Consumer Lawsuits Against Credit Bureaus Are Multiplying

I read this article last night and thought it applied to a number of people's situations here in poor_skills.

Article link: http://www.law.com/jsp/article.jsp?id=1155648410038

Consumer Lawsuits Against Credit Bureaus Are Multiplying
Tresa Baldas
The National Law Journal
August 16, 2006


The nation's three top credit bureaus are being slammed with a growing number of lawsuits filed by consumers who allege that the agencies are severely damaging their credit worthiness.

Scores of lawsuits challenging credit-report errors and low credit scores are pending in several states, including California, Louisiana, Michigan, Mississippi, New Mexico, South Carolina and Virginia.

Consumers allege that the bureaus -- Equifax, TransUnion and Experian -- are engaging in a practice that artificially lowers their credit scores, and that they are ignoring pleas to remove inaccurate information from the reports.

"It is becoming more and more prevalent that people are fighting back and suing credit bureaus and information furnishers who can't get it right without filing a lawsuit," said James Fishman of New York's Fishman & Neil, who has handled about 100 credit lawsuits in the last five years on behalf of plaintiffs.

"I've always told clients who come in and have been banging their heads against the wall, 'It takes a lawsuit to get your thing solved,'" he said.

Fishman, who settles about 99 percent of his cases, believes litigation works.

"When I go to court, the first thing I'm handed [from the defense] is a clear credit report," Fishman said. "You don't get that unless you walk into the courtroom."

Adam Taub, a Michigan consumer attorney who has handled numerous lawsuits against the credit bureaus and debt collectors, noted that "[i]n the last two or three years, just the number of calls on this particular issue has increased by 100 percent, probably more.

"Most of the people who come to my office are not particularly interested in filing a lawsuit right out of the gate," said Taub of the Lyngklip & Taub Consumer Law Group in Southfield, Mich. "Most of them have a problem. They're tearing their hair out. They're losing sleep. ... They're hopeful that the credit bureaus are going to do the right thing and remove the bad information."

But all too often, he added, nothing happens, so then comes the lawsuit.

"After being ignored over and over and over again, finally you have to do something to get their attention, and in this particular arena, it appears the only option is to bring a suit," Taub said.

ID THEFT SPURRING ACTION

Attorneys noted that in recent years, consumers have been spotting mistakes on their credit reports because they've been checking them more often, largely because of identity-theft fears. With free credit reports now available in all states, mistakes aren't hard to miss. And "credit-freeze" laws enforced in 22 states -- that bar lenders or anyone from reviewing a person's credit history -- also prevent identity thieves from opening fraudulent accounts.

There are also those who learn about bad credit the hard way: They go to buy a house or a car, and they are denied a loan or a lower interest rate because of a tainted credit report or a low credit score they were not aware of.

In both cases, plaintiffs allege that the credit bureaus are shirking their responsibility to maintain accurate records and thoroughly investigate cases involving false information, which is required under the Fair Credit Reporting Act.

Plaintiffs making those claims got a recent boost from the 5th U.S. Circuit Court of Appeals, which ruled on July 24 that the credit bureaus are ultimately responsible for the reinvestigation of disputed information in their systems and cannot shirk that responsibility by blaming another group for the false information. Morris v. Equifax Information Services, 2006 WL 2043567.

Officials at Equifax and TransUnion declined comment for this story, as did attorneys contacted who are defending them in a number of lawsuits.

Experian also declined comment on the pending litigation, but defended its reputation as a gatekeeper of more than 215 million credit files.

"We have many decades of experience in both managing and safeguarding the privacy and robustness of the consumer credit files under our care, and we take that responsibility very seriously," said Experian spokesman Donald Girard.

"One of the newest challenges for Experian is the relentless attack of phishers, scam artists, identity-fraud cheats and others who would seek to exploit the nations' credit system for their own gain," Girard added.

"Experian has developed increasingly sophisticated tactics and tools to safeguard its databases ... and it will continue to do everything in its power to ensure that consumers' data is used only for the purposes allowed by federal law."

In a recent lawsuit that Equifax settled with a New Mexico woman who sued over an allegedly botched credit report, Equifax also defended its record-keeping tactics. The case involved a small-town teacher whose credit report contained information that belonged to another woman with the same name, but who had bad credit. The woman sued Equifax over the mix-up and for allegedly allowing the false information to remain on her credit file for more than two years. Apodaca v. Discover, No. CIV-04-0717 (D.N.M.).

"At all pertinent times, Equifax has acted in good faith and without intent to injure plaintiff," Equifax stated in court documents. "[A]ny alleged damages sustained by plaintiff were, at least in part, caused by the actions of plaintiff and resulted from plaintiff's own negligence, which equaled or exceeded any alleged negligence or wrongdoing by Equifax."

The woman's attorney, Rob Treinen of Feferman & Warren in Albuquerque, N.M., said that Equifax put up a tough fight, but eventually settled in May for an undisclosed amount.

"It basically takes a lawsuit to get these things sorted out," Treinen said. "Our client gave Equifax everything that they would need to fix that. ... They absolutely would not own up to what had happened."

Meanwhile, in South Carolina, the credit bureaus are battling a new kind of legal claim that has caught the attention of consumer rights lawyers nationwide. A consumer has filed three class actions against the bureaus claiming that they are engaging in a practice that is artificially lowering credit scores. The practice involves allowing credit card companies -- in this case, Capital One Financial Corp. -- to withhold a customer's credit limit from his or her credit file, which lowers the credit score. Harris v. Experian Information Solutions, No. 6:06-1808-GRA (D.S.C.).

Attorney William Narwold of Mount Pleasant, S.C.-based Motley Rice, who is representing the plaintiff in the suits filed on June 15, explains how it works.

Credit card companies typically submit two numbers to the credit bureaus: a high balance, or how much is typically owed over time, and a consumer's credit limit. The scoring system used by the credit bureaus compares the high balance against the credit limit. But if the company neglects to report the credit limit, the scoring software automatically assumes that the high balance and credit limit are one in the same.

For example, if the consumer has a $5,000 credit limit that goes unreported, but only a $1,500 balance, it will appear as though the consumer has maxed out his or her card at $1,500, which results in a lower credit score.

And that, argued Narwold, causes consumers to lose out on lower interest rates for cars, homes and personal loans.

"All of a sudden, their not reporting information costs you money," Narwold said.

Narwold's suits claim that by not requiring credit card companies to report credit limits, the credit bureaus are violating the FCRA by not taking reasonable steps "to ensure maximum possible accuracy."

"That's the magic language from the statute. It's a pretty tough standard," Narwold said.

TOUGH CASES TO PROVE

Attorney Ian Lyngklip, co-chairman of the National Association of Consumer Advocates, who trains attorneys in the area of identity theft and fair credit reporting, noted that there has been a growing interest among lawyers who want to litigate such cases. Currently, there are about 200 lawyers nationwide experienced in this area, he said, noting that as many as 270 lawyers have participated in his training seminars in recent years.

Lyngklip, whose Michigan firm is handling about 20 lawsuits against the credit bureaus over erroneous credit and is investigating another 40 such cases, stressed that credit-reporting lawsuits against the bureaus are tough to prove.

For example, he said, a credit bureau might remove false information from a file. But a debt collector will continue to go after the person, then submit another file to the credit bureau -- and the information pops up again.

"It's a very difficult suit to win," Lyngklip said.

Difficult, but not impossible, as Virginia attorney A. Hugo Blankingship III can attest to.

On July 14, a jury ordered Equifax to pay his client, an identity-theft victim, $351,000 over erroneous information that kept appearing on her credit report. Sloan v. Equifax Information Services, No. 1:05-CV-1272, (E.D. Va.)

Sloan had filed against all three bureaus, but Experian and TransUnion settled for undisclosed amounts. The case involved a woman who had her Social Security number stolen by a hospital employee while giving birth to her child in 2003. The employee used it to open numerous accounts and ran up huge debts.

The identity thief was arrested in March 2004 and later sentenced to two years in prison. But the victim spent two years trying to clear up her credit.

"She wrote letters. She called them. They saw the problem. They just didn't fix it," said Blankingship of Blankingship & Associates in Alexandria, Va.

Attorneys at Kilpatrick Stockton in Atlanta, the firm that represented Equifax in the Sloan trial, declined comment, as did company officials.

TransUnion and Experian officials also declined comment on the Sloan case.
Thank you for the link! The credit bureaus practically have a monopoly over credit reporting and responsible reporting is the least that can be expected of them.
Thanks for the link! I'm graduating from law school soon (but not soon enough!) and I'm thinking about eventually starting my own practice doing law for the people type stuff, and this is an area I'll definately be looking into.

Also, hubby and I recently decided to start looking for our first house. I am NOT looking forward to dealing with cleaning up our credit reports!
Great article. I know when I was searching for information on NCO (a collection agency harassing us every time they had to locate someone with a similar last name to ours) I found a forum for collection agents. They had an interview of several collection agency managers and owners. One owner claimed that people who sued their agencies were all "ignorant of the law", which is obviously not true.

The really scary part was when they were all discussing how much money the collection agency business spends on lobbyists to get laws that favored collection agencies passed.
Christ. I've always wondered if took a certain kind of slimeball to be a manager at a collection agency.
Bureaus don't damage credit-worthiness. People damage [or ruin] their own credit-worthiness. At least that's the case 99.999999% of the time.
A year or so ago, I found several errors on each of my credit reports. I had no trouble whatsoever getting them removed immediately.

I then told all of my friends and colleagues about the errors and encouraged them to do the same. None of them had problems either.

So... being a statistician... I think this "problem" is blown way out of proportion, and I stick with my original statement.
Life must be grand for you if everything is so easy. The article is talking about mistaken identities which happens quite a bit especially if you have a really common name. Also, see the identity theft story of my sister in law below. They're still trying to get stuff removed because some of the companies & the credit bureaus refuse to cooperate with them on some of the charges.
Mind you, I'm not saying people are always responsible and the credit mistakes are not theirs. Not at all. I'm amazed and simultaneously saddened by the complete lack of common sense sometimes displayed here when people talk about stuff being in collection for a few years before doing anything about it.

This particular article was addressing the opposite end of the spectrum.
As a former supervisor in the security and investigations department of a large bank, I can tell you that your assumptions are beyond the shadow of a doubt, complete bullshit.

You win. You're my hero.
You, unfortunately, are probably not representative of what's happening across the board.

I have three accounts on my reports that shoult not be there, because they result from a hospital billing error. I have disputed them, I have contacted the hospital, and have contacted the collections agency.

They've been there for about three years now. The irony is that one item dates from a time when I was nowhere near the hospital.

The agencies and hospital refuse to remove them -- despite the fact that the action that led to them being there has now been prosecuted in New York as an illegal action.

They are for small amounts, but that's still three negatives on my credit.
Somewhat agreed. One reason the bureaus would be reluctant to remove negative info is partly because of fucks like some of the people in here who fraudulently "dispute" their credit reports in an effort to clean up their shitty credit. However, there is a valid point in the way that the credit scoring software works to sometimes show the customer as having a balance equal to their credit limit, which makes them appear to be a greater risk to potential lenders.

In all the WAH WAH BAD COLLECTION AGENCY crap that goes on around here, no one ever discusses how much money a typical collection agency spends on wages for its semi-skilled employees who need jobs as much as the rest of us do.
I think you were probably lucky/those companies and managers were nice and/or efficient. My sister in law had her identity stolen 2 years ago and they're still trying to get certain accounts off there. It seriously ruined her credit and the reporting agencies and offending companies won't take it off.

After a certain point even the companies with the originating false account try like JCPenney did and the CROs still don't take the info off. This article is talking about extreme cases like that. It shouldn't take two years and a lawsuit for them to remove bad info. Period.
It definitely is. Often I have debtors come to court and say "this hearing notice is the first I've heard of this!" Uh no. We sent you a validation notice which you ignored apparently, most of the time we tried to contact you by phone and you hung up on us or didn't return our calls, someone served you with a complaint and summons, and on and on and on. I do enjoy when someone says that and I have about 15 contacts on the person where they either hung up on us or gave us a sob story, or said it wasn't them (causing us to have to order all the cc statements and costing us more money) etc. That also pisses the judge off when he's holding a signed and sworn return of service in his court file showing that one of the county deputies served them in person. All of that doesn't even include the times the creditor sent the person notice and cc statements, and the times that a third party collector sent them notices before the account was referred to a law firm.

Another problem I see is when someone moves and leaves no forwarding address. If you're trying to hide from creditors, then no, you're not going to get your notices in a timely manner. Whose problem is that?

Most people in my state would be best off to just confess judgment and move on with their lives and take care of it when they're in a better position to do so. Especially since prejudgment interest is 18% and postjudgment interest is 10%.

About 10 years ago I did the same thing as you. I was checking my credit report and found some open store accounts that should be closed. I contacted each creditor directly and had them close the account. It probably took me 2-3 hours to call 5 companies; but how much time would it take me if JC Penney sent out a renewed credit card to my old address at a college dorm and the new resident managed to use the card? By the time they caught up with me at my new address it would be a HUGE pain in the ass to prove I didn't make the charges, and most stores don't even keep the charge slips after 60 days because you only have 60 days to dispute the charges under the Fair Credit Billing Act.
I've got the former phone number of some people in town who probably lost their phone # by not paying or something. About once a year they get in a tight spot, and the collectors start calling us asking for them. It's annoying, but they go away after a few calls.
Completely agreed.

But from my experience, balance / available credit line issues are usually very easily resolved, since credit card companies keep this info on hand, and do so accurately.