California Credit Law Blog

4 out of 5 credit reports contain an error, and a quarter of those errors cause serious problems, according to today's news from Washington. Yet the 2003 law that was supposed to make it easier for consumers to guard against identity theft and to freely access their credit reports is still not final.

The Fair Credit Reporting Act's 2003 amendments were supposed to make it easier for consumers to access and correct mistakes in their credit reports. But House Financial Services Committee members today criticized the FTC and the Federal Reserve for not implementing final rules from the 2003 law, according to Congress Daily. The FTC has still not implemented two of the 2003 provisions that gave consumers free access to their credit reports and permitted them to put a fraud alert on their file if there was a possibility of identity theft.

The Washington Post reported that as many as “79 percent of credit reports may contain an error, and 25 percent of errors lead to a denial of credit, according to a report by the U.S. Public Interest Research Group.” New York Rep. Gary L. Ackerman (D) “said at the hearing that the failure to implement the legislation has condemned consumers to ‘voice-mail hell’ as they try to navigate an opaque system.” The FTC and the Federal Reserve “cited the complicated nature of the regulations and massive bureaucratic hurdles as causing delayed enforcement of the mandates.”

According to the Los Angeles Times, Chi Chi Wu, staff attorney at the National Consumer Law Center, testified yesterday that “credit reporting companies continue to respond to disputes with only ‘perfunctory’ automated systems that tend to repeat errors rather than repair them.”

This is a distressing--and depressing--snapshot of our government at work. Or not.

Posted by Carol McLean Brewer | Permalink | Email This Post

Posted In: Correcting Errors on Your Credit Reports

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A victim of identity theft took matters into her own hands and tracked the thief through the streets of San Francisco, according to Mike Weiss's excellent article in the San Francisco Chronicle.

First San Francisco resident Karen Lodrick learned that the master keys to her neighborhood mailboxes had been stolen. Then her bank, Wells Fargo, told her about some suspicious activity in her accounts. Before she knew it, the thief had withdrawn $9,000. Apparently the thief had intercepted an unsolicited mailing from a bank, including a certificate of deposit statement that included Lodrick's social security number. The thief used that information to set up fake accounts in Lodrick's name. Even after she changed bank account and identification numbers, the thief again broke into her mailbox and stole the new information, starting the cycle all over again.

Lodrick spotted the thief's unusual coat in a local Starbucks--it was the same coat the ATM camera caught the thief wearing while she cleaned out Lodrick's accounts--and gave chase on foot. With the help of the San Francisco police, she caught the thief. But the thief got off very lightly. Although she eventually pled guilty to a felony, she was only sentenced to time already served in jail, plus three years' probation.

That means that perpetrators of identity theft, even if caught, are apparently free to continue to steal the identities of unsuspecting victims. Fortunately, there are some steps you can take to keep this from happening to you. The article gives ten suggestions to help prevent identity theft:

1. Keep your social security number in a safe and secure place.

2. Guard your purse or wallet at all times.

3. Limit your credit and debit cards to what you actually use.

4. Carefully check your bank and credit card statements for unauthorized charges.

5. Close credit accounts you don't use.

6. Shred documents that include personal identifying information, especially pre-approved credit card offers.

7. Before you give out personal identifying information, ask how it will be used.

8. Order your credit reports once a year and check them carefully.

9. Put passwords on your accounts and use them.

10. Use a locked post office box to send and receive mail.

We think these are great tips. Use them and hopefully you can avoid being an identity theft victim yourself.

Posted by Carol McLean Brewer | Permalink | Email This Post

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The Fair Credit Reporting Act provides that a consumer may sue a business for actual damages if the business negligently violated the Act, but if the business willfully violated the Act, the consumer may sue for actual damage or statutory damages ranging from $100 to $1,000, and punitive damages. In cases in which actual damages are hard to prove, a consumer will be very interested in wanting to prove the defendant business "willfully" violated the Act in order to obtain statutory and punitive damages.

On June 4, 2007, the U.S. Supreme Court explained the meaning of the term "willful" as used in the Act in deciding a pair of class actions consumers had filed against GEICO and Safeco insurance companies. The Court held that to prove a willful violation, the consumer must show that business either knowingly or recklessly violated the statute. The Court said that recklessness in this context meant conduct involving an unjustifiably high risk of harm that is either known or so obvious that it should be known. Safeco v Burr, 2007 WL 1582951.

This decision strengthens cases in which consumers are seeking statutory and punitive damages against companies that furnish inaccurate credit information to credit bureaus. The decision will also strengthen consumers’ cases against credit bureaus that recklessly fail to correct inaccurate information in credit reports. The decision may especially be important in class actions in which the main object is to obtain statutory damages of $100 to $1,000 for each class member.

Posted by Mark F. Anderson | Permalink | Email This Post

Posted In: Consumer Credit 101

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Debt collectors often buy old consumer debt and aggressively try to collect it. Sometimes the debt collector will threaten to sue, or threaten to put the debt on your credit report. How valid is that warning? How do you know when debt is too old to collect?

Liz Weston's article in MSN Money explains that there are two limitations periods you should know about:

First, the statute of limitations restricts the time in which a creditor can sue on a debt. In California, creditors must sue within four years to collect on promissory notes, contracts and credit card debt. If a debt is older than that, you are entitled to ask the judge to dismiss the collection lawsuit. Even threatening to sue you after a statute of limitations has run out violates the Fair Debt Collection Practices Act.

Second, the Fair Credit Reporting Act restricts the time the credit bureaus can report problems on your credit report. The trigger is the date the account first goes delinquent--in other words, when you miss your first payment on the account. Seven years and 180 days after that, with a few exceptions, the creditor is no longer allowed to report consumer debt on your credit report. Importantly, debt collectors are prohibited from restarting the seven-year clock by "re-aging" the debt--assigning it a new delinquency date--or by selling it to a different debt collector.

Sometimes creditors try to coerce consumers into making payments on old debt by telling them it will improve their credit score. The problem with that is making a payment on an old debt or agreeing to a new repayment plan might extend the statute of limitations or restart the clock altogether.

If you are sued--or someone threatens to sue you--and you know your debt is too old to collect, you should write the debt collector certified mail, return receipt collected. Tell them to stop bothering you and explain why your debt is too old.

If you have problems or need further information, we may be able to help you.

Posted by Carol McLean Brewer | Permalink | Email This Post

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