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Do Your Homework Before You Pull That Credit Report!


It is common practice for collection agencies to pull debtors’ credit bureau reports without looking at how the underlying debts came about. Collection agencies should think twice before pulling debtors’ credit bureau reports as a result of recent case law.

In Rodriguez v. Experian Info. Solutions, Inc., the plaintiff attempted to remove four outstanding parking tickets from his Experian credit bureau report that had been placed on said credit bureau report by a collection agency, Alliance One Receivables (“Alliance”). 2016 U.S. Dist. LEXIS 96826, at *2 (W.D. Wash. July 25, 2016). Alliance ran the plaintiff’s Experian credit bureau report twice for the purpose of collecting on the outstanding parking violations. Id. at *3-4.

The plaintiff responded by filing a Fair Credit Reporting Act (“FCRA”) lawsuit against Experian and Alliance, alleging that: (1) Experian failed to ensure the accuracy of his credit bureau reports, and (2) Alliance requested the credit bureau reports for an impermissible purpose. Id. at *4. Alliance immediately moved to dismiss the FCRA lawsuit.

The FCRA permits third parties, such as collection agencies, to request credit bureau reporting agencies provide debtors’ credit bureau reports for “certain statutorily enumerated purposes.” Id. at *6-7(quoting Pintos v. Pac Creditors Ass’n, 605 F.3d 665, 674 (9th Cir. 2009)(quoting TRW v. Andrews, 534 U.S. 19, 23 (2001)). One of the “statutorily enumerated purposes” is if a debt owed by a debtor stems from a credit transaction involving the debtor.” Id. (citations omitted).

“If a credit reporting agency furnishes a credit report for an impermissible purpose, the FCRA creates ‘a private right of action allowing injured consumers to recover any ‘actual damages’ caused by negligent violations and both actual and punitive damages for willful noncompliance.”’ Id. (quoting Andrews, 534 U.S. at 23).

In determining whether Alliance violated the FCRA, the judge looked at the Fair and Accurate Credit Transaction Act of 2003 (“FACTA”), which supplements the Fair Credit Reporting Act. Under FACTA, “the term ‘credit’ means the right granted by a creditor to a debtor to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor.” 15 U.S.C. §1681a(r)(5) referencing §1691a(d). The judge, in concluding that a parking ticket is not a credit transaction, held that, “[d]ebt collection agencies must demonstrate that outstanding debts, in addition to ‘involving’ consumers stem from a ‘credit’ transaction.” Rodriguez, 2016 U.S. Dist. LEXIS 96826, *12.

Collection agencies should take steps to ensure that debtors’ underlying debts meets FACTA’s strict definition of credit before pulling credit bureau reports. Failure to take this necessary step could result in unnecessary litigation.

The attorneys and staff at Gill Law Firm focus their practice in the areas of small business, debt recovery and nonprofit startups. To find out how we may assist you, please contact us by phone at (561) 454-0301 or via email at awgill@gillattorneys.com.

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