As we mentioned yesterday, we are putting up parts of our seminar paper that we recently presented at the University of Alabama Law School. This deals with credit reports and debt collectors and we presented this to collection lawyers and consumer lawyers.
II. OVERVIEW OF THE FCRA
Furnishers are those individuals or companies (including debt collectors) that furnish or provide information to the CRAs about consumers. This is normally done on a monthly or quarterly basis.
The consumer reporting agencies (“CRAs”), which include Equifax, Experian, and TransUnion , are the companies that compile the credit reports on consumers. The furnishers send the information about consumers to the CRAs who then store that data. When someone requests a “credit report” then the CRA from whom it is requested will “pull” the data together for that consumer and create or compile the report.
A credit report is defined as “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness . . . .” 15 U.S.C. Section 1681a(d)(1).
A “user” of information is anyone who pulls or requests a credit report from a CRA. There are specific rules about who is allowed to pull a report and under what circumstances it is allowable to pull a report.
B. How Credit Reports Are Obtained
It is now much easier for consumers to pull their credit reports. They are allowed to pull them for free every twelve months by going to www.annualcreditreport.com. With advertising on TV and other places, there is more awareness of the need to pull credit reports. Consequently, more consumers know what is on their credit reports. This fact enhances the effectiveness and dangerousness of the credit reporting tool for debt collectors.
C. How Inaccurate Information Is Disputed
If a consumer feels information is inaccurate, there are two ways to dispute it. One way, which invokes the FCRA, is to send a dispute to the CRAs. This can be done in a variety of ways, but the two main ways are by letter and by using the web based system at each CRA’s website. The other way is to dispute directly with the furnisher. Unfortunately for consumers, while this imposes duties upon the furnisher, there appears to be no private right of action (under the FCRA) unless the CRA notifies the furnisher of the dispute.
Basically the dispute needs to identify the consumer and the account or “trade line” that is alleged to be in error. It also needs to identify what the problem is unless the furnisher has the information in its file to show that the account is inaccurate. For example, if the debt collector knows that the account has been included in bankruptcy and discharged, the dispute letter could simply state the account is “inaccurate” as the debt collector knows it is inaccurate. But, for example, if the debt collector has the wrong “Sara D. Williams” then the consumer should send a letter pointing this out and possibly including an affidavit. The more information given to the CRA, the more responsibility this puts on the CRA to do an adequate job of investigating the dispute.
The CRA is supposed to forward all relevant information to the furnisher so, once again, the more information that is provided then the more responsibility the furnisher has to investigate.
The CRA has thirty days from receipt of the dispute to investigate. 15 U.S.C. Section 1681i(a)(1)(A). In our experience, the extent of the investigation by the CRA is simply to forward the dispute on to the furnisher with an electronic code which describes the dispute. That might be “bankruptcy” or “disputes account balance” or “not his/her account” etc. This means as a practical matter whether the account/trade line will stay on the consumer’s report or will be deleted or will be modified is up to the furnisher. Therefore, the debt collector must ensure that it has performed a reasonable investigation as it cannot count on the CRA to independently investigate and catch the debt collector’s errors.
D. Statute of Limitations For FCRA Claims
The statute of limitations is now two years from the date the consumer discovers the violation and within five years of the actual violation. 15 U.S.C. Section 1681p. This is a change in the law as TRW Inc. v. Andrews, 122 S.Ct. 441 (2001) had held there was no discovery rule in the FCRA. But Congress changed the statute to, in essence, overrule Andrews in the 2003 amendments to the FCRA.
With respect to a consumer who has disputed with a CRA information provided by a furnisher, it is two years from when the furnisher received the notification from the CRA of the dispute as there is no private cause of action against a furnisher (under FCRA) until the CRA notifies the furnisher of the dispute. We’ll address this in the final section.
E. Damages Under FCRA
The basic rule is that if a furnisher negligently violates the FCRA then the furnisher is liable for actual damages (compensatory damages – including emotional distress), court costs, and reasonable attorney fees. 15 U.S.C. Section 1681o(a). If the violation is willful then the consumer can receive statutory damages (up to $1,000) or actual damages and punitive damages. 15 U.S.C. Section 1681n(a).
If someone obtains a credit report without a permissible purpose then the damages are statutory or actual damages, punitive damages, court costs, and attorney fees. 15 U.S.C. Section 1681n(b).
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