Making Claims Against Inaccurate Consumer’s Credit Report
In the parlance of the FCRA:
- credit bureaus are called “consumer reporting agencies” or CRAs;
- credit reports are called “consumer reports”;
- entities, such as creditors, that buy credit reports are called “users”;and
- entities, such as credit card companies, that report information about consumers to CRAs are called “furnishers.”
What do you do when clients come in and say there’s something wrong on their credit reports? Errors on a credit report can mean many things: a creditor has simply listed something inaccurately; the credit bureau has mixed your client’s information with that of another with a similar name or Social Security number; or someone may have stolen your client’s identity and established fraudulent accounts. It is important to take the right steps both to diagnose the problem properly and preserve your client’s rights.
The principal statute in this context is the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1981, et seq. Although the FCRA provides a basis for many types of claims, this article provides a brief introduction solely to claims arising when a creditor furnishes inaccurate information about your client’s account.
First things first: Ask the client to obtain credit reports from each of the three credit bureaus, Equifax, Experian, and Trans Union. Everyone is entitled to a free report once per year from each CRA through the Web site established by the Federal Trade Commission at www.annualcreditreport.com. The attorney should compare the separate credit reports to identify all of the issues that need to be addressed, and how to address them. Two warnings: (1) do not be fooled by Web sites such as www.freecreditreport.com—they are not free; (2) do not use “tri-merge” reports (often used by mortgage companies) that combine the credit reports of the three credit bureaus.
Write the Credit Agency
Once you have identified the inaccurate entries on your client’s credit report, ask the client to write the CRA a letter disputing the accuracy of each incorrect entry. Most people write the furnisher who reported erroneous information; that’s the wrong way to go under the FCRA. If you remember nothing else from this article, remember that the consumer must write the CRA to dispute an erroneous entry to trigger the consumer’s rights under the FCRA. You can write the furnisher until the cows come home, but you will not trigger the client’s key rights under the FCRA.
Do not file the dispute online; the client should send a letter via certified mail, return receipt requested, with a copy sent (via blind copy, certified mail, return receipt requested) to the furnisher that supplied the erroneous information. The dispute letter should go into as much detail as possible and should include all available supporting documentation.
The CRA is required to investigate any item disputed by a consumer. As part of its investigation, the CRA must relay the dispute to the entity that furnished the information within five business days of the CRA’s receipt of the letter. The CRAs transmit the information to the furnisher electronically. The furnisher then has 30 days from the date the CRA received the dispute to investigate the consumer’s complaint and respond to the CRA by either confirming the entry as it is, modifying the entry to correct an error, or deleting the entry. If the furnisher does not respond within the 30-day period, the CRA must delete the trade line. Deleted information cannot be reinserted to the consumer’s credit report without written notice to the consumer.
CRAs and furnishers handle disputes in an extremely cursory fashion. Some disputes are handled by CRAs at offshore call centers where workers literally are allocated just a few minutes to process each dispute. The disputes are usually reduced to a numeric code indicating the basic thrust of the dispute, for example, “account not consumer’s.” This code is then transmitted to the furnisher, usually without any of the supporting documentation submitted by the consumer. The furnisher frequently simply looks at its records to see if they match what was reported to the CRA, conducting virtually no real investigation.
If a CRA and/or the furnisher fails to correct an incorrect entry on a credit report after receiving notice of the error, and that incorrect entry causes a consumer damages, then the consumer may have a claim under the FCRA for failure to investigate. Note, however, that liability is “forward looking” only. Damages may be claimed—but only damages that accrue after expiration of the 30-day investigation period. The consumer has no claim for any damages caused by the erroneous information prior to the time the dispute was filed.
Note that the FCRA is not a strict liability statute: having an inaccurate entry, standing alone, is not enough for a claim. The consumer must show that the CRA failed to follow reasonable procedures to ensure the maximum possible accuracy of information on a credit report ab initio. Even if those procedures are reasonable, liability can still attach if the CRA fails to conduct a reasonable investigation of a consumer’s report of incorrect entries.
Inaccurate information on a consumer’s credit report, however, may be a symptom of something other than a furnisher’s error. As noted above, it may be due to the credit bureau mixing your client’s information with that of another individual. These “mixed file” cases are common. The attorney should focus on whether the CRA’s procedure for creating the client’s consumer report poses an unreasonable risk of including information about other people. Among the evidence one might seek is the reinsertion of erroneous information that has already been deleted as part of the resolution of a consumer’s previous dispute. Accounts that a furnisher states were opened when the consumer was a minor would be another example of information that one might argue constitutes constructive notice to the CRA that the information cannot be correct. Resolution of these kinds of claims should include attention both to damages and equitable remedies under which the CRA agrees not to use the procedures that created the problem.
Those interested in this developing area of the law should start by reviewing Fair Credit Reporting, a manual published by the National Consumer Law Center. It is the Bible for practitioners in this field.
A. Thomas Stubbs is a solo practitioner in Decatur, Georgia, where he specializes in consumer law, wrongful death and injury, family law, and probates and estates. Contact him at email@example.com.
© Copyright 2009, American Bar Association.