling.

After he disputed the record, he got a form letter from Equifax that allegedly contained "numerous false and deceptive misrepresentations regarding Equifax's actions in connection with disputes of public records appearing on the class members' credit reports," according to the order.

Specifically, the form letter erroneously claimed that the "source" of the record was a local courthouse, that the company contacted the courthouse directly, and that courthouse personnel "reviewed" the disputed record, among other actions, the order said.

But Equifax gathers public records information from vendors, whose employees get the data from "primary" sources, including judgments, bankruptcies and liens filed in court. From 2004 to 2007, Equifax used ChoicePoint Inc. as its vendor. Its current vendor is LexisNexis, the order said.

"The theory of plaintiff's case seems to be that defendant violated the Fair Credit Reporting Act by failing to reveal, in a letter to plaintiff, the identity of one of its public record vendors in its notice of results of reinvestigation it sends consumers," Judge Rodriguez wrote.

"A significant part of the argument is that not only does Equifax not contact the court to conduct an investigation, but no one from ChoicePoint contacts the courthouse either," he said.

The plaintiffs are seeking statutory damages ranging from $100 to $1,000 and punitive damages from Equifax for allegedly willfully misleading consumers.

Judge Rodriguez narrowed the class somewhat, defining it as all consumers in New Jersey who got a "substantially similar" letter to the one Summerfield received, beginning two years before the complaint was filed, in their disputes about the accuracy of a public record reported by Equifax.

He also said the potential for individual recovery in the case was small.

Equifax had argued that the class litigation might make it susceptible to a "super penalty" because "it could potentially be liable for $12 million without any proof of harm, merely for a technical violation of FCRA," the order said.

"It appears that defendant's argument is with Congress, who enacted the statute," Judge Rodriguez shot back.

Equifax's opposition to the motion for class certification was allowed to be filed under seal.

A call to an Equifax spokeswoman was not immediately returned.

Plaintiffs are represented by Francis & Mailman PC and Donovan Searles LLC.

Defendants are represented by Traflet & Fabian Esqs.

The case is Bruce A. Summerfield et al v. Equifax Information Services LLC, case number 1:08-cv-01450-JHR-AMD, in the U.S. District Court for the District of New Jersey.

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On Your Side: Fair Debt Collection

CBS 3
Philadelphia

Have you ever been harassed by a collection agency to pay up on a debt? Well, you don't have to tolerate it. 3 On Your Side's Jim Donovan tells us about a local woman who was threatened by one company and she's fighting back.

These days, Seena Rosenberry is cautious about answering her phone.

"Oh it was just awful, how he was torturing me, they called my sister's house, my tenant's house, they called my friend's ex-wife's house and one of my friend's daughters," she said.

A debt collection company didn't have Seena's phone number, so it called people who knew her. And the messages they were leaving said she was in big trouble.

When Seena called them back, she was told she needed to pay an outstanding debt, a debt that wasn't even hers. "It was my sister's debt," Seena said.

But that didn't stop the aggressive collection agent who Seena says was nasty from the beginning of the phone call, to the end. The agent threatened Seena with all kinds of false statements.

"They said they're going to take your house, you're going to have to go to court, they're going to fine you," Seena said.

Frightened, Seena made a credit card payment over the phone, of more than $9,000, but she shouldn't have. Even though Seena was an authorized user on one of her sister's credit cards, the debt was supposed to be discharged when her sister filed for bankruptcy. That meant it no longer had to be paid by anyone.

Seena should not have been harassed either. That's because there's something called the Fair Debt Collection Practices Act. It protects consumers from overly aggressive debt collectors. The problem is, most people don't know it exists.

"It basically prohibits them from engaging in any kind of abusive, unfair or deceptive practice," said Mark Mailman, consumer protection attorney.

Mark is fighting to get back Seena's money and he says other people should fight back too.

"This debt collector contacted her and basically did every no-no under the sun," Mark said.

Under the law, collection agencies are not allowed to threaten to sue if they don't really mean it, tell a third party such as a relative or friend about your debt, call excessively or use obscene or abusive language.

While Seena waits to get her money back, she has some advice.

"Don't believe them and don't fall for it, please don't fall for it, call a lawyer, call somebody, do not give them the money," she said.

If you feel you're being harassed by a collection agency, be sure to document the call. Write down the date, the time and exactly what was said. Plus, you don't have to talk to them, just hang up the phone.

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A Helping Hand on Credit Issues. Lawyer Specializes in Consumer Litigation

Philadelphia Inquirer
By Jeff Gelles
Inquirer Staff Writer

Between Muhlenberg College and Temple University Law School, Jim Francis learned what became a valuable lesson: Things can go badly wrong with America's complex credit-reporting system, and it's not always easy for consumers to solve them.

Francis had dutifully left a forwarding address when he moved to Philadelphia from Allentown, but one of his bills went astray. By the time it caught up with him, his payment was overdue. The late payment became a blot on his good name.

As a budding lawyer, Francis thought he could solve the problem with a well-crafted letter to the credit bureau in question. "Nobody cared," he recalled in a recent interview. "The response was: 'We're going to leave this on your credit report.'"

That was in the 1990s. Today, Francis would expect better, in part because of his path-clearing work as a founding partner of Francis & Mailman P.C., a six-lawyer Center City firm that specializes in consumer litigation.

Francis' firm has sued the three national credit-reporting companies, along with banks, other businesses and debt collectors, to force them to fix problems in clients' credit reports. His firm's Web site, www.creditreportproblems.com, shows visitors how to get their free annual credit reports and deal with errors themselves. (It even includes an interactive tool that creates a dispute letter.) It also seeks clients, who still arrive looking for help with their own consumer nightmares.

Question: How did your personal experience shape your legal practice?

Answer: I heard numerous stories about people who had credit problems that couldn't get them resolved. The brazen indifference to those concerns just kind of reverberated for me throughout law school. When I got into doing plaintiff's work on the personal-injury side, there were cases there where the liability was much tougher for me to see.

In my case, I could document that this wasn't my fault, and I wrote to the bureaus and basically was ignored. And so for seven years I had late payments on my credit report and my credit score was low.

This happened at the time that I began my legal career. I said, 'There's got to be a law.' And I found the Fair Credit Reporting Act. I read it from cover to cover, and I remember at the time there were not many reported decisions. Since then, there have been a lot of decisions, and my firm has been part of a number of them.

Click here to read the full article on the Philadelphia Inquirer.

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$800,000 Verdict Against the Trans Union Credit Reporting Agency

April 27, 2007
Philadelphia, PA

Yesterday, a federal court jury in the United States District Court for the Eastern District of Pennsylvania returned an $800,000 verdict against the Trans Union credit reporting agency in a fair credit reporting case. The verdict is the largest known of its kind in a Pennsylvania federal court.

Trans Union, LLC is one of the country's "Big Three" credit reporting agencies, and has one of its main operations in Crum Lynne, Pennsylvania . Trans Union reported mixed information belonging to a suspected narcotics trafficker on consumer-plaintiff Sandra Cortez's credit report, and failed to fix the error despite several disputes. The jury awarded $50,000 in emotional distress damages, and $750,000 in punitive damages.

Plaintiff Sandra Cortez was represented by the law firm of Francis & Mailman, P.C. Trans Union was represented by the law firm of Kogan, Trichon & Wertheimer, P.C. Both law firms are located in Philadelphia, PA.

The case of Cortez v. Trans Union, LLC, Civ. No. 05-5684 was presided over by the Honorable John P. Fullam.

Information regarding the case and verdict may be obtained by contacting Jim Francis, Mark Mailman or John Soumilas at the address and telephone number listed above, or by emailing any inquiries to jfrancis@consumerlawfirm.com.

Related Coverage:
The Legal Intelligencer
By Shannon P. Duffy
April 30, 2007

A federal jury on Thursday awarded $800,000 to woman who claimed that a credit-reporting agency falsely branded her as a Colombian drug dealer when it confused her with someone on the U.S. Treasury Department's watchlist of known narcotics traffickers.

Plaintiff Sandra Cortez, 62, claimed that the error created humiliating ordeals when she was trying to buy a car and later when she was renting an apartment, but that Trans Union ignored her repeated pleas to have the erroneous information taken off her credit report.

After a three-day trial, the jury in Cortez v. Trans Union found that Trans Union had violated four provisions of the Fair Credit Reporting Act and awarded Sandra Cortez $50,000 in compensatory damages and $750,000 in punitive damages.

The jury also apparently wanted to make sure that its verdict sent a clear message. On the verdict form, below the monetary awards, the jury wrote: "The Trans Union business process needs to be completely revamped with much more focus on customer service and the consumer."

According to court papers, Cortez, who hails from Highlands Ranch, Colo., first learned of the error when she was purchasing a car and was told that her credit report included an "alert" that she was a match for someone listed by the Treasury Department's Office of Foreign Assets Control.

Cortez claimed that a manager at the car dealer threatened to call the FBI to report her, but that she was ultimately able to convince the dealer that she was not the woman on the government list.

Court records show that the OFAC list includes a "Sandra Cortes Quintero," who is believed by the government to be associated with a drug cartel in Cali, Colombia.

Cortez's lawyers - James A. Francis, Mark D. Mailman and John Soumilas of Francis & Mailman - said Trans Union's automated processes put the alert on Cortez's credit report even though the Colombian woman is 27 years her junior and has a different last name.

But the credit report didn't include the year of birth, they said, so anyone who looked at it would assume that Cortez had been properly identified as a "match" for a drug dealer.

The OFAC list, which is publicly available on the Treasury Department's Web site, includes about 3,300 groups and individuals, mostly foreign nationals, who are designated as terrorists or drug traffickers.

Long used by banks and other financial institutions to block financial transactions of drug dealers and other criminals, the list is now seeing wider use due to an executive order signed in the wake of the Sept. 11 terrorist attacks.

According to a report by the Lawyers' Committee for Civil Rights of the San Francisco Bay Area, the list is now used by many businesses to screen applicants for home and car loans and apartments.

The report, issued last month, said "few people in the United States are actually on the list. But because many names on the OFAC list are common Muslim or Latino names - such as 'Mohammed Ali' or 'Carlos Sanchez' - people in this country with similar names are increasingly getting snagged. Even a shared first or middle name, including some of the most common names in the world, can lead to consumer transactions being denied or delayed."

Under the law, anyone who does business with a person or group on the list risks penalties of up to $10 million and 10 to 30 years in prison.

Trans Union recently began offering an "OFAC adviser" feature in its credit reports, a service it touts as offering "the most comprehensive international list of known terrorists and criminals" and ensuring that it minimizes "false positives" through "unique" matching technology.

But Cortez's lawyers say she was just one of the victims of Trans Union's automated process which attaches an alert to a credit report whenever a consumer's name is similar to one on the list.

Francis said the list includes many common names, such as Charles Taylor, the former president of Liberia.

And Trans Union, he said, is not doing enough to ensure that innocent Americans don't have a terrorist or drug trafficker alert attached to their credit reports.

After the initial ordeal in the car dealership, Cortez claimed that she made repeated efforts to have the alert removed from her credit report, but that Trans Union failed to do so - despite assuring her once that it was no longer there.

In its verdict, the jury concluded that Trans Union had violated four provisions of the Fair Credit Reporting Act by not conducting a proper initial investigation; by not making proper disclosures to Cortez when she complained; by failing to note her dispute in subsequent reports; and by failing to have procedures that would ensure "maximum possible accuracy" in its reports.

The jury also found that the first three of those violations were "willful."

For Chicago-based Trans Union, the jury's finding of willfulness meant that it was exposed to possible punitive damages in the second phase of the trial.

In his closing argument, Soumilas told the jury that Cortez didn't suffer any economic harm as a result of Trans Union's error, but instead was seeking only to be compensated for the ordeals and humiliation she suffered.

On the issue of punitive damages, Soumilas didn't suggest any specific figure, but told the jury that Trans Union has a net worth of $939 million.

Trans Union's lawyers - Bruce S. Luckman and Timothy P. Creech of Kogan Trichon & Wertheimer - had argued in court papers that such an erroneous alert wasn't covered by the Fair Credit Reporting Act because it is not financial information.

But at trial, U.S. District Judge John P. Fullam rejected that argument and allowed the claim to go to the jury.

Neither Luckman nor Creech could be reached for comment on Friday.

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Theft of Information

Over the course of the last year, "theft of information"" has become a buzz phrase familiar to both businesses and consumers alike. The list below is a sampling of some of the companies that have by this growing and invasive form of theft. Click on the link to read the news story concerning identity theft. If you think you may have fallen victim to one of these thefts, order your credit reports today and contact us immediately should you find any incorrect information or account activity that doesn't belong to you.

ABN Amro Mortgage Group

Do you have a mortgage with ABN Amro Mortgage Group? Two million residential mortgage customers were affected by this latest information theft, which involved the disappearance and reappearance of a computer tape while in transit from Chicago, Illinois to Allen, Texas. The tape contained the names, account numbers, payment history and social security number of these borrowers.

Ford Motor Company

Ford is the latest to be hit by a security breach as a computer with names of 70,000 active and former employees and their personal data is stolen from a Ford facility in Detroit Michigan.

Scottrade

U.S. Securities regulators warn investment firms of potential "phishing" and hacking schemes, www.scottrade.com, 1.4 million customers receive notification of server security breach.

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$5.3 Million Verdict Against Trans Union A Victory for Consumers Nationwide

August 19, 2002
Chicago, IL and Philadelphia, PA

Recently, an Oregon jury awarded Judy Thomas $5.3 million dollars for errors found in her credit report. The Oregon woman battled with Chicago based credit reporting giant Trans Union for 6 years to have false information belonging to another woman, removed from her report. Thomas won her lawsuit against Trans Union for violations of the Fair Credit Reporting Act, the federal law which regulates the accuracy of information contained in credit reports and mandates that the credit reporting agencies investigate and correct mistakes within a 30 day period.

Trans Union, Equifax and Experian, or the "big 3" credit reporting agencies report most of the information that is used for consumer lending in this country. Often, a consumer is unaware of exactly what information is being reported about their own credit history, until they are unjustly turned down for a mortgage or installment loan. Only than, after ordering copies of their credit report, do they discover that there is an incorrect piece of information that has been reported which caused the denial.

According to consumer attorneys who handle Fair Credit Reporting Act claims, the system is inherent with flaws. The merging or mixing of credit files from 2 different, unrelated individuals into one report, or "mismerge" as it is know in the industry, is all too common. Jim Francis, of Francis & Mailman, P.C., a Philadelphia law firm that concentrates its practice in credit reporting cases, was not surprised by the verdict. "What is unfortunately known all too well by American consumers is that credit reports are riddled with errors and outdated information that often stands in the way of a job or mortgage. What is not known, is that the major credit reporting agencies are well aware of this problem and simply refuse to do anything about it."

"What's worse", said Francis, "is that when a consumer disputes inaccurate information on her report, the credit reporting agencies almost always side with the companies reporting the information in the first place, rather than with the consumer, because they are the credit bureaus' customers." The problem, according to Francis, is financially motivated; TThis is another case of the Ford Pinto. While the credit reporting agencies know full well that their cavalier and unlawful practices hurt consumers, they have consciously decided to keep the status quo out of an apparent belief that it is simply cheaper to defend against lawsuits than fix the problem at its core."

Up until this point, most cases against the big credit reporting agencies have ended in settlements rather than in court. In a similar case against Trans Union in 1998, a jury in Mississippi awarded $4.5 million to Terry Cousin. Trans Union had mixed credit information from Cousin's brother in with his credit report and did not remove the information, nor did they comply with the time period spelled out in the Fair Credit Act. Last year, the 5th Circuit Court of Appeals in New Orleans rejected the award, claiming Cousin erred on a technicality and did not have enough evidence to prove that Trans Union had violated the FCRA.

Mark Mailman of Francis & Mailman claims, "Juries are now awarding damages that take into account the emotional stress that goes along with a credit denial based on false information, as was the case with the $300,000 damages award in the Thomas verdict. He adds, "Your good credit rating is gone, and as a result of the ongoing battle to restore your rating, your emotional and physical health decline."

What can a consumer do to ensure the information in their credit report is accurate? Attorney Larry Smith an attorney from Chicago advises, "Order a copy of your credit report from each of the 3 credit reporting agencies and look them over carefully for inaccuracies. It makes good sense to know exactly what the credit bureaus are reporting about you before you apply for that important installment loan, rather than after you have been turned down. He adds, "Should you find mistakes or errors, notify the CRA of your dispute in writing, keep a copy of the dispute letter and follow up within a month. If you have made numerous attempts to have the information investigated and removed and the CRA has not done this, you are entitled to sue the agency under the FCRA."

According to attorneys Francis, Mailman and Smith, even after a credit bureau has investigated and removed inaccurate information, it may reappear again later. They advise ordering copies of your reports every 6 months to check that the negative item(s) is gone for good and that your credit history is reported accurately and is up to date.

For more information, contact Mark Mailman of Francis & Mailman, PC at 877-735-8600.

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Archived Articles

Ch. 6 Action News

Attorney Jim Francis is interviewed by Philadelphia ABC TV affiliate Ch. 6 Action News in this clip. The story involves one woman's battle with the credit bureaus to remove a false judgment that remained on her credit report after numerous disputes and attempts to correct.

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Jim Francis, of Francis & Mailman, is interviewed by NBC 10 News in Philadelphia on one consumer's "credit report nightmare".

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