Articles Posted in Credit Report Violations – FCRA

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A mortgage servicer called a “furnisher” for purposes of credit reporting is responsible for updates to a borrower’s credit report.  Many times following a foreclosure, there is a limited time for the lender to seek a deficiency judgment.  Here is Florida it is one year.  If a year goes by, and the lender fails to seek a deficiency judgment then it waives the amount it is still owed after the foreclosure sale of a home.

Here’s the good news:  If a lender fails to report a deficiency as having been eliminated, discharged or abolished, it is then reporting inaccurate information.  This inaccurate reporting opens the door to the furnisher’s liability under the federal Fair Credit Reporting Act, 15 U.S.C. Section 1681 et seq., (the “FCRA”) per the Ninth Circuit (California) in a recent case.  Gross v. CitiMortgage, Inc., 20-17160 (9th Cir. May 16, 2022).

This case is being compared to a leading contempt case, where the Supreme Court in Midland Funding  LLC v. Johnson, 137 S.Ct. 1407, (2017) found that a debt collector who filed a proof of claim in a bankruptcy that was obviously barred by the statute of limitations did NOT engage in false, deceptive, misleading, unconscionable, or unfair conduct so there was no violation of the Fair Debt Collection Practices Act.  While this decision involved a different set of circumstances and a different law, it is clear that these two views could be considered as inconsistent.

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debt-collection-dos-and-dontsNow that debt collectors are back and moratoriums are falling away, this is a good opportunity to remind Florida consumers about limitations that bind debt collectors.  Basically, things they may do or say that could get them into trouble, and give you recourse to sue or settle or more favorable terms.  So what do we look for?

  • Misleading letters regarding payment options, statute of limitations, or credit reporting.
  • Letters lacking required disclosures or misleading about dispute process.
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Credit-ReportWhat are the most common errors on a credit report that lead to FCRA claims — and resulting damages?

  1. Status Disputes – error/inaccuracy standards which give rise to valid disputes:
  • these are things that are factually inaccurate such as:
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Denied-ins-policyIn our consumer practice, I was surprised to see that denials of life insurance or annuities are often a violation of the Fair Credit Reporting Act (“FCRA”).  The medical screening reports are often ad hoc and inaccurate.

If you have applied for life insurance and been denied, don’t give up.  Instead, check your report with Medical Information Bureau (“MIB”).  You may find that it’s patched together and has information well over the allowed seven years or contains otherwise inaccurate diagnosis.

Prescriptions and your Rx history are tracked by Milliman INtelliscript based out of Brookfield, Illinois – 871-211-4816.

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credit-confid-infoWhen you have an apartment or employment denial, you can call the numbers listed below for the screening company and request a copy of the background report:

  • Accurate Background, Inc. – Irvin, CA 800-216-8024
  • First Advantage Corp. – Atlanta, GA 800-845-6004
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credit-report-wrongThe FCRA requires that “[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” 15 U.S.C. Section 1681e(b).

That’s a high burden “maximum possible accuracy”!  And it is not being met.  In one over the top case of ours, despite a client providing proof of life, she was reported as deceased by her student loan servicer over and over again wrecking havoc on her credit report.

More typically we run into instances where student loans are incorrectly reported as being in default when in fact they are no longer owed due to a settlement or discharge in bankruptcy.  This in fact is becoming our bread and butter raising these types of claims.

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arbitrationAre you looking down the barrel of an arbitration clause in your consumer/creditor agreement?  I’ve posted before (Arbitration Clauses in Consumer Contracts – How to Avoid Being Thrown out of Court) on some local case law here in Florida to help avoid arbitration clauses – but here’s a new case in the consumer’s favor in Bankruptcy Court for the Middle District of Florida.

The Bankruptcy Court ruled that an arbitration clause did not constrain the court’s contempt powers, “[w]ords in a consumer agreement cannot deprive the bankruptcy court of the inherent power to enforce compliance with an injunction.”  Verizon Wireless Personal Communications, LP v. Bateman, No. 14-5369, Adv. Pro. No. 18-1394 (M.D. Fla. Sept. 24, 2019).

So if you’re in bankruptcy, or had a previously filed one that you can reopen (without a filing fee), challenge the arbitration clause in bankruptcy – you may be much more likely to win!

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check-your-credit-reportIt’s very easy to file an online or even phone dispute with a credit bureau.  It’s fine to start a dispute in this manner.  However, to ensure that all parties are required to investigate the dispute and update the consumer’s credit report, it is important to provide notice to the furnisher as well.  A furnisher is the party who reports to the credit reporting agencies (“CRAs”).

In an April 2019 decision, Hunt v. JP Morgan Chase Bank, Nat’l Ass’n, the 11th Circuit, the appellate court governing the State of Florida, held that a class action could not go forward against the furnisher of consumer information because it (JP Morgan Chase) was not notified of the dispute.  When JP Morgan Chase initially provided information to the CRAs about a consumer’s account being past due, this was an accurate statement.

The Court did not address whether JP Morgan Chase had an obligation to “refresh” information it had previously provided — had it received notice of the dispute.  Finding that the furnisher did not receive notice of the dispute, the Court stopped its analysis there.

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fcraMany of our clients are getting their feet back under them now from the bankruptcies and foreclosures of the past few years.  In our efforts to help them improve credit scores, we often will see an old creditor which reports a debt inaccurately after its been sold or transferred to another.  Some of these furnishers/creditors argue that once they sell the debt, they have no further responsibility to ensure accurate reporting for that debt.

This is not true.  The duty to report accurately does not end once ownership of an account transfers or is sold.  Any furnisher must re-investigate upon receipt of a dispute from a Credit Reporting Agency (CRA).  Failure to do so, opens both the furnisher and the CRA up to liability for an FCRA violation.  If the furnisher does not respond to the dispute, then the CRA must delete the tradeline.

Damages under the FCRA can be substantial and can include claims against all three of the CRAs as well as the furnisher if they do not abide by this law.  Statutory and actual damages are available as well as attorney’s fees and costs – which are usually handled on a contingency basis where fees and costs are only due in the event of a successful recovery.  Further information can be found on our website.

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law-gavelWhat happens to the original debt when a consumer files an unlawful debt collection lawsuit?  Sometimes the creditor will file a counterclaim to force the underlying debt to judgment in an effort to turn the tide in favor of the debt collector.

Fortunately, in the Middle District of Florida there are several good recent cases that prevent this outcome.  The federal court has ruled there is no subject matter jurisdiction because there is no supplemental jurisdiction over the counterclaim based on the fact that the counterclaim is permissive and would substantially predominate over the plaintiff’s claims, and because the “set off” position didn’t support supplemental jurisdiction.  See Della Vecchia v. Ally Financial, Inc., No. 8:17-cv-2977-T-23AAS, 2018 WL 907045 (M.D. Fla. Feb. 15, 2018); Vernell v. Ally Financial, Inc., et. al., No. 2:15-cv-674-FtM-38MRM, 2016 WL 931104, at *4 (M.D. Fla. Mar. 11, 2016).

This can be an important litigation concern that could force an early and minimal settlement if it weren’t for this case law favoring the consumer.

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