California Credit Law Blog

In 2003, the federal Government required the three national credit agencies to establish a website where consumers could download their credit reports free, once a year. Unfortunately, the Government foolishly allowed the agencies to include advertising on the site, www.annualcreditreport.com. The agencies' advertising confused consumers into believing they had to pay for a credit score or credit monitoring services to get their free report.

The three agencies also set up their own "free" sites where consumers could download their credit reports. For example, Experian's site, www.freecrdeditreport.com, was heavily advertised on TV and purposely designed so consumers thought they were going to the true free site. Once there, consumers ended up paying for their credit score or worthless credit monitoring services.

Too late, but better than never, the FTC has imposed new rules effective April 1, 2010, to reduce the confusion. Under the new rule, any website that mentions free reports has to have a notice across the top of the site that the consumer may have the right to a free credit report at annualcreditreport.com. Similar disclosures will be required for TV and radio ads effective September 1, 2010.

On the Government site, beginning April 1, the credit agencies cannot advertise until after the consumer gets his or her free credit report from the site.

Question is, why did it take 7 years for the Government to get this right? I suppose one answer is that the Bush Administration did next to nothing for the consumer.

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

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The Fair Credit Reporting Act provides that credit reporting agencies may not report records of arrest or any other adverse criminal action that are more than seven (7) years old, except for convictions of crimes. A growing problem is that many Internet based companies are selling criminal records over 7 years old. These companies claim to not be subject to the terms of the FCRA, but the courts have ruled that criminal records sold to potential creditors, landlords, insurance companies and employers are "consumer reports" as defined by the FCRA.

When someone applies for a job, it is very easy for the prospective employer to obtain the obsolete criminal records from one of the Internet sites. The applicant rights are violated when the employer denies employment on this basis. Under the FCRA, an applicant whose rights are violated in this manner has the right to sue the company that reported the obsolete criminal records.

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

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Fannie Mae and Fannie Mac currently flag any mortgage loan application where the applicant disputes something on a credit report. As reported in the AARP Bulletin, that’s causing denials for applicants, no matter the strength of their qualifications.

Loan officers report that many flagged applications get put on hold or simply denied.

“Some of these underwriters … won’t process a loan” with the notation “consumer disputes this item,” says Eddie Johansson, president of Credit Security Group,a credit services company in Texas.

The law is clear that a consumer has the right to dispute any inaccuracy on his or her credit report. The Equal Credit Opportunity Act prohibits discrimination against anyone for exercising a right under the FCRA.

For their part, both Fannie Mae and Freddie Mac say having a credit dispute alone should not prohibit a consumer from getting a loan approved.

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

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Federal law requires the credit agencies to make everyone's credit reports available at no charge on a single website. The feds allowed the three major credit agencies to design the site. Predictably, the credit agencies designed the website, www.annualcreditreport.com, to confuse and entice consumers to buy credit scores and various credit protection products. Equally egregious, the three credit bureaus have capitalized on the free website by advertising "free" credit reports that are not really free.

Fortunately, the Credit Card Act of 2009 requires the FTC to issue new rules to stop these abuses. To implement the law, the FTC has proposed a new rule that to prohibit any advertising on the centralized website until AFTER the consumer obtains his or her free annual credit report.

The same new law requires that advertisements for “free credit reports” include prominent disclosures designed to prevent consumers from confusing these “free” offers with the federally mandated free annual credit report. The FTC rule will require any advertisement for "free" credit reports to prominently disclose that the advertised credit report is not the free credit report provided for by federal law. Such ads would also have to give the website address of the federally mandated free report website.

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The NY Times reports that employers are increasingly running credit checks on job applicants. While that may make sense if the applicant is going to be handling money or guard a Brinks truck, it makes no sense in the case of jobs that do not involve a risk of loss of money. Only a few states have laws barring the practice. However, there is a federal law requiring agencies that provide employment reports to employers to notify the applicant of the contents of the report if it is adverse. The idea is to give applicants a chance to dispute inaccuracies in the reports. This requirement is routinely ignored according to many reports.

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A towing company towed our client's car from the public streets because the registration had expired. The towing company sold the car for nothing. Then it assigned its claim for the towing charge to a collection company, Pacific Creditors. Pacific Creditors pulled our client, Maria Pinto's credit report. Apparently it was trying to determine if she had enough assets to satisfy a judgment. Assured by her credit report that she was sufficiently well-off, Pacific Creditors then began to telephone Ms. Pintos repeatedly. Its agents told her that if she did not pay the towing charge, it would ruin her good credit. Pacific Creditors knew she had good credit because it had viewed her credit report.

Andrew Ogilvie of our firm filed suit against Pacific Creditors, charging that it had violated the Fair Credit Reporting Act (FCRA) by pulling Ms. Pinto's credit report without a permissible purpose.

Today the Ninth Circuit Court of Appeals, in Pintos v. Pacific Creditors Ass'n, issued an opinion confirming that Pacific Creditors violated the FCRA by obtaining Ms. Pinto's credit report without any Fair Credit Reporting Act-sanctioned purpose.

The FCRA only allows credit reports to be pulled “in connection with a credit transaction involving the consumer . . . and involving the . . . collection of an account of . . . the consumer.” Mr. Ogilvie did not believe that the mere fact of owning a car that was later towed constituted such a "credit transaction." The Ninth Circuit's opinion confirms that it is not a "credit transaction."

Continue reading "A Towed Car Does Not Establish A Credit Relationship Under the Fair Credit Reporting Act" »

Posted by Carol McLean Brewer | Permalink | Email This Post

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Capital One Bank and the credit reporting agencies (Equifax, Experian and TransUnion) recently settled with our client who was the victim of identity theft. It took years for the identity theft victim to get Capital One to stop trying to collect on the account it opened for an imposter.

The story began when Capital One sent a pre-approved credit card application to our client at her former college apartment. Someone in the building got the application from the mail and used it to get a VISA card from Capital One in our client's name. The imposter took $500 from the account, but Capital One quickly learned the account was fraudulent--a law enforcement agency told it that professional identity thieves had opened the account--so it closed the account and charged off the account balance.

That should have ended the matter, but it didn't. A year later, Capital One sent another credit card application to our client at the same old address. The imposter again used the application to apply for credit in our client's name and again Capital One issued the imposter a VISA card. This time it gave the imposter a $20,000 credit line and sent "convenience" checks that the imposter used to withdraw almost $18,000. When the imposter failed to make the payments, Capital One located and began to dun our client. She disputed the account, retained a different lawyer, wrote lots of letters. Nothing worked. Capital One sued her to collect on the account.

Then she contacted us.

Continue reading "Capital One Settles With Identity Theft Victim" »

Posted by Andrew J. Ogilvie | Permalink | Email This Post

Posted In: Consumer Debt , Credit Cards , Credit Reports , Debt Collection , Identity Theft

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Evan Hendricks is a leading expert on credit scores and credit reports. His book, aptly named Credit Scores & Credit Reports, How the System Really Works, What You Can Do, 3d Edition, is now available in paperwback on Amazon. Anyone interested in how the credit bureaus operate should read this book.

Hendricks covers credit scoring, obtaining your credit report, disputing errors, identity theft, mixed files, reinvestigations, so-called credit repair, debt collection, and other topics.

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

Posted In: Consumer Credit 101 , Credit Reports , Credit Scores

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The NY Daily News reports on an individual who noticed his credit reports did not show all his credit cards. He gathered his credit card documents and sent them to the credit reporting agencies asking them to add them to his credit history with the idea it would improve his credit standing.

Trans Union wrote back saying no dice. They won't accept credit information from consumers. It has to come from subscribers. A TU spokesman dodged the real issue why not by saying consumers "cannot dispute an item that does not exist on their credit report." Of course, the consumer was not disputing anything. He wanted to update his report.

The TU spokesman said to contact the creditors and ask them to update TU. Bottom line--the FCRA should be amended to allow consumers to add to their reports. The credit bureaus could check with the creditors to see if it is accurate before accepting it.

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

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A recent court order in a class action will help millions of consumers who filed bankruptcy but have been plagued with old debts showing up on their credit reports. The old debts, which are typically forgiven by the courts in a bankruptcy filing, are still being reported as active on many consumers' credit reports.

As reported in the Wall Street Journal, Experian and TransUnion say they have already updated their credit files to be compliant with the court order. TransUnion also sent notices to some customers saying they "may experience a slight change" to their credit scores if any of their accounts are updated because of a bankruptcy.

Consumers with so-called zombie debt -- old loans they may have paid off years ago that can resurface when an aggressive debt collector erroneously demands payment -- are also likely to get some relief, if those debts also were discharged under Chapter 7 protection.

In many cases, old debts linger on credit reports if lenders don't update their records, or if collection agencies ignore the fact that debts were discharged in bankruptcy. The credit bureaus' new procedures should ensure that anyone who files for bankruptcy in the future will have more-accurate
credit reports.

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

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The NY Times reports that Experian is spending $70 million per years advertising its FreeCreditReport.com site where many consumers log on deceived into believing they will get a "free" credit report. For example, one person provided his credit card information thinking it was needed for identification only to find Experian charged him $14.95 a month for a credit-monitoring service.

The Experian website is not the one site where the credit report is free--that would be www.annualcreditreport.com. In 2005, the FTC sued Experian for deceptive marketing of its FreeCreditReport; Experian paid the FTC a fine of $950,000 settle.

The Experian credit-monitoring service is almost worthless. Ed Mierzwinski of Public Interest Research Group, refers to the product as a "protection racket." Experian and other credit bureaus with similar products promise to protect consumers against identity theft, but they do no such thing. Neither do the products improve anyone's credit scores.

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

Posted In: Credit Reports

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