Consumers suing to
correct bad credit reports
lawyers are proving that you can fight inaccurate reporting by the
Few businesses arouse as much resentment
as credit bureaus and the creditors who furnish information to them
-- especially when they get something wrong.
If they make errors, chances are that a creditor
-- such as a bank, mortgage company, credit-card company or department
store -- furnished inaccurate information to a credit bureau.
Credit bureaus won't help you much under those
circumstances. They'll continue to report what creditors tell them.
It's up to you to work things out with the bank, mortgage company,
credit-card company or department store that messed up your credit
record in the first place.
You can have statements attached to your file
disputing the information, but it still will turn up on your credit
report. But that was pretty much assumed to be as far as a wronged
consumer could go.
Credit Reporting Act, which governs credit reporting, says that
only a state's attorney general can sue a creditor for furnishing
inaccurate information. But if the creditor doesn't fix the inaccuracy
permanently and in a reasonable time, you can sue, even though the
Fair Credit Reporting Act doesn't explicitly give you that option.
to the courthouse
The preferred way to go about it, says Clarksdale, Miss., trial
lawyer Michael Lewis, is to sue for defamation. He should know.
In 1998 Lewis won a $4.5 million verdict against the credit bureau
TransUnion for a client who had been a victim of identity fraud
and had been unable to clear his name. The case is under review
by the U.S. Fifth Circuit Court of Appeals.
The recourse you have
What if you get "stuck in the computer"
and no one will get you out? If months of repeated letters
and phone calls don't resolve the problem, lawyer Michael
Lewis advises you to do the following:
Notify the furnisher of the information
in writing, preferably by certified mail. Avoid the phone
-- they'll say they never heard of you." The furnisher
has a duty to correct mistakes within 30 days.
You can request the credit bureau to include
a brief (up to 100-word) explanation of your side of the
story. But if a creditor "investigates" and
reaffirms the inaccurate information, it will continue
to be reported.
If the creditor continues providing incorrect
information, sue for defamation.
If it is a case of identity fraud, also
sue for "negligent enablement of identity fraud."
Courts are beginning to recognize that term.
Suing isn't for everyone. The out-of-pocket
expenses can be enormous without a guarantee of victory.
Don't consider filing a lawsuit until you have made a
good-faith effort for several months to clear up credit-reporting
For residents of most states, suing a creditor
under the Fair Credit Reporting Act for reporting false information
is difficult or impossible (the congressional delegations for California
and Massachusetts were able to push through exceptions for those
states). Lewis and other critics of the Fair Credit Reporting Act
say the law was amended in 1996 to appease the credit industry.
"The credit bureaus, in fact, have got
their version of the Fair Credit Reporting Act passed that takes
a bite out of the buttocks of the consumer," Lewis says.
Adds Ed Mierzwinski, consumer program director
for the Public
Interest Research Group: "Congress ignored strong evidence
that banks and department stores are responsible for some credit
bureau errors when it limited a consumer's right to sue creditors
for errors in their credit reports."
But the Fair Credit Reporting Act doesn't prevent
consumers from circumventing that law and suing for defamation or
even something called "negligent enablement of identity fraud."
crusade born out of frustration
Recently joining the ranks of legal combatants are Denise and
Robert Richardson of Greenfield, Mass. In a lawsuit, they say Fleet
Bank repeatedly told credit bureaus that the Richardsons had not
paid their mortgage. In fact, the Richardsons contend, a bank had
discharged the balance of the mortgage, roughly $20,000, to settle
an earlier lawsuit and agreed to mark the account "paid as
Denise Richardson says that she and her husband
were irritated when reports of the phantom default made it difficult
to get credit cards and co-sign their children's car loans. Then
a collection agency demanded payment of $21,832.12 to satisfy the
For 3½ years, the Richardsons and their attorneys
wrote at least 10 letters and made at least 13 phone calls to clear
up mistakes. It was like getting on Santa Claus' "naughty"
list and never getting off of it.
After being told that their only recourse was
persuading the Massachusetts attorney general to file a lawsuit,
the Richardsons found a pair of attorneys who argued that they could
sue not only for defamation but for violations of the FCRA.
Their attorneys, Lawrence J. Farber and Allan
Cook, pointed out that the FCRA allows Massachusetts residents to
sue creditors under some circumstances. They were aware of groundbreaking
federal lawsuits in Texas and Mississippi, in which consumers successfully
sued credit bureaus that didn't clean up the records of innocent
consumers who had been victims of identity theft. They believed
that they could adapt some of the legal arguments used in those
The Richardsons sued Fleet
Bank, the big three credit bureaus (Equifax,
Union) and Portfolio
Recovery Associates, the collection agency. The Richardsons'
lawsuit in federal district court seeks at least $25,000 in damages
from Fleet, unspecified actual and punitive damages from Fleet and
the other defendants, and attorney's fees and court costs.
Attorneys and representatives for most of the
defendants declined to comment on pending litigation. Megyn Kelly,
attorney for Experian, called the Richardsons' accusations "absolutely
false. This lawsuit has absolutely no merit and we expect it to
role as consumer advocate
Such talk doesn't deter Denise Richardson, who has transformed herself
into a consumer advocate who fields hundreds of e-mails from victims
of inaccurate credit reporting and has lobbied members of Congress.
"Someone said I've turned into a crusader,
but it was born out of frustration," she says.
What really frustrates her, she says, is that
the bank, the credit bureaus and the collection agency have not
explained how inaccurate information continued to be disseminated.
"I was told that it was unfortunate, unique,
unintended," she says. "They didn't use the word mistake.
Error -- that's the word they used. They minimized it. And it's
not unique. How can it be unique when I'm sitting here with hundreds
of letters from consumers?"
credit bureaus investigate
When a creditor reports a problem to a bureau, the consumer
challenges it and the bureau asks for a clarification, two things
can happen, the credit bureaus say. First, the creditor can correct
the information. Second, it can come back and say the information
has been confirmed.
"The next recourse to the consumer is to
deal with the credit grantor to arrive at a solution," says
Anissa Yates, Experian's manager of corporate communications, speaking
generally and not about the Richardson case.
The Richardsons say they tried to get Fleet
Bank to set the record straight permanently, but had no luck. The
credit bureaus didn't help.
"With these big corporations, you write
to them and I can't tell you how many times I got reinvestigation
forms back, saying they are reinvestigating my dispute, and the
bank verified it as accurate," Denise Richardson says.
Allan Cook, an attorney for the Richardsons,
says, "The source of the problem has been Fleet. They should
not have been reporting the information."
An attorney for Fleet declined to comment. A
spokesman for Fleet did not return phone calls.
Cook thinks Fleet will say that the inaccurate reporting was
an oversight, a software glitch, "and from our perspective,
it's irrelevant. It's not our problem. They have a duty not to report
inaccurate information. I can't believe they could not find this
information somewhere in their database system and not delete it
He says a credit bureau's typical investigation
"consists of calling the creditor and saying, 'Is this a legitimate
debt?' and they say, 'Yeah, it says it is here.' " Once the
credit bureau has done this, it replies to the consumer that it
has verified the information as accurate.
Generally, that's the way it's done, acknowledge
representatives of the big three credit bureaus. That's why they
tell you to deal directly with creditors when you're trying to resolve
inaccuracies. While you're trying to clear up inaccurate information
provided by a creditor, you can tell the credit bureau to provide
a brief explanation of your side of the story and include it in
the credit file. Explanations are limited to 100 words.
Equifax Inc. spokesman Dave Mooney says the
credit reporting giant has a quality-control program that compares
data provided by creditors with the previous month's data. If they're
out of whack -- say, for example, June's default rate was 15 percent
and July's was 23 percent -- "bingo, that's a red flag,"
Mooney says, and the creditor will be asked to check the information.
The credit bureaus won't venture forth to check
public documents such as court judgments and county property records,
but they will accept copies of supporting documentation from consumers.
In rare cases they might even repair a consumer's credit record
based on such documents, "but a month later we'll get the same
old information from the credit grantor again," Mooney says.
"shadow world" ripe for a fall
It's that kind of attitude toward the consumer that makes Lewis
call the credit-reporting industry "a shadow world that is
almost beyond the reach of the law and is certainly above and beyond
the reach of the consumer."
And Lewis, who dreamed up the legal strategy that brought the tobacco companies
to the negotiating table, has a plan to set up the credit industry
for a fall.
If someone assumes your identity to obtain credit
fraudulently, send certified letters to the credit bureaus demanding
a personal identification number to be used whenever someone applies
for credit in your name, Lewis advises. If the applicant doesn't
know your PIN, the applicant doesn't get credit.
The credit bureaus won't give you a PIN. All
three will add a fraud alert to the credit report "so when
someone applies for credit, the credit grantor will see the statement
and they'll know to be careful about granting credit," says
Christine Hill, spokeswoman for TransUnion.
A PIN, says Yates of Experian, would be unnecessary,
"just one more piece of identifying information," along
with the name, address, Social Security number and maybe place of
Lewis bets that there's a jury out there that
would not buy that argument. He thinks that if someone asks for
a PIN from the credit bureaus, then continues to get bad credit
reports because of an impostor's fraud, a jury will throw the book
at the credit bureaus.
The credit bureaus don't want to change their
methods because they don't want to upset their clients who extend
credit, he says.
"All the creditors around the country seem
to operate their credit application process in the same slipshod
way," he says. "It's not by accident. They don't want
to do anything to impede the customer's impulsiveness."
-- Posted: Aug. 20, 1999