Assuring Access to the Market

Question 1

FCRA Purpose and Scope

Answer 1

purpose: increasing transparency for the consumer, 1. Attempt to help ensure consumers confidentiality is protected, credit reports are used for a proper purpose, and provide consumers right of access to the basic info in the reports (limiting who can see reports)

Scope: applies only to consumer report generated by CRA, only consumer credit (in contrast with ECOA),

Question 2

CRA

Answer 2

Consumer reporting agency, Big 3 are transunion, experian, equifax

Question 3

users of reports

Answer 3

people who purchase these reports

ex. landlords, businesses employer

Question 4

furnishers

Answer 4

third parties who provide info about consumer to CRA

Question 5

1681(b) reasonable procedures

Answer 5

: CRA’s must adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other info in a manner which is fair and equitable to the consumer

Question 6

§ 1681a(c) Consumer

Answer 6

an individual

Question 7

§ 1681a(d)(1) Consumer Report

Answer 7

any written, oral, or other communication of any info by a CRA bearing a consumer’s credit worthiness, credit standing, credit capacity, reputation…expected to be used or collected in whole or in part for the purpose of establishing eligibility for:

a. (A) Credit or insurance to be used primarily for personal, family, or household purposes;
b. (B) Employment purposes; or
c. (C) Any other purpose authorized under § 1681b

Question 8

§ 1681a(f) Consumer Reporting Agency

Answer 8

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 info or other info on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purposes of preparing or furnishing consumer reports

Question 9

§ 1681a(k) = ECOA § 1691(d)(6): adverse action

Answer 9

A denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for

a. Denial of employment or any other decision for employment purposes
b. Action taken or determination that is—
c. Made in connection with application that was made by or transaction that was initiated by, any consumer
d. Adverse to the interests of the consumer.

Question 10

§ 1681b(a) To whom CRA may release a Consumer Report:

Answer 10

a. (1) in response to a court order
b. (2) in accordance with written instructions of the consumer
c. (3) to a person which it has reason to believe:
i. (A) intends to use info in connection with a credit transaction involving a consumer on whom the info is to be furnished and involving the extension of credit to, or review or collection of an account of the consumer; or
ii. (B) intends to use the info for employment purposes
iii. (C) intends to use the info in connection with the underwriting of insurance involving the consumer;
iv. (D) intends to use the info in connection with a determination of consumer eligibility for a license or other benefit granted by the government;
v. (E) intends to use the info in connection with a valuation of an existing credit obligation
vi. (F) legit business need for the info

Question 11

§ 1681h(e) Limitation of Liability

Answer 11

preempts certain tort actions against CRAs, users, and furnishers if the consumer acquired knowledge of the information through FCRA-mandated disclosure

a. Gives CRA, furnisher, and users limited qualified immunity from liability under 3 tort theories (defamation, invasion of privacy, negligence) unless the conduct involves malice or willful intent
i. If the consumer is harmed due to mandated disclosure under FRCA, most reporters are shielded from tort liability. Passed for political reasons. Generally, no private right of action.
1. Prior to FRCA, you could sue for libel or slander (defamation).
ii. To be liable they would have to have known the info is false or acted in reckless disregard
b. Consumer may not sue user, CRA or furnisher for listed tort actions

Question 12

1681j(b) Free Disclosures to consumers who make request following adverse action:

Answer 12

CRA has to provide free of charge if making a request within 60 days after getting notice of adverse action

Question 13

§ 1681g(a) Information on file; sources; report recipients

Answer 13

every CRA shall, upon interest, and subject to section 1681h(a)(1) of this title, clearly and accurately disclose to the consumer:

i. (a)(1): all information in the consumer’s file at the time of the request, except that –
1. (A) if consumer requests that the first 5 digits of their SS # not be included and CRA has received appropriate proof of ID of the requester, the CRA shall truncate the #
2. (B) nothing in this ¶ shall be construed to require a CRA to disclose to consumer any info concerning credit scores/any other risk scores or predictors relating to consumer
ii. (a)(2): sources of information; except that the sources of info acquired solely for use in preparing an investigative consumer report and actually used for no other purpose need not be disclosed

Question 14

1681c(a) When info in consumer reports becomes obsolete

Answer 14

no CRA may make any consumer report containing any of the following items of info –

i. Tells us for how long the information relevant and how long the reporters can report it
1. Bankruptcy is an example (older than 10 years)
ii. Even if the info continues to be reported, it might not be used by a user in their algorithm
iii. Positive information can stay on your report indefinitely
iv. Civil suits, judgments, and records of arrest that are older than 7 years
v. Paid tax liens that are older than 7 years
vi. Accounts placed in collection or charged to profit or loss that are older than 7 years
vii. Any other adverse item of information, other than records of convictions of crimes which are older than 7 years
viii. Name address, telephone info of any medical information furnisher
1. Unless information is provided in a “code” to which others wouldn’t understand
2. Unless report given to insurance company for purpose relating to engaging in the business of insurance other than property

Question 15

§ 1681i(a) CRA reinvestigation procedure

Answer 15

a. At any time, a consumer has a right to dispute the accuracy or completeness of info in his/her report
i. Do not first have to suffer an adverse action

Question 16

1681 (a)(1)(A) Reinvestigation required

Answer 16

where a consumer notifies a credit reporting agency that info contained in his or her report may be inaccurate, the agency shall reinvestigate free of charge and record the current status of the disputed information, or delete the item from the file, before the end of the 30-day period beginning on the date on which agency receives notice

ii. Reseller: don’t maintain own databases but they repackage info from the CRA’s and sell them
iii. Within 5 business days within receiving notice of dispute, CRA has to provide furnishers with information
iv. CRA may have responsibility to go beyond just asking the furnisher if info is correct if the CRA knows or should know that the furnisher might be supplying inaccurate info (inaccurate info rises from how things are collected and paid)

Question 17

1682(a)(2) Prompt notice of dispute to furnisher of info

Answer 17

agency shall provide prompt notification of the dispute to any person who provided any item of info in dispute, at the address and manager established with the person. Notice shall include all relevant info.

i. Must address whether or not the info was reported correctly with the furnisher
ii. Electronic notification generally
iii. Reporter must research the info and prepare a response

Question 18

1681 (a)(5) Treatment of inaccurate or unverifiable info

Answer 18

if after reinvestigation of any info disputed, an item of info is found to be inaccurate, reporting agency shall:

i. (i) promptly delete the item from the file of the consumer, or modify that item based on results of the reinvestigation; AND
ii. (ii) promptly notify the furnisher of that info that the info has been deleted or modified from the file of the consumer

Question 19

1681(b) Statement of the dispute

Answer 19

if reinvestigation doesn’t resolve the dispute, the consumer may file a brief statement setting forth the nature of the dispute

i. Consumer agency likely will not read the statement from the consumer
ii. Good to have a paper trail if you plan to sue later
iii. Users are the ones who pay reporting agencies, consumers have no direct financial influence on CRAs meaning no sig incentive to reduce/correct inaccuracies
1. Agencies have a strong interest in erring on the side of caution from the prospective of users who would much rather deny someone who may or may not be credit worthy rather than accept
2. Reinvestigation process isn’t perfect and sometimes have to initiate litigation or make repeated attempt
3. It is considered a reinvestigation because it is assumed that there are safeguards that the original investigation produced reasonably accurate info

Question 20

1681(c) Notification of consumer dispute in subsequent consumer reports:

Answer 20

whenever a statement of a dispute is filed, unless there are reasonable grounds to believe that it is frivolous or irrelevant, the CRA shall clearly note that it is disputed by the consumer and provide either the consumer’s statement or a clear summary thereof

Question 21

1681(d) Notification of deletion of disputed info

Answer 21

: following deletion of inaccurate info, the CRA shall furnish notification that it has been deleted

Question 22

How deep does a reinvestigation have to go?

Answer 22

A reinvestigation requires a CRA, in certain circumstances, to verify the accuracy of its initial source of info

i. Henson: Whether the duty arises will depend in part on whether the consumer has alerted the reporting agency to the possibility that the source may be unreliable or the reporting agency to the possibility that the source may be unreliable or the reporting agency itself knows or should know that the source is unreliable
1. If there is no notice, all they have to do is ask the furnisher to confirm the info
2. Question for the jury
3. Cost-benefit analysis
ii. If consumer tells them that the furnisher is unreliable or CRA knows/has reason to know that the source of info is not reliable, then they must do more than simply ask furnisher if info is accurate

Question 23

Adverse Action Requirements: only imposed on USERS of reports

Answer 23

1. § 1681m(a) Users of Reports
   a. Provide oral, written, or e-notice of adverse action
   i. FCRA does not define adverse action, ECOA does
   a. Must contain reason for the action (only for ECOA, not FCRA)
   b. If as a result of notice consumer decides to dispute accuracy of the info, that is when CRA gets involved and has responsibility to conduct a reasonable investigation
   ii. Purpose for this requirement is to let the consumer know why they were denied. Supplies transparency to consumers
2. Provides a teachable moment for consumers, telling them that they might need to improve their credit history
3. Before FCRA, consumer had no way to access the info in the reports

Question 24

1681m(h)(8) Enforcement: 1681n and 1681o do not apply to any failure by any person to comply

Answer 24

1. Possibly suggests that there is no private right of action for creditor’s failure to comply with adverse action disclosure requirements. But, the CFPB or government could enforce
2. No obligation to supply any disclosure if the loan were extended under terms requested

Question 25

b. Provide to the consumer written or e-disclosure:
c. Provide to the consumer orally, in writing, or electronically:
d. Provide to the consumer an oral, written, or e-notice of the consumers right:

Answer 25

i. Of a numerical credit score
i. Name, address, phone of the consumer reporting agency furnishing the report
ii. Statement that the agency didn’t make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken
i. To obtain a free copy of a consumer report and to dispute with a CRA the accuracy/completeness of any info in a consumer report furnished by the CRA

Question 26

§ 1681s-2(a)(1)(A) Responsibilities of furnishers of info to CRA’s

Answer 26

: a person shall not furnish any info relating to a consumer to any CRA if the person knows or has reasonable cause to believe that the info is inaccurate

Question 27

§ 1681s-2(a)(1)(D) Definition of reasonable cause to believe that the info is inaccurate

Answer 27

having specific knowledge, other than solely allegations by the consumer, that would cause a reasonable person to have substantial doubts about accuracy of info

Question 28

1681s-2(b)(1) Duties of furnishers of information upon notice of dispute:

Answer 28

: upon notice of dispute, the person shall –

1. (A) Conduct an investigation with respect to the disputed information;
2. (B) Review all relevant info provided by the CRA pursuant to 1681i(a)(2) of this title;
3. (C) Report the results of the investigation to the CRA;
4. (D) if they find an inaccuracy, must report to all CRA’s to which the person furnished the info; and
5. (E) if they find an inaccuracy, furnisher must promptly modify, delete, or permanently block the reporting of that info

Question 29

§ 1681e(b) CRA Compliance Procedures

Answer 29

CRA isn’t liable under FCRA if it followed reasonable procedures to assure maximum possible accuracy, but nonetheless reported inaccurate info (Richardson v. Fleet Bank)

Question 30

Richardson v. Fleet Bank noncompliance factors

Answer 30

v. Note: Preparer is held only to a duty of reasonable care, determined by what a prudent reasonable person would do under the circumstances
1. Courts also weigh “the potential harm from inaccuracy against the burden of safeguarding against such inaccuracy”
2. Court does not say that relying on creditors for accurate credit information constitutes a reasonable procedures as a matter of law where, like here, the credit reporting agency had reason to know of the dispute between the Ps and Equifax
3. If they have notice they must investigate otherwise they don’t have any duty to
4. Here, the plaintiffs sent notice at least three times - general issue of material fact as to whether it was reasonable for equifax to rely exclusively on fleets version of the Ps credit history
5. Damages can include humiliation, mental distress, and absence of out of pocket expenses

Question 31

vi. Reasonable procedures to assure maximum possible accuracy

Answer 31

1. Courts apply balancing test between potential harm from inaccuracy vs. burden of safeguarding against such inaccuracy
   a. Congress was in a tough position when adopting this legislation, and in order to get industry support it had to adopt a standard that consumer advocates find overly strict
2. Has been shown to be a negligence standard b/c it is difficult for CRA’s to process a large of amount of info without making mistakes. Some errors are allowed.
   a. Reasonable, but it is really dependent on nuances of a particular case
   b. If negligent, adhere to 1681o for penalties. Entitled to damages, costs and attorney’s fees.
   c. If acting willfully, can get punitive damages under 1681n
   i. High standard to meet

Question 32

viii. Claim for noncompliance with § 1681e(b) requires:

Answer 32

1. Inaccurate information was included in a consumer’s credit report
2. The inaccuracy was due to D’s failure to follow reasonable procedures to assure maximum possible accuracy
3. The consumer suffered injury
4. The consumer’s injury was caused by the inclusion of the inaccurate entry

Question 33

Fair Credit Billing Act

Answer 33

i. Liability of up to $50 on credit card
ii. Liability cap is unlimited (or the entire loss) on debit
iii. Only some private action allowed

Question 34

FACTA 2003 (amendment of FCRA that addresses identity theft) (purpose)

Answer 34

i. An impostor obtains info of consumer and uses that info to fraudulently pose at consumer to get goods and services
ii. Amended FCRA and primary goal was to reduce identity theft
iii. Consumers may bring private claims to enforce some obligations under the statute, but other provisions say they can only be enforced by public agencies
1. Most courts have concluded that consumers may no longer bring private claims

Question 35

a. § 1681j(a)(1)(A) Free annual disclosure

Answer 35

all consumer reporting agencies described in subsections (p) and (w) of section 1681a of this title shall make all disclosures pursuant to section 1681g of this title once during any 12-month period upon request of the consumer and without charge to the consumer
i. 3 major reporting agencies are required to provide free annual access to consumer reports

Question 36

i. 1681c-1(a)(1) ID theft prevention fraud alerts

Answer 36

1. (a)(1)(A) 90 day/initial: consumer who asserts in good faith a suspicion that they have been or are about to become a victim of fraud has a right to have a CRA include a fraud alert in his consumer report for at least 90 days
   a. Fraud alert serves as a cautionary flag to creditors, must verify your ID

Question 37

2. 1681c-1(b) Extended alerts:

Answer 37

gives consumer who has submitted an identity theft report as defined in 1681a(q) – typically a police report – a right to an extended report for 7 years
a. Submit proof of identity as well

Question 38

3. 1681c-1(c) Active Duty

Answer 38

provides for active duty military alerts which can last for a year

a. Prevents them from being victimized since they are busy, and this could distract them from their duty
b. Only one call required

Question 39

c. § 1681c(g)(1) Truncation of credit card and debit card numbers:

Answer 39

Must shorten credit/debit card #’s on receipts to no more than 5 digits and cannot print expiration date at all
i. (2) Limitations: applies only to receipts that are electronically printed, and shall not apply to transactions which the sole means of recording a credit card or debit card account number is by handwriting or by an imprint/copy of the card

Question 40

d. § 1681c-2(a) Blocking of information resulting from identity theft:

Answer 40

FACTA mandates that consumers be allowed to block negative info from reports resulting from identity theft not later than 4 business days after the date of receipt by such agency of

i. (1) proof of the identity of the consumer;
ii. (2) copy of the identity theft report;
iii. (3) the ID of such info by the consumer; and
iv. (4) a statement by the consumer that the info isn’t info relating to any transaction by the consumer

Question 41

e. § 1681j(d) Victims of identity theft entitled to free copy of consumer report:

Answer 41

upon request of consumer, a CRA shall make all disclosures without charge to the consumer

Question 42

f. § 1681g(e)(1) Info available to victims

Answer 42

creditors must provide copies of records to (A) identity theft victims and (B)-(C) law enforcement

i. Victims of identity theft can receive info from any business that transacted with the thief in the victim’s name
ii. Helps them document fraud transactions and find the thief in order to prosecute them

Question 43

g. § 1681g(e)(6) Limit on liability: no private right of action

Answer 43

exists for creditors failure to provide copy of records to identity theft victims