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Fair Credit Reporting: 16.8.4.2 Reliability During Recessions

Many credit scoring models were developed in booming economic times and there are questions about how predictive they were during economic recessions.382 Several studies, discussed below, have raised questions with respect to home mortgages. Credit scoring models also may have underestimated the effect of the economic slowdowns on credit card borrowers.383 However, FICO claims that its scores perform well in both good economic times and bad.384

Fair Credit Reporting: 16.8.7 Payment Plans; Loan Modifications; Forbearances

Consumers in financial distress will sometimes negotiate a modification of the terms of their loan with their creditors or will receive a forbearance allowing them to pay late or miss payments. Previously, loan modifications had been reported by the creditors using the Special Comment Code “AC”403 that resulted in a lowering of the consumer’s credit score.404

Fair Credit Reporting: 16.9.1 Credit Scoring’s Disparate Impact

As long as there have been credit scores, there have been concerns that scoring systems contain biases that disproportionately impact minorities and other groups protected by credit discrimination laws.428 Numerous studies have found that minorities as a group have lower credit scores than whites.429 They are also more likely not to have credit scores at all, with about 27–28% of African Americans and Latinos lacking a score, versus 16% of whites and Asian Americans.

Fair Credit Reporting: 16.9.2 Other Credit Scoring Gaps

In addition to disparate impact on racial minorities, research indicates that low-income consumers, renters, and other groups have lower credit scores as a group.436 These gaps between “good” and “bad” scorers might also be self-perpetuating, as low credit scores impede economic advancement, which in turn prevents the consumer from a better financial situation that could improve their credit score.437

Fair Credit Reporting: 16.10 Credit Scores and the Consumer Law Practitioner

A frequent question asked by practitioners is how a particular FCRA or other consumer law violation affects a consumer’s credit score. Credit scores sometimes factor into the measure of damages in a case, especially if lower scores resulted in higher rates for credit or insurance.455 Some have argued that a consumer’s credit score is a property right, and thus harm to a credit score alone is a form of damages.

Fair Credit Reporting: 16.12 Credit Scores and Utility Service

Another controversial use of credit scores involves the determination of whether a consumer will receive utility service and have to pay a deposit for such services.482 The use of credit scores by utility companies has been challenged as undermining their common law duty to serve the public and violating the prohibition against consideration of a “collateral” matter in determining whether to provide service.483

Fair Credit Reporting: 11.2.2.1 Generally

Any “person” who fails to comply with any requirement with respect to a consumer may be liable under the FCRA.29 Consumer reporting agencies, users of consumer reports, and those who furnish information to CRAs are liable for violations.

Fair Credit Reporting: 11.2.2.2.1 Introduction

Special care must be taken before suing government defendants. Courts have at times been especially strict in construing terms in the FCRA to preclude application to government agencies (whether federal, state, or local).50 More importantly, government agencies may have sovereign immunity from suit. Government officials may have qualified immunity.51

Fair Credit Reporting: 11.2.2.2.2 Federal agencies

Federal agencies are generally not considered to be CRAs and thus are not subject to the FCRA provisions regulating CRAs.53 But the federal government does act in other capacities regulated by the FCRA, including as a furnisher of data, a user of consumer reports, and a provider of credit card receipts. The FCRA’s definition of “person” explicitly includes “any . . .

Fair Credit Reporting: 11.2.2.2.4 American Indian tribes

Sovereign immunity also protects American Indian tribes, absent a clear and unequivocal abrogation of that tribal immunity by Congress.103 The Seventh Circuit has held that the FACTA amendments to the FCRA did not abrogate that immunity through the FCRA’s definition of a “person” subject to the Act, which includes “any . . . government,” but does not explicitly mention American Indian tribes.104

Fair Credit Reporting: L.1 Introduction

This appendix summarizes the enforcement orders found online as companion material to this treatise that have been secured by law enforcement agencies against consumer reporting agencies (CRAs), resellers, users, furnishers, and identity thieves. The major enforcement orders against the three nationwide CRAs are available online as companion material to this treatise, under “Primary Sources,” as are important examples of the other categories of enforcement orders.

Fair Credit Reporting: 11.2.3.1 Generally

Federal Trade Commission investigations and actions,105 studies,106 and private suits have demonstrated the existence of widespread systematic illegal practices in the consumer reporting industry. Class actions provide a potentially effective tool for ameliorating many such abuses. In addition, it may be easier, or at least more cost-effective, to prove some claims in a class action context, such as showing that a consumer reporting agency’s (CRA’s) procedures are not reasonable.

Fair Credit Reporting: 11.2.3.3.1 Motions to strike class allegations

Motions to strike class allegations prior to discovery “‘are disfavored because a motion for class certification is a more appropriate vehicle’ for argument about class propriety.”115 Nevertheless, courts will generally consider whether there are any clear impediments to class certification on the face of the complaint.

Fair Credit Reporting: 11.2.3.3.2 Damages issues

Whether a court will certify a class often turns on issues relating to damages. Where actual damages are sought, the defendant will argue that the superiority and predominance requirements of Federal Rule of Civil Procedure 23(b)(3)are not met because individual actual damages inquiries would be required for class members who chose to pursue such damages. This contention is generally unsuccessful in FCRA and other class actions.119 In Clark v.

Fair Credit Reporting: 11.2.3.3.3 Possibility of annihilating damages

As with other federal consumer protection statutes, the FCRA imposes no limit on the size of a class action award for actual damages.127 Unlike certain others, including TILA, the FDCPA, and the ECOA, however, it also does not cap the amount of an award of statutory damages in class actions.128 As a result, one issue that sometimes arises under the FCRA but not under these other statutes, is whether putative class actions for statutory damages should be denied certification as not being the supe

Fair Credit Reporting: 11.2.3.3.4 Alternative of individual suits

Defendants often contend that a class action should not be certified because it would not be superior to individual suits, as required by Federal Rule of Civil Procedure 23(b)(3). The Fourth Circuit rejected this contention in Stillmock v. Weis Markets, Inc.,140 holding that a class action is superior because, inter alia, even the availability of punitive damages and attorney fees is unlikely to result in enforcement of FCRA by individual actions at a scale comparable to the potential enforcement by way of class action.

Fair Credit Reporting: 11.2.3.3.5 Declaratory or injunctive relief

A separate issue regarding class certification is whether a Rule 23(b)(2) class for declaratory or injunctive relief may be certified under the FCRA. Because the majority view is that neither declaratory nor injunctive relief is available under the federal FCRA in any kind of action,142 cases discussing whether the criteria for certification of a Rule 23(b)(2) class have been satisfied in this context are rare.

Fair Credit Reporting: 11.2.3.4 Examples of Class Settlements

  • Credit/Debit Card Number Truncation Cases: Brown v. 22nd Dist. Agric. Ass’n, 2017 WL 2172239 (S.D. Cal. May 17, 2017) (despite misgivings, approving class settlement providing for $.50 reduction in future entrance fees for up to 1.5 million class members where fairground vendor printed entire expiration date of credit card); Gonzalez v. The Harris Ranch Beef Co., 2015 WL 756541 (E.D. Cal. Feb. 23, 2015) (preliminary approval: $90,500 for class of 281,000); Torres v. Pet Extreme, 2015 WL 224752 (E.D. Cal. Jan.