Fair Credit Reporting Act


On November 2, 2015, Big Lots Stores, Inc. became the most recent big-named retailer to be hit with a class action complaint alleging violations of the federal Fair Credit Reporting Act (FCRA).  The lawsuit, filed in the Philadelphia County Court of Common Pleas, alleges that Big Lots conducted improper background checks on employees in violation of the FCRA.  See Aaron Abel v. Big Lots Stores, Inc., Case No. 151100286.  Specifically, plaintiff claims that the consent form he signed in connection with an application for employment with Big Lots included extraneous information and failed to sufficiently disclose that a consumer report would be procured. The FCRA requires that a clear and conspicuous disclosure be made in writing to an applicant prior to the procurement of a consumer report in a document that consists solely of the disclosure that a consumer report may be obtained for employment purposes.  Notably, the disclosure must be in a separate document (i.e. it cannot be part of the employment application) and the disclosure cannot contain any additional information except for the consumer’s written authorization -- which is also required before procuring a consumer report.

This requirement for a “clear and conspicuous disclosure” has led to numerous recent FCRA class actions, including class actions against Home Depot, Chuck E. Cheese, and Whole Foods.  Markedly, the stakes in FCRA class actions can be quite high, considering the FCRA provides for statutory damages ranging from $100 to $1,000 per violation – even where the consumer suffered no actual harm.  For example, the class actions against Home Depot, Chuck E. Cheese, and Whole Foods each resulted in settlements, ranging from $802,720 to $1.8 million dollars.  This potential for high-value FCRA settlements and judgments leads to the unfortunate possibility of “professional job seekers” who seek out employment applications they know to be defective solely for the purpose of pursuing litigation.  Indeed, The National Law Review recently warned, in an article dated November 11, 2015, that a new breed of “opportunistic faux job applicants” – who have no intention of accepting employment with the targeted employers, are submitting employment applications in an attempt to position themselves as the named plaintiff in class action litigation.  To avoid such exposure, employers should re-examine their background check disclosure forms to ensure strict compliance with the FCRA.

For more information on the FCRA or to request a review of your background check disclosure forms, contact Katherine Olson at 312-334-3444 or kolson@messerstrickler.com.

Second Employment related FCRA Claim filed against AMAZON.COM

A second class action has been filed against Amazon.com in the U.S. District Court for the District of New Jersey alleging that Amazon violated the Fair Credit Reporting Act by failing to warn an applicant a negative reports it received and in turn, failing to allow the applicant an opportunity to clarify or fix what he deemed were errors on the report.   Plaintiff also alleges Amazon failed to provide him with a copy of that report or a list of his rights under the FCRA as required.  According to Plaintiff’s Complaint, Amazon allegedly offered him a position but later withdrew the offer after receiving negative information in a background check from a third party background screener.

The New Jersey Plaintiff seeks to represent a class of those people (employees or job applicants) at Amazon who did not receive a copy of their reports or correspondence explaining that the report would not be provided within 2 to five years from the date of filing.  As a best practice, employers should be aware of the requirements imposed by the FCRA and provide all applicable notices to employees or prospective employees as required.

For more information on the FCRA and its application in the employment law field, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com.

15 Million Consumers Impacted by Experian Reports Data Breach

From September 1, 2013 through September 16, 2015, consumers who applied for postpaid services or device financing through Experian’s client, T-Mobile USA, were notified of an unauthorized breach from which consumers’ names, dates of birth, addresses, Social Security numbers, and drivers’ license numbers were at risk.  Personal payment cards and bank accounts were not accessed during the breach.  The breach, which affected Experian North America’s business units – not its consumer credit bureau, impacted approximately 15 million consumers in the United States.  As a result, Experian is offering credit protection resources to those who were or may have been affected. It is critical for credit and collection agencies to be aware of the risks of data breaches and the practices that will prevent them.  Identity theft is the fastest growing consumer complaint as determined by the 2014 Consumer Complaint Survey Report by the Consumer Federation of America and North American Consumer Protection Investigators. Be sure to take preventative measures to protect both your company and the consumers you serve.

For more information regarding the Experian Reports data breach, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

Employment related FCRA Claim against AMAZON

A class action filed against Amazon.com in a circuit court in Tampa, Florida alleges that Amazon wrongfully used consumer credit reports in hiring, firing and even for shift assignments for employees and prospective employees in the state of Florida.

The lead Plaintiff alleged that Amazon obtained his credit report without his permission and did not give him the ability to refute or clarify information in the report before it turned him down for a job in one of Amazon’s Florida warehouses.  According to the Plaintiff, by doing so, Amazon violated his rights under the Fair Credit Reporting Act (“the FCRA”) and manifests a pattern of systematic violations of other employees’ and job applicants’ rights under the FCRA.  Plaintiff also alleged that Amazon’s background check disclosure form, which contains a liability release, also violates the FCRA.

Plaintiff alleged that he was “given no pre-adverse notice whatsoever of the information contained in the consumer report upon which defendant based its decision" and that Amazon.com "did not provide plaintiff with a copy of the consumer report that it relied upon prior to defendant's adverse employment action.  As a result, in violation of the FCRA, plaintiff was deprived of any opportunity to review the information in the report and discuss it with defendant before he was denied employment."

As a best practice, employers should be aware of the requirements imposed by the FCRA and provide all applicable notices to employees or prospective employees as required.

For more information on the FCRA and its application in the employment law field, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com for more information.

Request for Fees Not Yet Incurred In Complaint Violation of FDCPA

The Third Circuit Court of Appeals recently concluded that a demand for a specific amount of attorneys’ fees in a complaint before the fees have actually been incurred is an “actionable misrepresentation under the Fair Debt Collection Practices Act” (“FDCPA”).  In Dale Kaymark et al. v. Bank of America and Udren Law Offices PC, the plaintiff claimed that an itemized list of total debt in the foreclosure complaint improperly included $1,650 in attorneys’ fees, not all of which had been incurred. The district court dismissed the FDCPA claim on the grounds that legal pleadings were not subject to the section of the FDCPA at issue. On appeal, the Third Circuit was not persuaded that formal pleadings filed by attorneys are exempt from the FDCPA’s requirement that debt collectors must not use any "false, deceptive or misleading representation or means in connection with the collection of any debt." Instead, subject to very limited and express exceptions, "all litigation activities, including formal pleadings, are subject to the FDCPA." When drafting demand letters and complaints, creditors must be cautious when demanding fees from the debtor which the creditor has not yet incurred.  Although creditors are not barred from listing an estimate of anticipated fees in their demand letter or complaint, they must do so explicitly. Otherwise, the debtor might assume that the amounts listed as “due” are, in fact, due as of a particular date.

For more information on this topic, contact Stephanie Strickler at 312-334-3465 or sstrickler@messerstrickler.com.

Class Action Lawsuit Against Paramount Pictures Dismissed with Prejudice


Soon after filing a class action lawsuit against Paramount Pictures Corporation, Michael Peikoff’s lawsuit was dismissed with prejudice. In the complaint filed in the United States District Court for the Northern District of California, Peikoff alleged that Paramount Pictures violated the Fair Credit Reporting Act (“FCRA”) when it ran credit report checks on potential employees. Peikoff claimed that, though Paramount had disclosed its intentions and received authorization from job applicants, the authorization form was included in the general job application in violation of the law.

Judge Vince Chhabria disagreed with Peikoff. The Court determined that Paramount did not act recklessly by including the authorization form within the job application nor did it violate the FCRA by using such language. Judge Chhabria found that although Paramount was not entirely upfront with its intentions to run credit checks, it did not violate federal law.

For more information about this case or the FCRA generally, contact Joseph Messer at


or (312) 334-3440.

Message Left for Payroll Department Not a “Communication”

In an Order entered on January 16, 2015, Judge Victoria A. Roberts of the United States District Court for the Eastern District of Michigan issued a favorable ruling for debt collectors. In the case of William Brown III v. Van Ru Credit Corporation, the Plaintiff alleged the Defendant violated the Federal Debt Collection Practices Act (“FDCPA”) as well as two state laws by leaving a single telephone message at Brown’s place of business. The alleged violation occurred on April 14, 2014 when a representative at Van Ru called and left the following message in the general voicemail box at Brown’s business.

“Good morning, my name is Kay and I’m calling from Van Ru Credit

Corporation. If someone from the payroll department can please

return my phone call my phone number is (877) 419-**** and the

reference number is *****488; again my telephone number is

(877) 419-5627 and reference number is *****488.”

This message was heard by an employee, who was aware of Van Ru’s status as a debt collector. For this reason, Brown argued Van Ru violated 15 U.S.C. §1692c(b) declaring they communicated with an unauthorized third party about a debt owed by Brown.

However, this message does not constitute a communication. As defined by the FDCPA, a communication is “the conveying of information regarding a debt directly or indirectly to any person through any medium.” Since Van Ru only sought to contact the business’s payroll department and did not directly reference a debt, they did not violate the FDCPA.  This decision is a great victory for the collection industry, especially those agencies collecting federal student loan debt.

Judge Roberts granted Defendant’s Motion for Judgment on the Pleadings while denying Plaintiff’s Motion to File his First Amended Complaint. As such, Plaintiff’s FDCPA claims were dismissed with prejudice and the Court declined to retain jurisdiction over the state claims.

For more information on the decision of this case or any other consumer law related matters, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com.

View the Order Here: Order in favor of Van Ru



On December 3, 2014, New York financial regulators announced the adoption of final rules regulating debt collection practices in the state of New York.  The new regulations are intended to curb abuse by debt collectors, requiring them to, among other things, advise consumers when the statute of limitations has expired on debts and confirm settlements agreements in writing.  Interestingly, both such rules have long been in place in New York City pursuant to City Rules and Regulations.  See New York City, N.Y., Rules, Tit. 6, §§ 2-191, 2-192. The regulations are the result of more than a year of meetings and public comments stemming from two earlier published versions of the regulations.  The new statewide regulations are far from surprising, considering that more than 20,000 complaints about debt collection practices were filed by New Yorkers in 2014 alone.  In announcing the new regulations, New York Governor Andrew M. Cuomo stated that New York “will not tolerate debt collectors who wrongfully take advantage of consumers.”

To address the perceived abuses in the debt collection industry, the new regulations of third-party debt collectors and debt buyers include the following key reforms:

  •    Improved Disclosures and Debt Information: Enhanced initial disclosures will be required when a debt collector first contacts an alleged debtor. These disclosures go beyond current federal requirements, by requiring that collectors disclose key information about the charged-off debts they collect, including: the amount owed at charge-off, and the total post-charge-off interest, charges, and fees.

  •    Protection Against “Zombie Debts”: If a collector attempts to collect on a debt for which the statute of limitations has expired, prior to accepting payment, the collector must provide notice that the statute of limitations may be expired and that, if the consumer is sued on such debt, the consumer may be able to prevent a judgment by informing the court that the statute of limitations has expired.

  •    Substantiation of the Debt Allegedly Owed: These regulations establish groundbreaking protections that require a collector to “substantiate” a debt upon a consumer’s request for same, which may be made at any time during the collection process.  This will assist consumers who fail to exercise their right to verification under the 30-day window established by the federal Fair Debt Collection Practices Act.

  •    Written Confirmation of Settlement Agreements: Collectors must provide consumers with written confirmation of any debt settlement agreement, and must also provide written confirmation upon satisfaction of the debt.

  •    Email Communications: Consumers may opt to communicate with collectors via their personal email.  This is intended to reduce harassing phone calls and allow consumers to maintain better records of their communications with the collector.

The new regulations will take effect on March 3, 2015, with the exception of Sections 1.2(b) (disclosure requirements) and 1.4 (substantiation requirements), which take effect on August 30, 2015.  The final regulations are available at: http://www.dfs.ny.gov/legal/regulations/adoptions/dfsf23t.pdf.  Debt collectors who collect in the state of New York should examine the new regulations and prepare compliance plans to meet the new requirements.

For more information on the new regulations and/or compliance recommendations, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com

Federal Court Determines Voicemail Message and Return Phone Call with an Unintended Recipient Not in Violation of FDCPA

A federal court in New York recently decided that a voicemail message stating that the call was from a debt collector where the voicemail message’s intended recipient was disclosed to a third party who returned the call was not a violation of the Fair Debt Collection Practices Act (“FDCPA”).  In Abraham Zweigenhaft v. Receivables Performance Management, LLC, RPM left the following voicemail message:  “We have an important message from RPM.  This is a call from a debt collector.  Please call 1(866) 212-7408.”  Mr. Zweigenhaft’s son heard the message and returned the call.  He then had the following conversation with the RPM representative: RPM: Thank you for calling Receivables Performance Management on a recorded line. This is Michelle how can I help you?

Caller: Hi how are you? I received a message to call you, and I am just trying to figure out who you are trying to reach.

RPM: Okay and your phone number please, area code first.

Caller: (718) 258-9010

RPM: And is this Abra?

Caller: Is this who?

RPM: Abra Zweigenhaft?

Caller: Nope. It's not.

RPM: Okay let me go ahead and take your phone number off the list. The last four digits again please. 9010 or 7032?

Caller: 9010

RPM: Okay I'll take it off the list. You have a nice day.

Caller: Thank you.

RPM: Uh huh, bye bye.

Zweigenhaft filed suit against RPM alleging that the content of the voicemail message and the phone call together conveyed information regarding the consumer’s debt to a third party, Zweigenhaft’s son, in violation of FDCPA § 1692c(b).  The United States Court for the Eastern District of New York disagreed that this was a violation.  The court recognized the statute’s conflicting provisions.  Debt collectors are required by the FDCPA to meaningfully identify themselves when calling a consumer, but doing so may inevitably convey information about a consumer’s debt, which if overheard by a third party gives rise to consumer arguments that the debt collector violated the FDCPA.  In finding that the communications did not violate the FDCPA, the court stated that if it were to find that the contact was a violation of the FDCPA “would place an undue restriction on an ethical debt collector in light of our society’s common use of communication technology.”

For more information on this topic, contact Joseph Messer at 312-334-3440 or at jmesser@messerstrickler.com or Stephanie Strickler at 312-334-3465 or at sstrickler@messerstrickler.com.


Hang Up That Telephone: The Importance of Training Collectors to Properly Receive Attorney Information

Recently, United States Magistrate Judge David D. Noce created an important teaching moment for collectors in Istre v. Miramed Revenue Group, LLC et al, a case pending in the U.S. District Court for the Eastern District of Missouri. In Istre, after collection attempts, the plaintiff allegedly placed a call to the collection agency to inform it that he had retained counsel regarding his debts. At the beginning of the call, plaintiff told the agency that he had retained counsel. Instead of ending the call, however, the agency allegedly asked, “Why are you having a lawyer involved in this?” and, “So how are you going to go about this?” Only after plaintiff again stated that he had retained counsel regarding his debt did the agency request the attorneys’ contact information, which plaintiff immediately provided.

Upon these alleged facts, plaintiff alleged various violations of the Fair Debt Collection Practices Act, 15 U.S.C. 1692c(a)(2), d, e and f. Defendants filed a motion to dismiss, arguing that by initiating the call, plaintiff consented to the ensuing discussion about his debt. The court, however, agreed with plaintiff that the mere fact that plaintiff initiated the phone call was not conclusive that he thereby consent to the debt collector to the collection attempt. The court further held that without that consent, once notified of legal representation, defendants may only ask for the attorney’s contact information before ending the call. As a result, the court found that plaintiff properly stated a cause of action under 1692c(a)(2), d, and f. However, it granted the motion with respect to 1692e, finding that no misleading statement had been alleged in the complaint.

The decision shows the importance of dissuading collectors from continuing a telephone call after receipt of attorney information. For a full copy of the opinion, see http://scholar.google.com/scholar _case?case=14559722534209738563&q=istre+v.+miramed+revenue+group&hl=en&as_sdt=400006&as_vis=1.

For more information on this subject, and other consumer litigation compliance information, contact Nicole Stricler, 312-334-3442, nstrickler@messerstrickler.com.

Federal Judge Rules One Voicemail Message Is Not Enough to Sustain FDCPA Violation

In Hagler v. Credit World Services, Inc., a federal judge in Kansas decided that a debt collection agency was not in violation of the FDCPA by failing to identify itself as a debt collector in one voicemail message.  The judge explained that multiple calls must be made in order for “harassment” to occur.

Plaintiff was initially contacted by a Credit World Services employee to discuss the outstanding debt.  Plaintiff informed the employee that he would need to call him back.  After waiting about a month with no contact with Plaintiff, Defendant called Plaintiff and left the following voicemail:

“Hi, this message is for Charles.  Please call Bill Jackson at 913-362-3950 when you get a chance. 

 My extension is like 281.  Thank you.”

Plaintiff sued, arguing that Defendant’s voicemail violated several provisions of the FDCPA.  Specifically, Plaintiff alleges Defendant:

•Failed to disclose meaningfully the caller’s identity, in violation of 15 U.S.C. § 1692d(6);

•Failed to disclose that a debt collector had left the voicemail, in violation of 15 U.S.C. § 1692e(11); and

•Used misleading and deceptive language, in violation of 15 U.S.C. § 1692e.

Plaintiff also claimed that the voicemail message was otherwise deceptive and failed to comply with the provisions of the FDCPA.  Plaintiff and Defendant filed cross-motions for summary judgment on all four claims.

The judge agreed with the collection agency on all four counts.  The judge decided that the voicemail message did not provide a “meaningful” disclosure of the employee’s identity as a debt collector under § 1692d(6) as the employee only provided his name, which has no real meaning to the debtor.  The judge explained further that the employee must provide more about himself than his name to be a “meaningful” disclosure.  However, the judge ruled that a violation requires more than just one call.

Because the clear language of § 1692d(6) prohibits the placement of telephone “calls” without meaningful disclosure, the judge did not agree that this single voicemail message violated the FDCPA.  He supported this finding by citing other district courts who also focused on the plural usage of “calls” in the statute.  See Thorne v. Accounts Receivables Mgmt, Inc., 2012 U.S. Dist. LEXIS 109165 (S.D. Fla. July 23, 2012); Jordan v. ER Solutions, Inc., 900 F. Supp. 2d 1323 (S.D. Fla. 2012); Sanford v. Portfolio Recovery Assocs., LLC, 2013 U.S. Dist. LEXIS 103214 (E.D. Mich. May 30, 2013).

The judge also determined that the debt collector was not in violation of the FDCPA for failing to provide the “mini-Miranda” disclosure.  The judge noted that “in order to ‘convey information regarding a debt,’ a message must ‘expressly reference debt’ or the recipient must be able to infer that the message involved a debt.”  Since the employee did not mention the debt in the voicemail message, the judge did not consider it a debt collection communication under the FDCPA.

Finally, the judge disagreed that the message was misleading.  The employee merely left his name, phone number, and requested Plaintiff call him back.  The judge decided that nothing in the message was intended to mislead the Plaintiff.

For more information on this topic, contact Stephanie Strickler at 312-334-3465 or sstrickler@messerstrickler.com.



A class action lawsuit was recently filed in the Northern District of California against the world’s largest web-based professional network, LinkedIn Corp., for alleged violations of the Fair Credit Reporting Act (“FCRA”).  


Tracee Sweet et al. v. LinkedIn Corp.

, Case No. 5:14-cv-04531 (N.D. Cal. Oct. 9, 2014).  The four plaintiffs claim that LinkedIn violated the FCRA “through the use of its reference search functionality, which allows prospective employers, among others, for a subscription fee, to obtain reports containing ‘Trusted References’ for job applicants who are members of LinkedIn.”  By using the “Search for References” feature, prospective employers can access a report containing the names, locations, employment areas, current employers, and current positions of all persons in the user’s network who may have worked with the applicant.  The reference report encourages the prospective employer to contact references by allowing prospective employers to view each reference’s profile; to “connect” with each reference on LinkedIn; and to send each reference a message by “InMail,” LinkedIn’s internal electronic messaging system.  Members of LinkedIn, however, are allegedly not notified when prospective employers run the reference report on them. 

The plaintiffs claim that  LinkedIn violated the FCRA by “(1) fail[ing] to comply with the certification and disclosure requirements mandated by the FCRA for credit reporting agencies who furnish consumer reports for employment purposes, (2) fail[ing] to maintain reasonable procedures to limit the furnishing of consumer reports for the purposes enumerated in the FCRA and to assure maximum possible accuracy of consumer report information, and (3) fail[ing] to provide the users of the reference reports the notices mandated by the FCRA.”  In essence, the plaintiff claim, the reference reports allow any prospective employer to “anonymously dig into the employment history of any LinkedIn member, and make hiring and firing decisions based upon the information they gather, without the knowledge of the member, and without any safeguards in place as to the accuracy of the information.” 

The plaintiffs seek to certify a class of all persons in the U.S. who have had a reference report run on them in the last two years that was initiated through LinkedIn’s “Search for References” feature.  The plaintiffs also propose a subclass of individuals who applied for employment through a LinkedIn job posting in the last two years, whose potential employer ran a reference report initiated through LinkedIn’s “Search for References” feature. 

Importantly, the lawsuit hinges on whether the reference reports constitute consumer reports, which are defined by the FCRA as “any written, oral, or other communications 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 purposes of serving as a factor in establishing the consumer’s eligibility for – [among other things] employment purposes . . . .”  In the event the reference reports are deemed not to constitute consumer reports, the claims would fall outside the purview of the FCRA and the lawsuit should be dismissed. 

For more information on the LinkedIn case and/or the FCRA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

Illinois Attorney General Files Lawsuits Against Scam Student Loan Debt Settlement Companies

In July of this year, Illinois Attorney General, Lisa Madigan, filed lawsuits against two debt settlement companies in connection with student loan scams.  The separate lawsuits, one against Illinois based First American Tax Defense and one against Texas based Broadsword Student Advantage, allege that the companies engaged in deceptive marketing practices and illegally charged student loan borrowers as much as $1,200.00 in upfront fees for bogus services or for government services that are already available at no cost.   Particularly, the lawsuits allege that the debt settlement companies advertised a wide-range of student loan relief services in Illinois, such as the ability to negotiate lower monthly payments, remove wage garnishments, get loans out of default, and secure student loan forgiveness. 

In truth, the defendants lacked any such capability and in fact do little more than complete applications to federal borrower assistance programs that are already available to consumers from the United States Department of Education at no cost.  The Complaints seek inter alia injunctive relief and civil penalties for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, the Credit Services Organizations Act, and the Debt Settlement Consumer Protection Act, which Attorney General Madigan crafted to ban companies from charging upfront fees to consumers seeking debt relief assistance. 

Illinois is suspected to be the first state to bring legal action against debt settlement companies in connection with student loans.  In the past, debt settlement companies targeted those with large credit card debt or mortgage loans.  With more than half of recent graduates either unemployed or working low-paying jobs, however, debt settlement companies have found a new group of consumers to target. 

Student loans are the biggest source of consumer debt after mortgages.  American student loan debt currently exceeds $1 trillion dollars, with an estimated seven million Americans already in default on $100 billion in student loans and tens of thousands of additional borrowers defaulting each month.  Even before Illinois brought its lawsuits, the Federal Trade Commission was inundated with hundreds of thousands of complaints from consumers regarding debt settlement companies.  Consequently, it likely won’t be too long before we see other states following Madigan’s lead and bringing claims against debt settlement companies operating student loan scams in their respective states. 

For more information on the aforementioned complaints and/or the Illinois Consumer Fraud and Deceptive Business Practices Act, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.  

Third Circuit Holds CRAs’ Compliance with the HEA Not Furnisher’s Concern

The Third Circuit recently considered for the first time the interplay between the Fair Credit Reporting Act (“FCRA”) and the Higher Education Act of 1965 (“HEA”), with respect to the responsibilities of an institution of higher education that furnishes information on student loan indebtedness to a consumer reporting agency (“CRA”).  In Seamans v. Temple University, Case No. 12-4298, plaintiff-debtor appealed an order of the United States District Court for the Eastern District of Pennsylvania, which granted summary judgment to defendant, Temple University, on plaintiff’s claims for negligent and willful violations of the FCRA.  In Seamans, the plaintiff argued that the defendant provided incomplete and misleading information to CRAs regarding an education loan when it never provided the CRAs with the collection history and date of delinquency of the loan.  The Third Circuit reversed the lower court’s decision, holding that furnishers of consumer credit data remain obligated to report fully and accurately under the FCRA regarding the collection history and date of delinquency for even an HEA-qualifying education loan. 

To protect consumersfrom having their credit forever impaired by aging debts, CRAs are precluded from reporting accounts which have been “placed for collection” or “charged to profit and loss” more than seven years prior to the report. See 15 U.S.C. § 1681c(a)(4).  When a furnisher provides information to a CRA regarding an account placed for collection or charged to profit or loss, the furnisher then has 90 days in which to notify the CRA of the account’s “date of delinquency,” which is defined as “the month and year of the commencement of the delinquency on the account that immediately preceded the action.”  See § 1681s-2(a)(5)(A).  The date of delinquency enables the CRA to calculate the seven-year window for “aging-off” purposes—without it, the CRA would be unable todetermine when the account had been placed for collection, rendering the “aging-off” date impossible to calculate.  The HEA, however, contains a provision that instructs CRAs to disregard the FCRA’s “aging-off” provisions when reporting data on certain federally backed education loans.  See 20 U.S.C. § 1087cc(c)(3). 

Defendant argued that by simply omitting from its report all facts that could trigger the “aging-off” provisions, it was helping the CRAs comply with the HEA and, in practice, furthering the congressional intent to prevent unpaid student loans from “aging off” credit reports.  The Third Circuit disagreed, finding that the question of whether a particular loan should or should not “age off” a credit report was the CRAs’ statutory concern, not an excuse for furnishers to report loan information in an incomplete or inaccurate manner. 

Although furnishers, such as the defendant in Seamans, are obligated to provide complete and accurate information to CRAs, the FCRA explicitly precludes private suits for failure to comply with that statutory duty and instead provides for enforcement of that provision by federal and state officials.  See 15 U.S.C. § 1681s-2(a), (c), (d).  Accordingly, the plaintiff’s claims in Seamans were limited to those which occurred after defendant was informed of plaintiff’s dispute of the information.

For more information on the Third Circuit decision or furnishers’ duties under the FCRA, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.



In a recent Fair Credit Reporting Act (“FCRA”) case, Mohammad Babar v. Screening Reports, Inc., the U.S. District Court for the District of New Jersey granted defendant, Screening Reports, Inc.’s, motion for judgment on the pleadings, dismissing plaintiff’s complaint with prejudice.   Joseph Messer & Katherine Olson of Messer Strickler, Ltd. represented Screening Reports, Inc., with the assistance of local counsel. 

In the lawsuit, plaintiff sought to recover from Screening Reports, Inc., for a willful violation of Section 1681e(b) of the FCRA, which provides that “[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.”  To prove a willful violation of Section 1681e(b), a plaintiff must establish, among other things, that the defendant prepared a report which was inaccurate.  Plaintiff alleged that defendant inaccurately reported an “eviction record match” on his credit report.  Plaintiff admitted that he was involved in the eviction action but alleged that he was never evicted because the action was dismissed without prejudice. 

Screening Reports, Inc. moved pursuant to Federal Rule of Civil Procedure 12(c) for judgment on the pleadings arguing that it could not be found liable under Section 1681e(b) because it provided an accurate report.  The Court reviewed the report, which defendant had attached to its Answer to the Complaint, and found that judgment on the pleadings was warranted.  Specifically, the Court relied on the report’s decision detail, which required any and all eviction actions filed against the plaintiff in the past 84 months be reported.  Accordingly, the plaintiff need not have been actually evicted for an eviction action to appear on his report.  Importantly, the Court also found that the eviction action was captioned in the report as “DSM W/O PR 1-5-12.”   The Court held that with this caption, the report clarified that while an eviction proceeding was filed against plaintiff, it was dismissed without prejudice.   As the plaintiff admitted that the eviction action was filed against him and dismissed without prejudice, the report was accurate.  Because the report was accurate, Plaintiff could not establish a violation of § 1681e(b), and the Court dismissed the complaint with prejudice.

For more information on this case or assistance in defending an FCRA claim, contact Joseph Messer at (312) 334-3440 or Katherine Olson at (312) 334-3444.  

Credit Reporting Agencies May Be Affected by SECURE Act Amendments to FCRA

Earlier this month, U.S. Senators Sherrod Brown (D-OH) and Brian Schatz (D-HI) held a news conference where they discussed their proposed legislation intended to protect consumers from inaccurate credit reports and credit scores.  The Senators’ legislation, Stop Errors in Credit Use and Reporting (SECURE) Act of 2014, will be introduced after Consumers Union releases a new report addressing credit report errors that affect 40 million of U.S. citizens. 

Under the Fair Credit Reporting Act (“FCRA”) (15 U.S.C. 1681 et seq.), credit reporting agencies (“CRAs”) are required to “Follow reasonable procedures to assure maximum possible accuracy” of information contained in credit reports.  Senators Brown and Schatz contend that many reports still contain many errors that can be prevented.  In fact, in a 2013 report the Federal Trade Commission (“FTC”) found that one in five consumers has an error on at least one of their credit reports.  Those errors were significant enough to impact the credit scores of half of those consumers.

Senator Schatz commented on the legislation: “Errors in a credit report can make the difference between whether someone can live the American Dream and buy a home or even get a job…  Our legislation will make credit reports more accurate, help people to correct any mistakes, give federal agencies more tools to enforce the law, and hold reporting agencies and data furnisher accountable for their mistakes.”

The SECURE Act proposes changes for credit reporting agencies intended to:

1)      Make credit reports more accurate from the beginning;

2)      Ensure that consumers are heard when they dispute information in their credit report;

3)      Provide consumers with a free, meaningful credit score once a year;

4)      Require CRAs and data furnishers to conduct meaningful investigations when consumers file disputes;

5)      Provide additional tools to agencies to adequately regulate and supervise creditreporting agencies; and

6)      Give consumers better legal tools to enforce their rights under the FCRA.

The SECURE Act would provide increased requirements on CRAs and data furnishers:

-          Requires CRAs to pass along documentation sent by consumers to data furnishers and requires data furnishers to consumer the documentation in their re-investigation;

-          Prevents CRAs from ignoring new or additional information provided by a consumer that is relevant to an on-going dispute;

-          Requires CRAs to gather report information on disputesand their resolution;

-          Directs the Consumer Financial Protection Bureau (“CFPB”) to establish minimum procedures that a CRA must follow to ensure maximum possible accuracy of consumer reports.

Among the amendments to the FCRA is section 612, where, among other changes, subsection (b) will be stricken and the following will be inserted:

(b)Free Disclosure After Notice of Adverse Action or Offer of Credit on Materially Less Favorable Terms.—

“(1) In general.—Not later than 14 days after the date on which a consumer reporting agency received a notification under subsection (a)(2) or (h)(6) or section 615, or from a debt collection agency affiliated with the consumer reporting agency, the consumer reporting agency shall make, without charge to the consumer, all disclosures required in accordance with the rules prescribed by the Bureau under section 609(h).

The SECURE Act is also intended to provide:

More disclosures to consumers:

1)      Provides consumers with access to meaningful credit scores free of charge annually; and

2)      Ensures that consumers get the information they need to understand their credit reports by enabling consumers to identify and correct errors on their report, understand how their credit report is being used and by whom, and see the same information that is used by lenders to deny a consumer credit or increase interest rates.

Legal redress:

1)      Holds CRAs accountable to the FTC for negligent violations of the FCRA; and

2)      Provides for injunctive relief as a remedy for consumers who sue CRAs under the FCRA.

Regulatory reforms:

1)      Creates a national registry of CRAs to provide consumers with opportunity to know which companies are collecting and disseminating information about them; and

2)      Directs the Government Accountability Office to conduct a study of existing public credit reporting systems and evaluate the feasibility, costs and benefits of creating a national credit reporting system in the U.S.

For more questions regarding the SECURE Act and the FCRA in general, you may contact Joseph Messer at (312) 334-3440, or at jmesser@messerstrickler.com.

New Disclosure Requirement for Out-of-Statute Debts in West Virginia

New changes to the West Virginia Code will require debt collectors to update any collection notices that will be sent to West Virginia consumers on out-of-statute debts (i.e., debts beyond the statute of limitations for filing a legal action for collection).  2014 H.B. 4360, a recently enacted bill, amends and reenacts §46A-2-128 of the Code of West Virginia relating to consumer credit protection, and specifically to unfair and unconscionable means to collect a debt.

Effective June 6, 2014, the new legislation will require debt collectors pursuing out-of-statute debts to inform consumers in their initial written communication that the creditor or collector cannot report the debt to the credit reporting agencies as unpaid and cannot sue for it.  Below is an excerpt with the required disclosure language (emphasis added):

(1)When collecting on a debt that is not past the date for obsolescence provided for in Section 605(a) of the Fair Credit Reporting Act, 15 U.S.C. 1681c:

“The law limits how long you can be sued on a debt.  Because of the age of your debt, (INSERT OWNER NAME) cannot sue for it.  If you do not pay the debt, (INSERT OWNER NAME) may report or continue to report it to the credit reporting agencies as unpaid”; and

(2) When collecting on debt that is past the date for obsolescence provided for in Section 605(a) of the Fair Credit Reporting Act, 15 U.S.C. 1681c:

“The law limits how long you can be sued on a debt.  Because of the age of your debt, (INSERT OWNER NAME) cannot sue you for it and (INSERT OWNER NAME) cannot report it to any credit reporting agencies.”

The bill also reinstates that no debt collector may use unfair or unconscionable means to collect or attempt to collect any debt.  Besides not including the necessary disclosures stated above, the following conduct will also violate §46A-2-128 of the Code of West Virginia:

-          Seeking or obtaining any written statement in any form that specifies that a consumer’s obligation is incurred for necessaries of life if this obligation was not incurred for such necessaries;

-          Seeking or obtaining any written statement in any form containing an affirmation of any obligation by a consumer who has been declared bankrupt, unless the nature and consequences of such affirmation are disclosed, as well as the fact that the consumer is not legally obligated to make such affirmation;

-          Collection or attempt to collect any interest or other charge, fee or expense incidental to the principal obligation unless they are authorized by the agreement creating the obligation and by statute;

-          Any communication with a consumer whenever they are appeared to be or are represented by an attorney unless the attorney fails to return calls or answer correspondence;

-          Collection or attempt to collect from the consumer debt collector’s fee or charge for services rendered (see restrictions in the 2014 H.B. 4360 bill).

For more information on this new legislation, the Code of West Virginia or fair debt collection statutes for other states, you may contact Joseph Messer at jmesser@messerstrickler.com or at (312) 334-3440 or Stephanie Strickler at sstrickler@messerstrickler.com or at (312) 334-3465.

Don’t Just Delete! CFPB Reminds Furnishers to Properly Investigate Disputes

Recently, the Consumer Financial Protection Bureau (“CFPB”) issued a bulletin to highlight the obligations that debt buyers, debt collectors and others who furnish information to credit reporting agencies (“CRAs”) have under the Fair Credit Reporting Act (“FCRA”) to investigate disputed information in a consumer report. 

Interestingly, one of the main concerns echoed by the CFPB is the practice of merely deleting a line item on a report in lieu of conducting an investigation. Proper investigations of disputes, according to the CFPB, are important because they provide critical checks on the accuracy of furnished information.  Investigations prompt a furnisher to reconsider information that a consumer has identified as incorrect, a process that not only helps the individual consumer at issue but also help furnishers identify systematic problems in their system. If a furnisher’s practice is merely to delete disputed entries instead of conducting an investigation, consumers are denied the full protections of the FCRA. For example, furnishers must provide notice of information found to be inaccurate to all consumer reporting agencies to which it reports. If a furnisher did not conduct an investigation, it may not provide this notice to all credit reporting agencies. Thus, furnishers should not assume that deleting an item will generally constitute a reasonable investigation.

The CFPB has been and will continue to monitor furnishers’ compliance with the FCRA and other federal consumer financial laws and regulations, especially regarding consumer disputes of information they have furnished to CRAs.  As a result, it is important to ensure that your organization is following the CFPB’s established protocol in handling disputes. For more information on the FCRA and CFPB’s enforcement and supervisory actions, contact Nicole Strickler at (312) 334-3442 or at nstrickler@messerstrickler.com.

Another $3.5 Million Penalty for FCRA Violations

In early 2014, the Federal Trade Commission (“FTC”) brought a complaint against one of the largest check authorization service companies in the nation, TeleCheck Services, Inc. (“TeleCheck”), and its associated debt collection entity for FCRA violations.  TeleCheck and the collection agency agreed to pay $3.5 million to settle the case.

TeleCheck is a Texas consumer reporting agency (“CRA”) that compiles consumers’ personal information and supplies it to U.S. retail merchants to aid them in their determination of whether to accept consumers’ checks.  Under the FCRA, consumers have the right to dispute the information TeleCheck provides to the merchants and have TeleCheck investigate and correct any inaccuracies if their checks were denied based on the information provided by TeleCheck.

The FTC alleged in its complaint that TeleCheck failed to follow reasonable procedures to assure maximum accuracy of the information it provided to its merchant clients and failed to timely correct mistakes in consumers’ reports.  The FTC also alleged that TeleCheck did not follow proper dispute procedures and even refused to investigate disputes. 

The complaint also included allegations against the associated collection agency, which provided information about consumers to TeleCheck.  The FTC alleged that the collection agency violated the requirements of the FTC’s Furnisher Rule, which requires entities supplying information to CRAs to ensure the accuracy of the information provided. 

TeleCheck and the associated collection agency stipulated to change their business practices going forward to comply with the FCRA requirements and the Furnisher Rule.  The stipulated payment of $3.5 million is one of the largest ever resulting from an FTC filed FCRA complaint.  Another check authorization company, Certegy Check Services, Inc., was charged with a $3.5 million fine for similar allegations earlier this year.  These cases are a part of FTC’s initiative to target practices of data brokers which help companies make decisions about consumers, such as their ability to pay for essential goods and services by check.  As Jessica Rich, the Director of FTC’s Bureau of Consumer protection commented: “If CRAs like TeleCheck provide merchants with inaccurate information, those merchants may wrongly deny consumers the ability to buy even the most essential items, like food and medicine.”

For more information about these cases or FCRA policies and regulations, please contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

C.D. of California Rules Law Firm’s Debt Collection Letter Did Not Misrepresent Attorney Involvement or Threaten Legal Action

On January 23, 2014 the U.S. District Court for the Central District of California issued an order granting Defendants’ motion to dismiss  in an FDCPA case captioned John Kermani v. Law Office of Joe Pezzuto, LLC; Joseph James Pezzuto II.  Importantly, the court dismissed Plaintiff’s claim with prejudice.  Nicole Strickler of Messer Strickler, Ltd. represented the Defendants.

The following facts were taken from Plaintiff’s complaint which the Court accepted as true for purposes of deciding the motion to dismiss.  Plaintiff’s complaint arose out of his alleged receipt of a single dunning notice sent by a Law Office on a debt incurred by Plaintiff to Bank of America, N.A.  Allegedly, the Law Office sent a dunning letter stating that Bank of America was the creditor and included the account number and current balance of the debt.  The Plaintiff alleged that the dunning letter was printed on the Law Office’s letterhead and contained the following disclaimers: “At this time no attorney with our law firm has personally reviewed the particular circumstances of your account”, and “BE ADVISED THIS IS AN ATTEMPT TO COLLECT A DEBT BY A DEBT COLLECTOR.”  In addition, Plaintiff alleged that the Law Office twice obtained Plaintiff’s consumer report from TransUnion, a consumer reporting agency.

Plaintiff alleged that Defendants violated (1) the Fair Credit Reporting Act (“FCRA”) and the Consumer Credit Reporting Agencies Act (“CCRAA”) by obtaining Plaintiff’s report without a permissible purpose, and (2) the Fair Debt Collections Practices Act (“FDCPA”) and Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act”) by falsely implying the dunning letter came from an attorney, thus misleading Plaintiff to believe Defendants had been retained for legal action; falsely representing the character of a debt; and threatening to communicate false credit information.


FCRA and CCRAA Claims:

Plaintiff alleged that the Law Office violated the FCRA and the parallel California statute, the CCRAA, by obtaining his consumer report without a permissible purpose.  The FCRA prohibits a person from obtaining a credit report for purposes not specified in 15 U.S.C. § 1681b.  One such purpose, however, is using “the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the … collection of an account of [] the consumer.”  15 U.S.C. § 1681b(a)(3)(A).  Plaintiff alleged that the Law Office lacked a permissible purpose because he was not involved with any credit transaction with the Law Office.  The Judge quickly dismissed this argument as the FCRA and CCRAA do not limit permissible purposes to situations where consumers have “direct dealings” with debt collectors.  Pyle v. First Nat’l Collection Bureau, No. 1:12-CV-00288-AWI, 2012 WL 5464357m at *3 (E.D. Cal. Nov. 8, 2012).  The relevant inquiry is whether the debtor was involved in a credit transaction with the creditor, not the collection agency.  Therefore, the Law Office had a permissible purpose for obtaining Plaintiff's credit report.

FDCPA and Rosenthal Act Claims:

Plaintiff also alleged various violations of the FDCPA and the parallel California statute, the Rosenthal Act.  Many of Plaintiff’s claims were unsupported with facts and were quickly dismissed as failing to state a claim.  The most interesting finding of the Court’s decision involved Plaintiff's claims under FDCPA §1692e(3) and e(5).  Under §1692e(3) a debt collector is prohibited from falsely representing that “any individual is an attorney or that any communication is from an attorney.”  Likewise, §1692e(5) prohibits debt collectors from threatening “to take any legal action that cannot legally be taken or that is not intended to be taken.  The Plaintiff alleged that the Law Office misrepresented that the dunning letter came from an attorney in violation of §1692e(3).  The Plaintiff also alleged that the dunning letter misled him to believe that the Law Office had been “retained for legal action” against him by stating that “[t]his office has been retained to collect the debt owed by you.” 

The Court specifically found that the dunning letter did not give the misimpression that an attorney was involved in the collection of a debt, or that it threatened legal action.  First, the Plaintiff alleged no facts to support that the dunning letter was written by a non-attorney.  Conversely, Plaintiff alleged that Mr. Pezzuto is an attorney.  Second, the Court stated that “[t]he disclaimer that ‘no attorney with our law firm has personally reviewed the particular circumstances of your account,’ does not support the allegation that a non-attorney wrote the letter, rather, the statement creates a presumption of some minimal level of attorney involvement.”  Therefore, the dunning letter did not give the misimpression that an attorney was involved in the collection of the debt, and was not in violation of §1692e(3).

Likewise, the Court found that the dunning letter did not threaten legal action.  In fact, the language of the letter informed Plaintiff that the Law Office was “retained to collect the debt against” him, with no reference to possible litigation.  Additionally, the letter states, “[a]t this time, no attorney with our law firm has personally reviewed the particular circumstances of your account.”  The Court found that no language in the letter refers to litigation or suggests any purpose for the letter other than to collect a debt.  Therefore, the letter was not in violation of §1692e(5).

If you need assistance with reviewing or rewriting your dunning letter, contact Nicole Strickler at (312) 334-3442 or by e-mailing nstrickler@messerstrickler.com.