EDITORS by wuyunqing


									            FCRA NEWSLETTER • January 25, 2010 • STRASBURGER & PRICE, LLP

The Strasburger FCRA Newsletter is   Court Dismisses Consumer’s FCRA Claim Based on
designed to keep you current on      Res Judicata
FCRA-related legal issues and        Vinton v. Certegy Check Servs., 2009 U.S. Dist. LEXIS
events. For more frequent updates,   119154 (W.D. Mich. Dec. 22, 2009)
see our blog at the FCRA Blog.
                                     Facts: In September 2008, Plaintiff filed suit against
                                     Defendant Certegy Check Services, Inc. (“Certegy”) and
         PREPARED BY                 Defendant Fidelity National Information Services, Inc.
                                     (“Fidelity”), alleging that a senior database administrator
                                     at Certegy stole her confidential information and sold it to
                                     a third party for marketing purposes and that Defendants
                                     violated the FTC privacy rules, 16 C.F.R. § 313, et seq.
                                     Defendants filed a motion to dismiss for failure to state a
                                     claim, which the Court granted. Then, on October 5,
                                     2009, Plaintiff filed the instant action, alleging facts
                                     identical to those alleged in her first lawsuit and naming
                                     the same Defendants. Plaintiff alleged violations of the
                                     Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq.
           Paul L. Myers             (“FCRA”), and pendent state-law claims against
   paul.myers@strasburger.com        Defendants under the Michigan Consumer Protection Act,
   2801 Network Blvd., Suite 600     MICH. COMP. LAWS § 445.901, et seq. (“MCPA”), and
         Frisco, TX 75034            the Michigan Identity Theft Protection Act, MICH. COMP.
          (469) 287-3903             LAWS § 445.61, et seq. (“MIPTA”). Defendants moved to
                                     dismiss for failure to state a claim on the basis of res
                                     judicata, which the Court granted.
                                        •   Res Judicata.        The four elements for the
         Erik J. Grohmann                   application of res judicata are: (1) a final decision
                                            on the merits in the first action by a court of
          Tiffany L. Cox
                                            competent jurisdiction; (2) a subsequent action
         Marc F. Kirkland                   between the same parties or their privies; (3) the
                                            subsequent action raises issues actually litigated
           Paul L. Myers
                                            or which should have been litigated in the first
          M. Kasey Ratliff                  action; and (4) an identity of the causes of action
         Paul W. Sheldon                    in the first and second actions.

      Martin E. Thornthwaite            •   Res Judicata. The doctrine of res judicata
                                            applied to Plaintiff’s second lawsuit against
                                            Defendants because Plaintiff should have litigated
                                            the FCRA, MCPA, and MITPA claims in her first
         Subscribe: RSS Feed                lawsuit against Defendants. The claim asserted in
                                            . . . continued on next page.
             FCRA NEWSLETTER • January 25, 2010 • STRASBURGER & PRICE, LLP

Continued from Page 1
       Plaintiff’s first lawsuit and the FCRA, MCPA, and MITPA claims asserted in the instant
       lawsuit arose out of the same transaction or series of transactions and the same core of
       operative facts.

Court Denies CRA’s Motion for Summary Judgment Finding that Default Judgment
Against Creditor Created Question for Jury Regarding CRA’s Reinvestigation
Pourfard v. Equifax Info. Servs. LLC, 2010 U.S. Dist. LEXIS 1236 (D. Or. Jan. 5, 2010)
Facts: Plaintiff brought FCRA, Fair Debt Collection Practices Act (“FDCPA”) and Oregon
Unlawful Debt Collection claims against Sprint, AFNI, Inc. (Sprint’s debt collector), and Equifax
regarding Plaintiff’s mobile phone account. Plaintiff claimed that Sprint incorrectly charged him
for phone service. Plaintiff disputed the account on several occasions with Equifax and even
obtained a judgment in small claims court against Sprint. This judgment was provided to Equifax
with one of Plaintiff’s disputes, but the account was verified by the furnisher. Equifax moved for
summary judgment claiming that it complied with its obligations under the FCRA. The Court
denied the motion.
   •   Accuracy. Equifax first argued that Plaintiff’s FCRA claims fail as a matter of law
       because Plaintiff did not present evidence that Equifax reported inaccurate information.
       However, Plaintiff asserted that the default judgment he received against Sprint in small
       claims court established the inaccuracy of the account. The Court agreed because a
       default judgment conclusively establishes the truth of all material allegations that are
       contained in a complaint and every fact necessary to uphold the default judgment. The
       default judgment verified Plaintiff’s material allegations and established that the amount
       reported by AFNI was inaccurate. Therefore, Plaintiff established an inaccuracy in his
       credit report as required by §§ 1681e and 1681i.
   •   Reasonableness of the Reinvestigation. Equifax next argued that it is unreasonable
       to expect that it should have been able to resolve Plaintiff’s dispute with AFNI, when
       Plaintiff was unable to do so. The Court disagreed and found that the FCRA places the
       burden of investigations squarely on the CRA. Because Equifax continued to report the
       Sprint account despite the judgment in favor of Plaintiff the Court found that the
       reasonableness of Equifax’s conduct remained a question for the jury.
   •   Collateral Attack. Equifax also asserted that Plaintiff’s dispute of the AFNI account
       constituted an impermissible collateral attack against the AFNI account as an attempt to
       force Equifax to resolve Plaintiff’s dispute with AFNI for him. Equifax relied on a line of
       cases precluding a collateral attack on a disputed account when there remains a legal
       question that could not have been answered by the CRA through a reasonable
       investigation. The Court disagreed and found that the default judgment established that
       Sprint wrongfully billed Plaintiff for the phones and phone services and Equifax’s
       continued reporting of the account created grounds for an FCRA claim.
   •   Business Damages. Equifax argued that Plaintiff could not recover damages related to
       cancellation of a business credit card account. The Court disagreed citing to a recent
       Ninth Circuit opinion, Dennis v. BEH-1, LLC, 520 F.3d 1066, 1069 (9th Cir. 2008), that

             FCRA NEWSLETTER • January 25, 2010 • STRASBURGER & PRICE, LLP

       held that the denial of credit for a consumer to start a business venture was in part
       grounds for actual damages under the FCRA.
   •   Punitive Damages. Punitive damages are only available under the FCRA for willful
       violations of the statute. Willful violations of the FCRA include those violations
       committed with reckless disregard for FCRA duties. The Court found that a reasonable
       juror could conclude that the alleged violations here were willful.

Credit Report Used for Commercial Purpose Is Not A “Consumer Report” Under the
Velez-Colon v. Caribbean Produce Exch., Inc., 2009 U.S. Dist. LEXIS 114169 (D. P.R. Dec.
8, 2009)
Facts: Plaintiff sued Defendant Caribbean Produce Exchange, Inc. (“CPE”) alleging that it
violated the FCRA by obtaining Plaintiff’s credit report under false pretenses and without a
permissible purpose. Plaintiff filled out an application for commercial credit on behalf of
Hidrocultivos, Inc. for the sole purpose of obtaining credit for Hidrocultivos, Inc. CPE filed a
motion for summary judgment, claiming that Plaintiff’s credit report was not a “consumer report”
as defined by the FCRA. CPE alternatively pled that if Plaintiff’s credit report was covered by
the FCRA, it was furnished for a “legitimate business need” under § 1681b(a)(3)(F) and,
therefore, the suit should be dismissed as a matter of law. The Court agreed and dismissed
Plaintiff’s claims.
   •   Consumer Report. The FCRA defines a “consumer report” as any written, oral, or other
       communication of any information by a consumer reporting agency (“CRA”) bearing on a
       consumer’s credit worthiness, credit standing, credit capacity, character, general
       reputation, personal characteristics, or mode of living which is used for the sole purpose
       of serving as a factor in establishing the consumer’s eligibility for credit or insurance
       purposes, employment purposes, or any other purpose authorized under § 1681b.
   •   Consumer Report. Regardless of the intended use of the credit report, it will be
       considered a consumer report within the meaning of the FCRA if the information
       obtained therein was collected for a consumer purpose. Accordingly, even if the credit
       report is used for a non-consumer purpose, it may still fall within the definition of a
       consumer report if it contains information that was originally collected by a CRA with the
       expectation that it would be used for a “consumer purpose.”
   •   Permissible Purpose. A party may obtain a credit report if it otherwise has a legitimate
       business need for the information in connection with a business transaction that is
       initiated by the consumer. Courts have held that the terms “legitimate business need”
       and “in connection with” refer to the needs and objectives of the individual to whom the
       report is furnished, not the needs of the person about whom the report is furnished.
   •   Consumer Report. It is well established that consumer reports issued for commercial,
       business or professional purposes are outside the scope of the FCRA. Accordingly,
       credit reports obtained in connection with applications for commercial credit are not
       “consumer reports” under the FCRA.

             FCRA NEWSLETTER • January 25, 2010 • STRASBURGER & PRICE, LLP

Court Dismisses FACTA Suit Because E-Mail Order Confirmations Are Not Covered
Shlahtichman v. 1-800 Contacts, Inc., 2009 U.S. Dist. LEXIS 112379 (N.D. Ill. Dec. 2, 2009)
Facts: Plaintiff alleged that Defendant violated the Fair and Accurate Credit Transactions Act
(“FACTA”) by showing his credit card’s expiration date on a computer generated receipt sent to
his e-mail account. Defendant filed a motion to dismiss based on Plaintiff’s alleged failure to
state a claim upon which relief could be granted. The Court agreed that FACTA did not apply
and dismissed the lawsuit.
   •   FACTA. Pursuant to § 1681c(g), businesses are prohibited from electronically printing
       receipts that contain more than the last five digits of a consumer’s credit or debit card
       number or the expiration date of the credit or debit card. The Court found that e-mail
       order confirmations are not entitled to FACTA protection because (1) “e-mail order
       confirmations are not ‘electronically printed’ receipts” and (2) “an e-mail order
       confirmation is not provided ‘at the point of the sale or transaction.’”

Furnisher Successfully Moves to Dismiss § 1681s-2(b) and Massachusetts State Law
Claims in Alleged Identity Theft Case
Catanzaro v. Experian Info. Solutions. Inc., 2009 U.S. Dist. LEXIS 112356 (D. Mass. Dec. 1,
Facts: Plaintiff brought suit against Verizon, Trans Union, and Experian alleging violations of
the FCRA, Massachusetts Consumer Protection Act, and FDCPA for alleged misconduct in
furnishing and reporting erroneous credit information. Believing she was an identity theft victim,
Plaintiff claimed that two Verizon accounts were improperly appearing on her credit file, and
remained so despite numerous disputes to both the CRAs and Verizon. Verizon filed a Motion
to Dismiss, which the Court granted.
   •   Furnisher Investigation. Verizon correctly argued that notification by a CRA to the
       furnisher is a prerequisite for liability under § 1681s-2(b)(1). Plaintiff failed to state that
       either CRA notified Verizon that her account was in dispute. Because notification by a
       CRA is an essential element of Plaintiff’s FCRA claim, the Court found that Plaintiff’s
       amended complaint, as written, failed to state a claim under § 1681s-2(b)(1).
   •   Preemption. Section 1681t(b)(1)(F) expressly preempts all state laws covered by
       § 1681s-2. However, Massachusetts General Law § 54A(a), requiring furnishers to
       follow reasonable procedures to ensure accurate and complete reporting to CRAs, is
       one of two state statutory provisions that is expressly excluded from the FCRA’s
       preemption provision. While the FCRA exempts § 54A(a) from its preemptive reach, it
       includes no such specific exemption for § 54A(g), the Act’s enforcement mechanism,
       which creates a private cause of action for violations of the related state statute.
       Accordingly, in order for Plaintiff to bring a civil action to privately enforce Verizon’s
       alleged violation of § 54A(a), the exception to preemption must also apply to § 54A(g).
       The Court found that a plain meaning of interpretation of § 1681t(b)(1)(F) supports the
       finding that § 54A(g) it is not preempted by the FCRA.

             FCRA NEWSLETTER • January 25, 2010 • STRASBURGER & PRICE, LLP

Plaintiff’s TILA and FCRA Claims Against Mortgage Company Dismissed for Failure to
State Claim
Sparks v. M & T Bank, 2009 U.S. Dist. LEXIS 111474 ( E.D. Mich. Dec. 1, 2009)
Facts: Plaintiff alleged various causes of action against Defendant M & T Bank, arising out of
his mortgage with Defendant, including violations of the Home Ownership and Equity Protection
Act ("HOEPA"), and the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq., the FCRA, 15
U.S.C. § 1681, et seq., and claims of predatory lending, fraudulent misrepresentation, and
defamation. Defendant filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)
for failure to state a claim, which the Court granted.
   •   Limitations. Under 15 U.S.C. § 1640(e), there is a one-year statute of limitations for
       violations of HOEPA and TILA. A violation occurs when the loan agreement is signed.
   •   Limitations. In cases of fraudulent concealment, the statute of limitations can be tolled
       when the plaintiff demonstrates that: (1) the defendant took affirmative steps to conceal
       the plaintiff's cause of action; and (2) the plaintiff could not have discovered the cause of
       action despite exercising due diligence. In this case, Plaintiff’s allegations concerned
       Defendant’s conduct in extending the loan at the time it was signed and did not allege
       specific acts of fraudulent concealment sufficient to equitably toll the one-year limitations
       period for violations of HOEPA and TILA.
   •   Fraud. In alleging fraud or mistake, Rule 9(b) requires a party to state with particularity
       the circumstances constituting fraud or mistake. At a minimum, the Sixth Circuit requires
       a plaintiff to allege the time, place, and content of the alleged misrepresentation on
       which he or she relied; the fraudulent scheme; the fraudulent intent of the defendant;
       and the injury resulting from the fraud. In this case, Plaintiff's complaint did not contain
       allegations concerning the time and place of the alleged misrepresentations. Plaintiff
       could not merely recite a statute, claim it had been violated, and expect to survive a
       motion to dismiss.
   •   Predatory Lending. Michigan does not recognize a common law claim of predatory
   •   Preemption. A common law claim of defamation is preempted under § 1681h(e).
   •   Furnisher Duties. Plaintiff failed to state a claim under § 1681s-2(a), which requires
       furnishers to provide accurate information regarding consumers to CRAs, because the
       provision does not create a private cause of action.
   •   Furnisher Duties. Plaintiff also failed to state a claim under § 1681s-2(b), which
       requires furnishers to conduct a reasonable investigation upon notification of a dispute
       from a CRA. Plaintiff's complaint did not allege that Defendant either received a dispute
       from a CRA or that Defendant failed to adequately investigate the dispute.

             FCRA NEWSLETTER • January 25, 2010 • STRASBURGER & PRICE, LLP

Defendant had a Permissible Purpose to Obtain Plaintiff’s Credit Report During Debt
Collection Litigation
Weitz v. Wagner, 2009 U.S. Dist. LEXIS 110220 (E.D.N.Y. Nov. 24, 2009)
Facts: Plaintiff contended that Defendant wrongfully accessed Plaintiff’s consumer report
without his permission when Defendant sued Plaintiff in a small claims court action. Defendant
obtained Plaintiff’s consumer report without Plaintiff’s knowledge in order to confirm the monies
Plaintiff owed the Defendant. After a bench trial, the Court found that Defendant had a
permissible purpose because Defendant intended to use the consumer report information in
order to assist in the collection of the debt owed to Defendant by Plaintiff. The Court entered
judgment for the Defendant and dismissed the case.
   •   Permissible Purpose. While Plaintiff claimed Defendant violated § 1681b because
       Defendant obtained Plaintiff’s consumer report without his knowledge or permission,
       Defendant “intended to use the consumer report information in connection with the
       review or collection of an account of the Plaintiff, as permitted by 1681b(a)(3)(A).”
   •   Willfulness. The Court found that even if Defendant did violate the FCRA by obtaining
       Plaintiff’s report, which she did not, Defendant’s action could be based on a reasonable
       reading of the FCRA and would not constitute willful noncompliance.
   •   Damages. Plaintiff’s allegations that Defendant’s pulling of Plaintiff’s consumer report
       contributed to his inability to obtain a loan and poor credit rating was mere speculation.
       The Court noted that Plaintiff had at least 23 other inquires when Defendant obtained
       Plaintiff’s consumer report, and Plaintiff “presented no evidence as to how, if at all, a
       particular inquiry affected his credit score.”
   •   Punitive Damages. Although actual damages are not a prerequisite for punitive
       damages, the Court found no evidence that punitive damages were warranted even if
       Defendant had violated the FCRA.

Court Finds Defendant Furnisher Willfully Failed to Conduct a Reinvestigation of
Plaintiff’s Dispute
Frank v. Global Payment Check Recovery d/b/a Checkrite Servs., 2009 U.S. Dist. LEXIS
105966 (D. Minn. Nov. 12, 2009)
Facts: Plaintiff sued Defendant collection agency under the FCRA after the Defendant
continued to report a paid account as unpaid to CRAs. Plaintiff disputed the account with a
CRA, and Defendant erroneously verified the account as unpaid through automated consumer
dispute verifications (“ACDVs”). After Plaintiff filed suit against Defendant, Plaintiff sent
requests for admission (“RFAs”) to Defendant regarding Defendant’s failure to update the
account as paid and erroneously verifying the account as unpaid. Defendant failed to timely
respond to the RFAs, and they were deemed admitted against Defendant. Thus, summary
judgment was granted against Defendant on Plaintiff’s claim that Defendant willfully failed to
conduct a reinvestigation into Plaintiff’s dispute of the collection account.

             FCRA NEWSLETTER • January 25, 2010 • STRASBURGER & PRICE, LLP

   •   Furnisher Investigation. Pursuant to § 1681s-2, the Defendant must conduct a
       reasonable investigation of its records to determine whether the disputed information
       can be verified. Such an investigation requires “some degree of careful inquiry by
       creditors.” The record showed that Defendant twice received ACDVs regarding the
       collection account at issue and failed to inform the CRA that the account had been paid.
       The Court determined that the deemed admissions against Defendant should not be
       withdrawn because Defendant had failed to show that withdrawal or amendment would
       promote the presentation of the merits of the action.
   •   Willful Violation. As a result, the Court found that Defendant admitted that it willfully
       failed to conduct a reasonable investigation of Plaintiff’s dispute and entered summary
       judgment against Defendant.

No Private Right of Action Exists Under § 1681s-2(a)
Patterson v. Long Beach Mortgage Co., 2009 U.S. Dist. LEXIS 117068 (N.D. Tex. Nov. 9,
Facts: Plaintiff, proceeding as a pro se litigant, claimed that after he executed a series of
promissory notes with Defendant Long Beach Mortgage Company, the successor-in-interest
bank, Washington Mutual, engaged in a series of improper acts. Plaintiff alleged numerous
violations of various federal statutes, including § 1681s-2(a)(1)(A) of the FCRA as well as fifteen
additional common law claims. Defendant filed a motion for summary judgment as to all claims,
which the Court granted in its entirety.
   •   Summary Judgment. A summary judgment non-movant who does not respond to the
       motion is relegated to his unsworn pleadings, which do not constitute summary judgment
       evidence. In addition, the movant’s evidence may be accepted as undisputed.
   •   Pro Se Litigants. Generally, the courts liberally construe the pleadings of a pro se
       litigant. However, the courts have no obligation under Federal Rule of Civil Procedure
       56 to sift through the record in search of evidence to support a party’s opposition to
       summary judgment. Instead, a party opposing summary judgment must identify specific
       evidence in the record that supports the challenged claims, and articulate the precise
       manner in which that evidence supports the challenged claim.
   •   Furnisher Duties. Section 1681s-2(a)(1)(A) of the FCRA provides that a person may
       not furnish any information to any CRA if the person knows or has reasonable cause to
       believe that the information is inaccurate. However, § 1681s-2(d) states that a violation
       of § 1681s-2(a) shall be enforced exclusively by certain federal agencies and federal and
       state officials. The FCRA, therefore, does not create a private right of action for an
       alleged violation of § 1681s-2(a).

                  FCRA NEWSLETTER • January 25, 2010 • STRASBURGER & PRICE, LLP

Plaintiff Alleged Facts Sufficient to State Claims Under the FCRA but Court Dismissed
Request for Injunctive Relief
Williams v. Credit Protection Ass’n, 2009 U.S. Dist. LEXIS 102975 (N.D. Tex. Oct. 21,
2009); Williams v. Credit Protection Ass’n, 2009 U.S. Dist. LEXIS 102912 (N.D. Tex. Nov. 3,
Facts: Defendant CRA filed a motion to dismiss various FCRA claims asserted by Plaintiff.
Plaintiff claimed he notified the CRA that his personal information was allegedly compromised
and that his credit reports contained inaccurate information. Plaintiff claims the CRA failed to
resolve his concerns and that he was denied credit and refinancing opportunities and refused a
checking account. The Magistrate recommended that the CRA’s motion be granted in part and
denied in part. The Court accepted the Magistrate’s findings and conclusions and dismissed
Plaintiff’s claims for injunctive relief but held that Plaintiff sufficiently stated a claim under §§
1681i and 1681e.
    •    Failure to State a Claim. In order to state a claim upon which relief can be granted, the
         Court noted that a complaint need only contain some factual allegation showing an
         entitlement to relief and providing fair notice of the grounds on which the claim rests.
         The Court reasoned that Plaintiff made “some factual allegations” sufficient to state a
         claim under § 1681i in that he claimed to have disputed the accuracy of information
         retained by the CRA, that the CRA failed to conduct a reasonable investigation
         concerning the alleged inaccuracies, that the alleged inaccuracies were not corrected,
         and that Plaintiff alleged damages as a result.
    •    Failure to State a Claim. Under § 1681e, a plaintiff must show that the inaccuracies on
         his credit file resulted from a negligent or willful failure to use reasonable procedures
         when the report was prepared. The Court held that Plaintiff’s complaint alleged enough
         facts to show his right to relief under this section. Plaintiff stated that his personal
         information had been stolen resulting in inaccuracies on his credit file. Plaintiff further
         claimed that the CRA continued to disseminate the inaccurate information despite notice
         from Plaintiff and subscribers of the problems and that as a result,
         Plaintiff was denied credit, refinancing, and a checking account. The Court concluded
         that Plaintiff’s complaint “raises a right to relief above the speculative level and provides
         fair notice of the grounds on which his § 1681e claim rests.
    •    Injunctive Relief. The Court held that the FCRA “does not authorize private litigants to
         seek injunctive relief against CRAs” and dismissed that claim.

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