FREQUENTLY ASKED QUESTIONS ABOUT YOUR RIGHTS UNDER CALIFORNIA AND FEDERAL CONSUMER CREDIT PROTECTION LAWS

In summary, what should a consumer do if he or she has to deal with false or inaccurate derogatory marks on a credit report?

In general, what are the most common types of credit damage cases?

What should a consumer do if he or she believes she has become a victim of false or inaccurate credit reporting?

What should a consumer include in a letter to the creditors and the credit bureaus?

What if the creditor and the credit bureaus perform a reinvestigation and still will not remove the derogatory credit mark?

What can I expect from a lawsuit against a creditor or credit bureau that publishes a false or inaccurate derogatory?

Do attorneys usually take these cases on a contingency basis?

Do I need to send a demand for reinvestigation if I have been the victim of an impermissible access case?

What can I expect from a lawsuit involving an impermissible pull?


Q: In summary, what should a consumer do if he or she has to deal with false or inaccurate derogatory marks on a credit report?

A: Step 1: Gather all of the evidence you can get your hands on showing that the mark is false or inaccurate. This may be letters from creditors, cancelled checks, invoices marked “Paid,” subsequent bills from the creditor showing that a bill or a late fee has been paid, forms showing that a judgment has been paid or satisfied, etc.

Step 2: Prepare a letter to be sent via certified mail, detailing exactly why the derogatory mark is false or inaccurate, and attach copies of any and all documents you have showing that the derogatory mark is false or inaccurate. Request in the letter that the derogatory mark be deleted or modified to make it more accurate within 30 days. Keep the original documents for yourself, and keep a copy of the letter, along with the certified mail receipt.

Step 3: Send the letter, via certified mail and with all of the evidence attached, to the original creditor, to any debt collectors involved and to the credit bureau or bureaus which have reported the inaccurate derogatory mark. The three major credit bureaus are Equifax, Experian and Transunion. Each can be reached on the web by typing “.com” after the name of each, i.e. “Experian.com”.

Step 4: by law, the credit bureaus and the creditors have 30 days to correct or delete any false or inaccurate credit derogatory marks. The credit bureaus will often correspond with you to let you know whether they have decided to correct or delete the derogatory marks in question.

Step 5: pull your credit report after 30 days, and see if the derogatory mark still appears. If not, then continue to pull your credit reports every 90 days or so, to see if the derogatory mark reappears. Sometimes it does.

Step 6: If the derogatory marks are not deleted or corrected after 30 days, you may, if you wish, repeat Steps 1 through 4, above, if you wish to handle it yourself. However, it may also be time to consult an attorney, as, if you can prove that the mark is false or inaccurate, you may have rights, including the right to money damages and the right to a court order straightening out your credit report, under both federal and California credit reporting laws.

Q: In general, what are the most common types of credit damage cases?

A: There are three main types of credit damage cases:

1. "False or Inaccurate Derogatory" cases: where a creditor (a lender, a bank, a finance company or a retail store) makes a false or inaccurate credit report to the major credit bureaus, which then shows up on your credit report. (A "derogatory" or a "derogatory mark" is a negative credit report made to a credit bureau. One court defined "serious derogatory information" as follows: "'Serious Derogatory Information" means information indicating a bankruptcy adjustment plan, bankruptcy liquidation reorganization, charge off, collection account, charge off now paying, deed in lieu, foreclosed, foreclosure proceedings, government claim, insurance claim, paid by dealer, paid charge off, paid collection account, paid foreclosure, paid repossession, repossession, or Subscriber cannot locate." FTC v. TRW, Inc., 784 F. Supp. 361, 362 [ND Tex. 1991] )

The three major credit bureaus are Transunion, Equifax and Experian. There are other smaller credit bureaus, but these tend to be specialized to specific areas or industries, such as landlords researching potential apartment tenants.

These types of lawsuits are usually brought against the creditor who reported the derogatory, or the collection agency who reported it as a part of collection efforts.

"False or inaccurate" implies exactly what it says: the report must be false or inaccurate. It can also be incomplete, if there is additional information which would make the picture more accurate. As a practical matter, before my law firm will consider bringing a lawsuit on a "false derogatory" case, we need to see that the derogatory mark is more than just a little bit inaccurate. We frequently see cases where the creditor reports a consumer as being 90 days late when the consumer was only 60 days late. This is the type of inaccuracy which is not important enough to make into a lawsuit.

However, if a consumer has paid off a debt entirely and the creditor continues reporting it, as happens quite often, or assigns the debt out for collection after it has been paid off, this would obviously be more serious and more probably worthwhile as a possible lawsuit.

Other examples of false or inaccurate derogatories include reporting debts which do not belong to the consumer at all, or debt collectors reporting debts which the consumers have otherwise satisfied directly with the creditor. Also, if there are circumstances surrounding a debt which the consumer wants known, the consumer has the right to dispute the debt, in writing and via certified letter to the credit bureaus, and provide a written explanation of why he or she thinks the debt is improper. If the credit bureaus fail to show the debt as disputed, and if they fail to provide the consumer's explanation of the dispute, this, too, can be treated as a false, incomplete or inaccurate derogatory.

2. "False Identity" or "Mistaken Identity" cases: these can involve the classic "identity theft" cases, but there are other examples of "false identity" cases of which the consumer should be aware.
Credit bureaus, creditors and debt collectors frequently confuse consumers who have similar last names, similar social security numbers or similar birthdates, and this confusion can lead to serious mistaken identity problems. Consumers will be billed for charges and debts they positively did not incur.

Depending on who is responsible for the mix-up, these types of lawsuits are typically brought against the credit bureau or the creditor who itself suffers from the "mixed file".

For "identity theft" cases, the consumer MUST notify the three major credit bureaus (Equifax, Experian and Transunion), and must also notify law enforcement and any involved creditors WITH CERTIFIED LETTERS. Phone calls or emails will not do the trick. The consumer who finds himself or herself a victim of identity theft MUST take the initiative and write certified letters to straighten out the problem. The certified letters must be accompanied by a copy of the police report. The credit bureaus will put a "fraud alert" on the file, and, by law, the creditors should cancel the debts. However, there are instances where creditors and/or the credit bureaus do not cancel "identity theft" debts, and my firm would bring a lawsuit against any credit bureau or creditor that refused to cancel and erase such debts even after notification to do so.

3. "Impermissible Access" or "Impermissible Pull" cases: for a creditor or potential creditor to "pull", or access, your credit report, it would need a permissible purpose. Common permissible purposes include when a consumer has applied for credit or has applied to buy something, such as a car, a home mortgage or a major appliance.

However, there are limits on when creditors can pull a consumer's credit report.

"Impermissible access" occurs when a creditor pulls a consumer's credit report without the consumer's permission and without a permissible purpose. Sometimes, for instance, creditors will pull a consumer's credit report long before the consumer initiates a credit transaction, such as when a store or a car dealership would pull a consumer's credit report to see if they would quality to buy something at a certain price, even though the consumer has not even expressed an interest in the purchase. Insurance companies sometimes pull credit reports on plaintiffs in personal injury or worker's compensation claims, because if the plaintiff is strapped financially, he or she will usually settle sooner and for less money.

There are many forms of impermissible access, but the common denominator is that the creditor pulled the credit report without the consumer's permission and without any permissible purpose. These types of lawsuits are always brought against the creditor who performs the impermissible pulling.

Q: What should a consumer do if he or she believes she has become a victim of false or inaccurate credit reporting?

A: The first thing the consumer must do is contact the creditor, any involved collection agencies and the credit bureaus in writing, via certified mail, to demand a "reinvestigation" of the credit derogatory. My firm requires potential clients to seek reinvestigation themselves before we will sign up their cases.

It is absolutely required that a consumer use certified mail when corresponding to a creditor, collector or credit bureau regarding an alleged false derogatory. There are two reasons: first, the consumer must document his or her entire case if the case is ever to be successful at trial. Phone calls positively do not do the trick. Second, the creditor and the credit bureau are required to perform their reinvestigation within 30 days after receiving the demand for reinvestigation. The date upon which the certified letter is received by the credit bureau determines the first day of this 30-day period. Thus, the certified letter triggers the legal requirements of the creditor and the credit bureau.

Q: What should a consumer include in a letter to the creditors and the credit bureaus?

A: Everything explaining why the derogatory is false or inaccurate. A consumer's written letter, without supporting documentation, may not be enough. You want to give the creditor and the credit bureau a realistic chance to "do the right thing". Give the creditor and the credit bureau any documentary evidence you may have to straighten out the derogatory. Examples: copies of your driver's license or birth certificate; copies of any bills or cancelled checks showing that a debt has been paid off; letters from former creditors showing that a debt has been paid off. Include these with the certified letter. If you need a bigger envelope, use it. Obviously, keep the originals of any documents you send to the creditors or credit bureaus.

Keep a file with all of your documents concerning the dispute, including all letters to and from the creditors, the credit bureaus and debt collectors and your certified mail return receipts. Your documentation becomes absolutely critical if your case moves into a lawsuit.

Q: What if the creditor and the credit bureaus perform a reinvestigation and still will not remove the derogatory credit mark?

A: There is no harm in sending a second, or even a third, demand for reinvestigation. However, at some point you will want to consult with an attorney.

Q: What can I expect from a lawsuit against a creditor or credit bureau that publishes a false or inaccurate derogatory?

A: If you win, you can expect to recover any damages you can prove, in addition to statutory penalties of up to $5,000.00 per violation. In certain circumstances, you can also obtain mental anguish damages and punitive damages.

Q: Do attorneys usually take these cases on a contingency basis?

A: Yes. The credit reporting statutes provide that a successful plaintiff can collect his or her attorney's fees from the defendant creditor or credit bureau.

Q: Do I need to send a demand for reinvestigation if I have been the victim of an impermissible access case?

A: No. You have the right to seek compensation from someone who accesses your credit report as soon as they do it. If you wish to contact them first to seek an apology or some kind of compensation, that is fine, but you also have the right to seek the immediate assistance of an attorney.

Q: What can I expect from a lawsuit involving an impermissible pull?

A: In California, there is a statutory penalty of $2500.00 per violation for impermissible access to a consumer's credit report. In certain situations, the consumer can also receive his or her actual damages, if he or she can prove them, as well as mental anguish damages and punitive damages. The successful consumer will also have his or her attorney's fees paid by the defendant.

There is much to know in this area of the law. The above is a primer on the topic, and is not meant as an exhaustive discourse.

I hope that you find something useful in this short article. If you are a Southern California consumer and you have any further questions, please don't hesitate to contact Robert F. Brennan, A Professional Corporation at (818) 249-5291, or at www.brennanlaw.com.