The FCRAFair Credit Reporting Act

Summer L. Masterson-Goethals, Esq.

Legal Services of Southern Missouri

Consumer Report

15 USC §1681a

(1) In general.— The term “consumer report” means any

written, oral, or other communication of any information by a

consumer reporting agency 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—

(A) credit or insurance to be used primarily for personal,

family, or household purposes;

(B) employment purposes; or

(C) any other purpose authorized under section 1681b of

this title.

Maximum Possible Accuracy

15 USC §1681e(b)

Whenever a consumer reporting agency prepares a consumer report, it must follow reasonable procedures “to assure

maximum possible accuracy of the information” it reports. 15 USC §1681e(b). A consumer reporting agency is not strictly liable for

all inaccuracies and can avoid liability by showing that it followed reasonable procedures to ensure the maximum possible accuracy

of the report. Guimond v. Trans Union Credit Info. Co., 45 F3d 1329, 1333 (9th Cir 1995); Henson v. CSC Credit Services, 29 F3d

280, 284 (7th Cir 1994); Cahlin v. Gen. Motors Acceptance Corp., 936 F2d 1151, 1156 (11th Cir 1991); see 15 USC §1681o(a)

(liability for negligent noncompliance). Misleading or incomplete statements have been held actionable under the Fair Credit Reporting

Act (FCRA). Agosta v. InoVision, Inc., Civ.A. 02-806, 2003 WL 22999213, at *5, 2003 US Dist LEXIS 23889, at *17 (ED Pa Dec 16,

2003) (“Though ‘technically accurate,’ a derogatory entry on a credit report is actionable because it is misleading or materially

incomplete.” (quoting Koropoulos, 734 F2d at 42)). On the other hand, a consumer report that failed to note the date and nature of

adeficiency, as the consumer requested, was not so misleading as to be inaccurate (seven-year-old mortgage foreclosure). Sepulvado

v.CSC Credit Services, Inc., 158 F3d 890, 896 (5th Cir 1998).

Reinvestigation of Disputed InformationProper reinvestigation requires a consumer reporting agency to “conduct a reasonable reinvestigation to determine whether the

disputed information is inaccurate.” 15 USC §1681i(a)(1)(A). This may require more than just determining if information

previously reported is accurately recorded or still reported by the creditor. See Pinner v. Schmidt, 805 F2d 1258, 1262 (5th Cir

1986) (it was unreasonable for credit reporting agency to contact only agent of creditor to verify delinquent account when plaintiff

notified agency that he had personal dispute with agent). In Cushman v. Trans Union Corp., 115 F3d 220, 225 (3d Cir 1997), the court

held that to fulfill its obligation of reinvestigation, a credit reporting agency may be required, under certain circumstances, to verify the

accuracy of its initial source of information. Whether the agency has a duty to go beyond the original source depends on a number of

factors, including whether the consumer has alerted the agency to the possibility that the original source may be unreliable, or the agency

itself knows or should know that the source is unreliable. Another factor is the cost of verifying the accuracy of the source versus the

possible harm that inaccurately reported information may cause the consumer. See Henson v. CSC Credit Services, 29 F3d 280, 287 (7th

Cir 1994). Once a consumer notifies the reporting agency of incompleteness or inaccuracy, the consumer reporting agency has 30 days

to reinvestigate and “record the current status of the disputed information, or delete the item from the file.” 15 USC §1681i(a)(1)(A). The

30-day period may be extended no more than 15 days if the agency receives relevant information from the consumer during the 30-day

period. 15 USC §1681i(a)(1)(B)–(C). When the agency conducts a reinvestigation, it must review and consider all relevant information

submitted by the consumer during the 30-day reinvestigation period. 15 USC §1681i(a)(4).

Disclosure to Consumer of File Information

15 USC §1681g

A consumer reporting agency must, on request and proper identification, clearly and accurately disclose to the consumer the

nature and substance of all information on the consumer in its files at the time of the request, with two exceptions. First, if the

consumer so requests, and provides appropriate proof of identity, the first five digits of the consumer’s Social Security number, or

similar identification number, may not be included in the disclosure. Second, the agency is not required “to disclose to a

consumer any information concerning credit scores or any other risk scores or predictors relating to the consumer” when the

consumer requests information from his or her file. 15 USC §1681g(a)(1). However, if the consumer requests the consumer’s

file but not the consumer’s credit score, then the reporting agency must inform the consumer that the consumer may request and

obtain the consumer’s credit score. 15 USC §1681g(a)(6). If there is no source for the information in the file, and the

consumer disputes the accuracy of the information, the agency must either investigate the dispute or delete the information. Guimond v.

Trans Union Credit Info. Co., 45 F3d 1329, 1334 (9th Cir 1995). An agency must disclose to the consumer the recipients of

any consumer report about the consumer that it has furnished for employment purposes within two years preceding the request, and

for any other purpose, within one year preceding the request. 15 USC §1681g(a)(3)(A). A consumer reporting agency must provide with

each disclosure a written summary of the consumer’s rights under the FCRA. 15 USC §1681g(c)(2)(A). FACTA significantly modified

the disclosure requirements for the summary of the consumer’s rights. These requirements are discussed in more detail in §9.3-

6(a)(2).

Furnishing Reports for Permissible Purposes15 USC §1681b

A consumer reporting agency must follow reasonable procedures designed to limit the furnishing of consumer reports to

the permissible purposes listed in 15 USC §1681b. 15 USC §1681e(a). If the agency followed reasonable procedures, issuing a

report for an impermissible purpose will not result in liability. Dotzler v. Perot, 876 F Supp 207 (ED Mo 1995).

To be considered reasonable under this section, procedures for issuing consumer reports must require that prospective users

“identify themselves, certify the purposes for which the information is sought, and certify that the information will be used

for no other purpose.” 15 USC §1681e(a). A consumer reporting agency must make a reasonable effort to verify the identity of a new

prospective user and the proposed uses certified by the new user before furnishing a consumer report. A consumer report may not be

issued if the consumer reporting agency has reasonable grounds for believing that the consumer report will be used for an impermissible

purpose. 15 USC §1681e(a).

Identity Theft Information Blocking

15 USC §1681c-1 and 1681c-2

The Fair and Accurate Credit Transaction Act of 2003 added §1681c-2 to the Fair Credit Reporting Act. Pub L No 108-

159, §152(a), 117 Stat 1952, 1964. Under 15 USC §1681c-2(a), a consumer reporting agency must block the reporting of

information in a consumer’s file that the consumer identifies as information that resulted from an alleged identity theft. The agency

must block the information not later than four business days after receiving the following:

(1) Appropriate proof of the consumer’s identity;

(2) A copy of an identity theft report;

(3) The identification of the information by the consumer; and

(4) “[A] statement by the consumer that the information is not information relating to any transaction by the consumer.”

Identity Theft Blocking (cont.)15 USC §1681c-2(a)

The consumer reporting agency must promptly notify the furnisher of the information identified

by the consumer of the following:

“(1) that the information may be the result of identity theft;

(2) that an identity theft report has been filed;

(3) that a block has been requested . . .; and

(4) of the effective dates of the block.”

15 USC §1681c-2(b)

The consumer reporting agency may decline to block, or rescind a block, of information if the agency reasonably

determines that (1) the information was blocked in error, (2) the information was blocked “on the basis of a material

misrepresentation of fact by the consumer relevant to the request to block,” or (3) “the consumer obtained possession

of goods, services, or money as a result of the blocked transaction.”

15 USC §1681c-2(c)(1).

The consumer reporting agency must promptly notify the consumer if a block of information is declined or rescinded.

15 USC §1681c-2(c)(2). Exceptions for resellers and verification companies are provided in 15 USC §1681c-2(d) and

(e).

Duties on Furnishers on Notice of Dispute

15 USC §1681s-2(b)

If a consumer disputes the accuracy of any information in a consumer report, the consumer reporting agency must notify the

“person” who furnished the disputed information. 15 USC §1681i(a)(2). Once the person receives this information from the

consumer reporting agency, the person must do the following:

(1) Conduct an investigation into the disputed information.

(2) Review all relevant information provided by the consumer reporting agency.

(3) Report the investigation results to the consumer reporting agency.

(4) “[I]f the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis.”

(5) “[I]f an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any

reinvestigation . . . , for purposes of reporting to a consumer reporting agency only, as appropriate, based on the results of the

reinvestigation promptly—(i) modify that item of information; (ii) delete that item of information; or (iii) permanently block the

reporting of that item of information.” 15 USC §1681s-2(b)(1).

Duties on Furnishers on Notice of Dispute (cont.)The person must complete all required reports, reviews, and investigations before the expiration of the period during which

a consumer reporting agency must complete its reinvestigation following a dispute by the consumer, as mandated by 15 USC

§1681i(a)(1). 15 USC §1681s-2(b)(2). This period is typically 30 days, beginning on the date that the agency received notice of the

dispute from the consumer. A person who furnishes information to a consumer reporting agency must have reasonable procedures in

place “to respond to any notification that it receives from a consumer reporting agency under [15 USC §1681c-2] relating to information

resulting from identity theft, to prevent that person from refurnishing such blocked information” to another agency. 15 USC

§1681s-2(a)(6)(A). The consumer has the right to prevent a person from reporting to a consumer reporting agency information about

credit that results from identity theft. If a consumer submits an identity theft report stating that the information maintained by the person

about the consumer resulted from identity theft, the person may not furnish the information to any consumer reporting agency

“unless the person subsequently knows or is informed by the consumer that the information is correct.” 15 USC §1681s-

2(a)(6)(B). 15 USC §1681s-2(a)(7) addresses negative information.

Duties on Furnishers on Notice of Dispute (cont.)Negative information is defined as “information concerning a customer’s delinquencies, late

payments, insolvency, or any form of default.” 15 USC §1681s-2(a)(7)(G)(i). This subparagraph

applies to financial institutions that (1) extend credit and regularly in the ordinary course of

business furnish information to a consumer reporting agency, and (2) furnish negative

information regarding credit extended to a customer. These institutions must

provide in writing to a customer a clear and conspicuous notice about furnishing negative

information. 15 USC §1681s-2(a)(7)(A)(i), (a)(7)(C)(ii). This notice must be provided to the

customer no later than 30 days after furnishing the negative information to a nationwide

consumer reporting agency. 15 USC §1681s-2(a)(7)(B)(i). The notice may be furnished to the

customer along with any notice of default, billing statement, or any other materials provided to

the customer. However, the notice may not be included in the initial disclosures provided

under 15 USC §1637(a) of the Truth in Lending Act (i.e., open-end credit). 15 USC §1681s-

2(a)(7)(B)(ii), (a)(7)(C)(i).

Civil Actions for Negligent Violations15 USC §1681o

Consumers may bring a private cause of action for negligent violations of the FCRA for actual damages, attorneys

fees and costs. 15 USC §1681o. The elements of a claim are:

(1) inaccurate consumer information,

(2) failure to follow reasonable procedures,

(3) injury to the consumer, and

(4) injury caused by the inclusion of the inaccurate information. That the information was a substantial factor in causing the injury is

sufficient to provecausation. Philbin v. Trans Union Corp., 101 F3d 957, 965–967, 963 (3d Cir 1996). In Zhang v. Am. Gem Seafoods,

Inc., 339 F3d 1020, 1040 (9th Cir 2003), a case involving employment discrimination, the court commented on the proof required to

recover emotional distress damages in general. The court held that objective evidence is not required, and damages may be awarded

based only on the testimony of the plaintiff. See Acton v. Bank One Corp., 293 F Supp2d 1092, 1101 (D Ariz 2003) (emotional distress

damages under the FCRA do not require specific objective proof).

Moreover, consumers may recover damages for injury to their business ventures as a result of violations of the FCRA. See

Dennis v. BEH-1, LLC, 520 F3d 1066, 1069–1070 (9th Cir 2008). The FCRA does not authorize punitive damages for

negligent noncompliance. See 15 USC §1681o(a).

Civil Liability for Willful Violations15 USC §1681n

Willful violation of any Fair Credit Reporting Act (FCRA) requirement allows a claim for punitive damages in addition to

actual damages, court costs, and attorney fees. 15 USC §1681n(a). Punitive damages may be recovered without a showing of actual

damages. See Boothe v. TRW Credit Data, 557 F Supp 66, 71–72 (SDNY 1982) ($15,000 in punitive damages awarded when actual

damages neither pleaded nor proven); Russell v. Shelter Fin. Services, 604 F Supp 201, 203 (WD Mo 1984) ($1 in nominal

damages sufficient to allow punitive damages in amount to be determined by jury). Liability for willfully failing to comply with the

FCRA extends not only to acts known to violate the FCRA, but also to reckless disregard of statutory duty. Safeco Ins. Co. of Am. v.

Burr, 551 US 47, 56–58, 127 S Ct 2201, 167 L Ed2d 1045 (2007). Willfulness under the FCRA does not require a showing of

malice or evil motive, as may be required for obtaining punitive damages under state law. See, e.g., Thornton v. Equifax, Inc., 619

F2d 700, 705 (8th Cir 1980). To be found in willful noncompliance, a defendant must have knowingly and intentionally committed an act

in conscious disregard of the rights of others. Stevenson v. TRW Inc., 987 F2d 288, 293 (5th Cir 1993); Trans Union Corp. v. Crisp, 896

SW2d 446, 449 (Ark Ct App 1995). Courts have considered a variety of circumstances in finding willfulness, including the number and

seriousness of the violations, as well as the relationship of the parties. See, e.g., Millstone, 528 F2d at 834 (report “rife with innuendo,

misstatement, and slander” prepared in violation of verification procedures, released only after civil action filed); Carroll v. Exxon

Co., U.S.A., 434 F Supp 557, 561 (ED La 1977) (policy of providing adverse action disclosure only on consumer request);

Collins, 410 F Supp at 931–932 (refusal to reinvestigate on consumer request).

Civil Liability for Willful Violations (cont.)Any person who willfully fails to comply with a requirement under the FCRA regarding a consumer is liable to the

consumer for actual damages incurred as a result of the failure, with a minimum recovery of $100 and a maximum recovery of

$1,000. 15 USC §1681n(a)(1)(A). If a natural person obtains a consumer report under false pretenses, or knowingly without a

permissible purpose, the consumer may recover actual damages incurred as a result of the violation or $1,000, whichever is greater. 15

USC §1681n(a)(1)(B). If a person has a permissible purpose for obtaining a consumer report, regardless of the reason given to the

consumer reporting agency, the person may not be held to have obtained the report by false pretenses. Edge v. Prof’l Claims

Bureau, Inc., 64 F Supp2d 115, 117 (EDNY 1999), aff’d, 234 F3d 1261 (2d Cir 2000).

Missouri Merchandising Practices Act (MMPA)

See §§ 407.010 – 407.1500 RSMo.

The MMPA is divided into multiple subsections, the first applies generally to all deceptive and unfair acts.

It also contains many other protections for consumers, including:

The right to keep unsolicited items sent to you

Regulations in the use of aftermarket parts by insurance companies

Credit protections

Odometer fraud

New car “lemon law”

Three day right of recession for home solicitation sales

Wheelchair lemon law

Credit “freezes”

Health Spas

MMPA (cont.)

Car rental companies

Motor vehicle dealer franchises

Going out of business sales

Farm implement dealers

Outdoor power equiptment

Fine art dealers

Sales commissions

Tobacco sales

Foreclosure advertising

Convenience stores

Motorcyle and all-terrain vehicles

Telemarketing practices

“Do not call lists”

MMPA (cont.)

Email marketing

“spam” email

Travel clubs

Use of social security numbers

Boat dealers special considerations

Most of these sections refer back to § 407.020 RSMo Supp. 2012, which classifies violations generally as unfair and deceptive acts and provides for recovery, which can include punitive damages and attorneys fees.

Many other Missouri statutes refer back to the MMPA and place violators under its purview as well.

The MPA Cause of Action Elements generally:

The act, use, or employment of:

Deception

Fraud (the elements of common law fraud are not required to prove violation of MMPA, esp. intent)

False pretense

False promise

Misrepresentation

Unfair practice

Concealment, suppression, or admission of any material fact

In connection with

The sale

Of any merchandise

In trade or commerce

Resulting in an ascertainable loss of money or real or personal property to a person who purchases primarily for personal, family, or household purposes.

See Watson and Conway cases for new interpretation of “in connection with.”

The MMPA Cause of Action

Definitions

“Merchandise” any objects, wares, goods, commodities, intangibles, real estate, or services;

“Person” any natural person or representative, partnership, firm, for-profit or not-for-profit corp, company, foundation, trust, entity, agent, employee, etc.;

“Sale” any sale, lease, offer for sale or lease, or attempt to sell or lease merchandise on credit or for cash; and

“Trade” or “commerce” the advertising, offering for sale, sale or distribution, or any combination thereof, of any services and any property, tangible or intangible, real, personal, or mixed, and any other article, commodity, or thing of value wherever situated.

Cases under the MMPA (examples) Deceptive practice for able company to send and charge for cable guide that was not

requested. Huch v. Charter Commc’ns, Inc., 290 S.W.3d 721 (2009).

Selling a used car without properly transferring title as required by law. Antle v. Reynolds, 15 S.W.3d 762 (2000).

Charging an excessive amount for towing a car. Ford v. St. Louis Metro. Towing, WL 618491 (2010).

Failing to disclose that a used vehicle was actually a rebuilt wreck. Gibbons v. J. Nuckolls, 216 S.W.3d 667 (2007).

Falsely representing that a used vehicle had passed a safety inspection when it did not. Viene v. Concours Auto Sales, Inc., 787 S.W.2d 814 (1990).

A material misrep of facts regarding the quality of a used vehicle. Morehouse v. BehlmannPontiac-GMC Truck, 31 S.W.3d 55 (2000).

Selling a house with significant undisclosed problems. In re McClelland, WL 5157685 (2008).

Failing to honor a lifetime warranty on an air conditioner. Schulmann v. Air Servs. Heating & Air Conditioning, Inc. 199 S.W.3d 228 (2006).

Failing to consider in good faith a mortgage loan modification. In re Shelton, 481 B.R. 22 (2012).

Criminal Element

The MMPA has a criminal provision that holds that anyone who knowingly violates the MMPA with intent to defraud is subject to a Class D felony under 407.020.3

A criminal action can be brought by both state prosecuting attorneys and the Attorney General because they have concurrent criminal enforcement authority.

As a common practice, I have my clients file a complaint with the AG and with the local police, BBB, and if it’s a car case, the MO DMV.

Policy Behind the MMPA

The legislatures intent behind this Act was to protect consumers and to “supplement the definitions of common law fraud … to preserve fundamental honesty, fair play and right dealings in public transactions.” See Danforth v. Independent Inc., 494 SW2d 362 at 368.

It is “designed to regulate the marketplace to the advantage of those traditionally thought to have unequal bargaining power as well as those who may fall victim to unfair business practices; it was done to give broad scope to the meaning of the statute and to prevent evasion because of overly meticulous definitions, and leaves [it] to the court in each … instance [to determine] whether fair dealing has been violated.” Huch v. Charter Communications, Inc., 290 SW3d 721 at 725.

To read more about MMPA policy and the Act generally, see The Missouri Merchandising Practices Act: Remedies for Consumers by Doug Noland.

DamagesThe MMPA provides for actual damages, punitive damages, and equitable relief, and attorneys fees.

Actual damages under 407.025 = cost to repair the defective goods, difference in what it should have been worth v. what it actually was worth, plus consequential damages which were the direct result of the deceptive and fraudulent conduct.

*General rule on actuals is the “benefit of the bargain” rule. But, you can use another measure of damages when the specificcircumstances make that measure of damages inadequate.

Punitive Damages under 407.025.1 = plaintiff must show by clear and convincing evidence the defendant’s culpable mental state byshowing either a willful, wanton, outrageous conduct, or reckless disregard for the act’s consequences from which evil motive can be inferred. These awards can be significantly higher than the actuals and are limited by 510.265.

Attorney Fees under 407.025 = based on the amount of time reasonably expended. They are not statutory, rather they are within the discretion of the court. Submit a detailed time record and hourly rate affidavit.

Equitable Relief = can be submitted if the plaintiff recovers actual damages and is incidental to the actual damages, but you cannot ask for an injunction to stop defendant from similar deceptive or fraudulent conduct.