Codified at 15 U.S.C. sec. 1681, The Fair Credit Reporting Act (FCRA) regulates the collection, dissemination and use of consumer credit information. The FCRA, combined with the Fair Debt Collection and Practices Act (FDCPA) codified at 15 U.S.C. sec. 1692, represents the foundation of consumer credit protection in the U.S.
The FCRA is designed to ensure that a consumer's credit history cannot reflect inaccurate negative information. Although all attorneys should give special deference to the FCRA, attorneys specializing in creditors' rights are especially in danger of inadvertently exposing their clients to liability resulting from violations of the act.
A creditors' rights attorney may not be directly responsible for what his clients report to consumer reporting agencies (CRAs), but he can limit the risk of his clients' exposure to FCRA-related liability by ensuring that any information provided, analyzed or collected by the attorney that could eventually be reported to a CRA is accurate.
If a furnisher of consumer reports is found to be negligent in failing to comply with FCRA, the act provides for a consumer's recovery of actual damages and attorney's fees. Attorneys specializing in this field should beware of the pitfalls that can occur.
In order to ensure that an attorney or his client does not engage in activities prohibited by the FCRA, it is critical that he is aware of how the act defines a consumer report and a CRA. Most crucial, however, is his understanding of the duties required by furnishers of consumer reports to CRAs.
The FCRA defines a consumer report as ‘â�¦any written, oral, or other communication of any information by a CRA bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for credit or insurance to be used primarily for personal, family, or household purposes, employment purposesâ�¦’
The act provides for numerous exceptions to the before mentioned definition of a consumer report. Accordingly, when determining whether information accumulated and subsequently disseminated from attorney to client or client to a CRA is considered a consumer report by the FCRA, the attorney should analyze Section 1681(d) in its entirety.
A CRA is defined by the FCRA as ‘â�¦any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information, or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.’
Although the three largest CRAs (Experian, Transunion and Equifax) are familiar to most attorneys, it is important to note that the act provides that any person or entity as previously defined can be considered a CRA, and, thereby, be subject to FCRA regulation.
CRA information
Under the FCRA, persons or entities furnishing consumer reports to CRA have a duty to provide accurate information, investigate disputed information, and provide notice to the consumer of negative information reported to the CRA.
Specifically, furnishers of consumer information are prohibited from furnishing ‘â�¦any information relating to a consumer to a CRA if the [furnisher] knows or has reasonable cause to believe that the information is inaccurate.’ The act defines the term ‘reasonable cause to believe that the information is inaccurate’ as meaning the furnisher has ‘â�¦specific knowledge, other than solely allegations by the consumer, that would cause a reasonable person to have substantial doubts about the accuracy of the information.’
The FCRA also provides that furnishers of consumer information to CRAs have a duty to correct and update consumer information that the furnisher knows to be inaccurate. The act further requires that furnishers of consumer information to a CRA provide notice to the CRA if any of the reported information is disputed.
Notice must also be provided of any voluntary closure of an account by the consumer occurs, and on delinquent accounts, the month and year of the commencement of the delinquency must be specified.
For attorneys representing creditors, the provisions outlined above can serve as a guideline for what action one should take when notified of a debt dispute. Although these attorneys do not report information directly to the consumer reporting agencies, they are commonly the first persons contacted by the consumers when the consumers wish to dispute the existence of a debt, a payment history, or the amount owed.
Attorneys are even more likely to be contacted in situations where a furnisher of consumer information to collect a debt, foreclose on the consumer's property or otherwise protect the client's interest in a property or debt has retained the attorney.
Appropriate steps
Upon proper notification of a debt dispute by a consumer, the attorney should look to Section 1681(s-2)(a) to ensure that his actions – from the initial to receipt of the notification of the debt dispute through the ultimate determination of the validity of the dispute – do not expose his client to potential FCRA liability.
As counsel to the consumer report furnisher, the attorney must advise his client of the dispute in a timely manner in order to avoid the client's reporting disputed information to a CRA or the client's failure to adhere to Section 1681(s-2)(a) timeframes.
Further, it is not uncommon for the attorney's representational duties to include being responsible for investigating and advising on the validity of the disputes. The attorney's ultimate opinion on the validity of the dispute, therefore, may be the most persuasive factor in the consumer report furnisher's final determination.
This decision will result in reporting the information to a consumer reporting agency as disputed, investigating the disputed information further or declaring the dispute invalid.
Attorneys who represent their clients in this capacity must investigate any dispute with all available diligence. Once a final determination is made on the validity of the debt dispute, the attorney is often not in a position to ensure that his client provides the appropriate notices required by the act.
However, the thorough analysis of the debt dispute and the subsequent communication of said analysis to the client is critical to the lender's determination of what notices are required.
Although most attorneys who represent creditors do not have control over what their clients ultimately report to consumer reporting agencies, they are the first line of defense against their clients reporting of inaccurate or disputed information to a CRA. Therefore, an attorney's in-depth understanding of what is required of his client by the FCRA is vital for effective representation.
Matthew R. Smith is an attorney in the foreclosure division of Wilson & Associates PLLC, which operates offices in Arkansas and Tennessee. Smith can be reached at (501) 219-9388.
