Shaw v. Experian - 9th Circuit Oral Argument

Here is a link to our recent oral argument in the Shaw v. Experian class action:

Shaw Oral Argument

The Shaw case concerns the accuracy of Experian's reporting of short sales. Following the great recession, there was a dramatic increase in short sales. To help consumers, the nation’s largest mortgage underwriters created a new, 2- year waiting period for consumers who want to re-enter the conventional mortgage market after completing a short sale. This rule contrasts sharply with the 7-year waiting period applicable to foreclosures and makes it imperative that consumer reports identify short sales with maximum possible accuracy. Experian’s consumer reports fail that standard because they can, at best, only imply a possible short sale while simultaneously implying other events, including a possible foreclosure.

While Experian now insists it accurately and precisely reports short sales, that is not what it told Fannie Mae in May 2010. At that time, when Fannie Mae asked how it could identify short sales in Experian’s data, Experian admitted:

There are no specific codes that will specifically identify a Short Sale condition. The data reporting guidelines instruct the client to report the account as Settled-Special Comment AU. So the presence of this comment on a Mortgage loan ‘could’ imply short sale.

This single piece of evidence undermines Experian’s current contention that any particular set of codes can be relied on to identify short sales with the precision and certainty demanded by the mortgage industry. Experian expressly told Fannie Mae that is not true. And, the record shows the reason it is not true is because Experian requires furnishers to report short sales using the exact same codes they use to report other events that are not short sales. Accordingly, Experian’s data is inherently vague, imprecise and uncertain.

Experian materially compounds this uncertainty by displaying an ambiguous, catchall code 9 in the payment history grid of its consumer reports. The code 9 is not reported by furnishers and can infer numerous derogatory events, including a potential foreclosure. Experian’s reports therefore portray inconsistent and conflicting information that caused the rejection of new mortgage applications for scores of consumers, including Plaintiffs. Experian’s reports are inaccurate because they are so imprecise, incomplete, misleading and unreliable they are not only expected to, but did in fact, adversely affect credit decisions.

What to do if Your Credit Dispute is Denied

What to do if Your Credit Dispute is Denied

Your legal rights under the Fair Credit Reporting Act

According to the FCRA, the credit reporting agencies, Equifax, Experian & Trans Union (also referred to as CRAs) must investigate your dispute. Upon receipt of your dispute, the CRAs have 30 days to complete their investigation and provide you with their findings. The law requires their findings to be accompanied by a free credit report. If their investigation led to the denial of your credit dispute, now is the time to seek legal counsel to enforce your legal rights.

Prior to obtaining legal representation, ensure you have followed the dispute process accordingly. (See step-by-step instructions on Disupting Credit Report Errors here). 

Credit Attorney G. John Cento to speak at National Business Institute seminar - Collection Law From Start to Finish

On Monday, November 9th, attorney G. John Cento will speak about FCRA compliance at a seminar hosted by the National Business Institute. The seminar, Collection Law from Start to Finish, will provide attendees the legal framework to collect consumer debt. To register, or to purchase a recording of the seminar click here.

Identity Theft

Federal Law Aids Consumers in Fixing Credit Reports Due to Identity Theft

When an identity is stolen, the theft usually leads to the fraudulent use of personal identifying information. The use of stolen information such as name, Social Security number, and date of birth fall victim to identity theft when used to obtain electricity, gas, open a checking account, and even attain employment.

When new accounts are open, thieves usually don't stick around to see their financial obligations through. In turn, furnishers start reporting negative information to the credit reporting agencies. The new information gets assigned to a credit file that matches the name, Social Security number, and date of birth of an innocent, now victimized, consumer.

Credit Reporting Law - Presentation Hosted by the Indianapolis Bar Association

Credit reporting problems can affect any consumer. Join G. John Cento of Cento Law LLC on May 30 as he presents an introduction to credit reporting law, including a review of the many important provisions of the Fair Credit Reporting Act (FCRA), an outline of the credit reporting industry key players and common claims brought under the FCRA.

Background Checks | Employment Screening

Background Checks and the Federal Law

Employers obtain background checks (or consumer reports, commonly known as credit reports) to aid decision making when it comes to evaluating a consumer for employment, promotion, reassignment, or retention as an employee. Intelli Corp, HireSafe, HireRIght, Clarifacts, EmployeeScreenIQ, and Proforma are just a few of the many background check/employee screening companies that offer employers their services. When an employer conducts a background check, they may be provided with any of the following information about you:

  • Credit reports;
  • Criminal and civil records;
  • Social security number (trace and validation);
  • Employment verification;
  • Education verification;
  • Professional license verification;
  • Motor vehicle and driving records;
  • Military record verification; and
  • Workers’ compensation history.

Out-of-Date Entries on Your Credit Report

Negative information such as: delinquencies, bankruptcies, charge-offs, loan defaults, foreclosures, lawsuits and judgments, and tax liens are barred from forever appearing on your credit report. The Fair Credit Reporting Act (FCRA) requires credit reporting agencies to remove most negative information from your credit reporting after the credit reporting time limit has expired. Reporting old, out-of-date information is against federal law.

According to the FCRA, credit reporting agencies cannot report negative information for an undetermined amount of time. In fact, negative information can only be reported for a specific amount of time.

40 Million Americans Have Mistakes on Their Credit Reports | Is your credit report accurate?

A new government study reports that over 40 million Americans have mistakes on their credit reports; and 20 million Americans have serious mistakes on their credit reports. Just before the government study was released, 60 Minutes aired a story about their investigation into the credit reporting industry. As explained by 60 Minutes, both the government study (which was conducted by the Federal Trade Commission and was the largest and most comprehensive such study ever done on the credit reporting industry) found these mistakes are often almost impossible to remove from your credit file.

Limitations of the e-OSCAR System | Credit Report Disputes

In a study released this month by the Consumer Financial Protection Bureau, the CFPB found that there are specific limitations on the e-OSCAR system; the electronic system used by the national consumer reporting agencies (Trans Union, Experian and Equifax) (CRAs) to process consumer disputes of the accuracy of their credit reports.  Under the Fair Credit Reporting Act, the CRAs are required to send data furnishers a notice of a consumer dispute that includes “all relevant information regarding the dispute that the agency has received from the consumer.” 

CRA Reinvestigation Obligations Under the FCRA

When a consumer disputes the completeness or accuracy of any information contained in his/her credit report, the consumer reporting agency (CRA) must conduct a "reinvestigation."  The term "reinvestigation" is a statutory term under the Fair Credit Reporting Act (FCRA). If the reinvestigation reveals that the information is inaccurate or cannot be verified, the CRA must promptly delete the information. 15 U.S.C. § 1681i(a). Failure to conduct a reasonable reinvestigation violates the FCRA. Cushman v. Trans Union Corp., 115 F.3d 220, 223–24 (3d Cir.1997). The burden to conduct the reinvestigation is on the credit reporting agency. It cannot be shifted back to the consumer.

A credit reporting agency's reinvestigation obligation is to verify the accuracy of its original source of information. This duty may include going beyond the original source. Whether the credit reporting agency must go beyond the original source depends on a number of factors, including: (1) whether the consumer has alerted the CRA that the original source may be unreliable; (2) whether the CRA itself knows or should know that the original source is unreliable; and (3) the comparative costs of verifying the accuracy of the original sources versus the potential harm the inaccurate information may cause the consumer. Dixon-Rollins v. Experian Information Solutions, Inc., 753 F.Supp.2d 452 (2010).

Findings & Purpose of the Fair Credit Reporting Act

The Fair Credit Reporting Act (commonly known as the “FCRA”) is codified at 15 U.S.C 1861, et seq. In enacting this legislation, the United States Congress made several findings: (A)  The banking system is dependent upon fair and accurate credit reporting. Inaccurate credit reports directly impair the efficiency of the banking system, and unfair credit reporting methods undermine the public confidence which is essential to the continued functioning of the banking system.

You May Have More Than One Credit File

At any given time, the national consumer reporting agencies maintain hundreds of millions of consumer "credit files" in their databases. According to some estimates these files relate to approximately 250 million credit active consumers across the United States. This means that many consumers have more than one file in a consumer reporting agency's system. Having more than one file on any one consumer serves as a catalyst to incomplete and inaccurate data being relied upon in the creation of a consumer report (commonly known as a “credit report”).

Numerous credit files may exists on a single consumer for the following reasons:

  • Consumer reporting agencies may not have enough information to say with the highest degree of certainty that each of the credit files should "merge."
  • The various creditors' records do not always identify an individual consumer in the same way.
  • Consumers may use two or more names in their credit activities (such as nick names, maiden and married names, names with and without generational suffixes).
  • Consumers may have two or more addresses (such as home/school, work/home or vacation or second homes).
  • Creditor's records may misspell or invert letters in names, street addresses, or social security numbers.

Know Your Credit History | Protect Your Rights

Credit Report
Credit Report

Consumer reporting agencies, also known as “credit reporting agencies” or “credit bureaus,” serve a critical role in a consumer’s financial life. After collecting financial and personal data on individuals; the credit reporting agencies are able to generate the aggregated results into a consumer report, commonly known as a “credit report.” In most lending, credit reports, and the credit scores which are derived from them, form the basis of lending decisions. Many employers also use credit reports and other investigative reports to make hiring decisions. From the ability to pay back a loan to establishing one’s worthiness for a job, the information contained in a credit report can cause substantial injury to a consumer when that information turns out to be inaccurate.

Federal laws, like the Fair Credit Reporting Act, were passed by Congress to require credit reporting agencies to “follow reasonable procedures to assure maximum possible accuracy of the information” contained in credit reports, and to protect consumers when inaccuracies cause such injury. However, the burden is still heavily on the consumer when resolving such issues because those federal laws require consumers to know what is on their credit reports and to take action when inaccuracies are discovered. For this reason, it is critical that consumers take advantage of the federal law which requires the agencies, which are Equifax (including credit files owned by CSC Credit Services), Experian, and Trans Union, to provide them with one free credit report each year.  To obtain your free annual report go to the only official site: www.AnnualCreditReport.com.

Supreme Court Ruling Prompts the FTC, the Department of Justice, and the CFPB to Intervene

In May 2012, the Federal Trade Commission, the Department of Justice, and the Consumer Financial Protection Bureau intervened and filed a memorandum in support of the constitutionality of the Fair Credit Reporting Act (FCRA). The issue arose in Shamara King v. General Information Services, Inc. when the defendant, General Information Services (GIS), moved to dismiss the case; claiming that the FCRA was unconstitutional based upon the recent Supreme Court ruling in Sorrell v. IMS Health, Inc., 131 S. Ct. 2653 (2011). As the dissent in Sorrell noted, the ruling would potentially open a Pandora’s Box of First Amendment challenges pertaining to the disclosure of public information. The issue of disclosing public information is the very issue at the heart of a class action lawsuit which was filed in the U.S. District Court for the Eastern District of Pennsylvania against the credit reporting agency, GIS. 

Second Circuit Holds FCRA Preempts State Tort Claims

Macpherson v. JP Morgan Chase Bank, NA

Consumer alleged that Chase provided false information about his finances to Equifax, a consumer credit reporting agency. Chase removed the case to federal court and moved for dismissal under Fed.R.Civ.Pro. 12(b)(6), on the grounds that the consumer's claims were preempted by the Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681t(b)(1)(F). Consumer appealed from the district court's dismissal of his state common law tort claims. The Second Circuit affirmed the judgment of the district court and held that the FCRA preempted consumer's state law claims against Chase.

Macpherson v. JPMorgan Chase

More About How Trans Union Processes Consumer Disputes - E-OSCAR and the ACDV Process

In 2005, a Trans Union ("TU") representative testified as follows regarding TU's procedures to conduct reinvestigations when a consumer disputes inaccurate information on their credit report: In general, when TU receives a dispute from a consumer, TU investigates the dispute using one of two systems developed for the purpose of processing and tracking disputes: the mail Consumer Dispute Verification process (“CDV”) and; the electronic Automated Consumer Dispute Verification process (“ACDV”) utilized in the instant matter.