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Fair Credit Reporting: 12.3.1.6 Constitutional Challenges

Defendants have challenged both the FCRA and the California Investigative Consumer Reporting Agencies Act (ICRAA) on constitutional grounds. Two aspects of the FCRA have been subject to attack: its authorization of potentially enormous statutory damages in a class action, and its restriction on the dissemination of certain accurate information. As to the former, the contention that FCRA statutory damages are unconstitutionally vague and, in the context of a class action, excessive, has failed in the majority of cases.381

Fair Credit Reporting: 16.5.1 The Black Box

One reason for the controversy over credit scores is that the method by which they are calculated has been kept secret from consumers, advocates, and regulators. The process by which a credit score is calculated has been likened to a “black box.”

Fair Credit Reporting: 10.7.3.2.2 State statutes exempt from preemption

Section 1681t(b)(1)(F) explicitly lists two state statutes regarding furnisher liability, one in Massachusetts and one in California, that are not preempted as to their terms in effect on September 30, 1996.337 The Massachusetts law is Mass. Gen. Laws ch. 93, § 54A(a). The California law is Cal. Civ. Code § 1785.25(a) (West). Note that other provisions of California law are not exempted from preemption, such as Cal. Civ.

Fair Credit Reporting: 10.7.3.2.1 Introduction

Section 1681s-2 imposes specific types of obligations on furnishers. Thus, state statutes that impose requirements or prohibitions with respect to these specific obligations are preempted (with certain exceptions) by section 1681t(b)(1)(f). The specific obligations imposed by section 1681s-2 are:

Fair Debt Collection: 11.1 Private Remedy Is Primary Enforcement Mechanism

A debt collector who violates the federal Fair Debt Collection Practices Act (“FDCPA” or “Act”) while collecting a consumer debt is subject to suit by “any person”1 adversely affected by the violation. The Act grants concurrent federal and state jurisdiction,2 and the successful plaintiff may recover:

Fair Credit Reporting: 16.7.3 Credit Scores May Undermine FCRA’s Dispute Mechanisms

Credit scoring sometimes may conflict with the FCRA’s consumer protections, most particularly its dispute provisions designed to correct inaccurate information. First, the speed of lending decisions based on credit scoring does not allow time for a consumer to dispute inaccurate information if it is discovered during the credit application process.

Fair Credit Reporting: 2.3.6.5.1 Insurance underwriting purposes

The term consumer report includes a report to establish the consumer’s eligibility for insurance to be used primarily for personal, family, or household purposes.279 In addition, the definition of a consumer report incorporates by reference the permissible purposes listed in section 1681b, including the use of consumer reports “in connection with the underwriting of insurance involving the consumer.” Section 1681b does not, however, contain a requirement that the insurance be for personal, family, or household purposes.

Fair Credit Reporting: 18.4.1.6.1 Introduction

At first glance the scope of information the GLBA protects from disclosure appears to be expansive—including all nonpublic personal information about a consumer. However, a raft of exceptions remove significant categories out of the protected class of information.

Fair Credit Reporting: 2.4.3.1 Types of Affiliate Sharing Excluded from Definition of Consumer Report

Information communicated between persons related by common ownership or affiliated by corporate control is excluded from the definition of a consumer report.368 However, this information is excluded only if the companies provide the consumer with an opportunity to opt out of the information sharing. There are two types of information shared by affiliates that are excluded from coverage as consumer reports.

Fair Credit Reporting: 15.3.2.1 Generally

Another common example of an investigative consumer report is a report prepared for employment purposes. Employers may want more in-depth information about an employee or a prospective employee than is available in a typical consumer report, and will request that personal interviews be conducted with former associates or employers. Investigative reports for employment purposes relate not only to hiring, but also to promotions, demotions, transfers, discharges, and related employment decisions.73

Fair Credit Reporting: 10.2.3a FCRA Claims Against Consumer Reporting Agencies Not Barred by Section 230 Communications Decency Act Immunity

As the internet grew commonly available to the public, and its popularity soared, Congress become concerned with the threat of tort-based claims to the free flow of speech, recognizing the medium as “a forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity.”93 Accordingly, in 1996, Congress enacted the Communications Decency Act, adding Section 230 to the Communications Act of 1934, which granted sta

Fair Credit Reporting: 10.7.3.3.2 Aggressive industry preemption challenges

Some courts have read the preemption provisions for CRAs narrowly. For example, one district court concluded that a Texas statute requiring that certain information be included in a reinvestigation report was not preempted, because section 1681t(b)(1)(B) preempts requirements or prohibitions under state law “relating to the time by which a consumer agency must take any action,” but says nothing about requirements for the content of a reinvestigation report.380

Fair Credit Reporting: 10.7.3.3.3 CFPB interpretive rule clarifies the narrow scope of FCRA preemption

On July 11, 2022, the CFPB issued an interpretive rule clarifying that the FCRA’s express preemption provisions have a “narrow and targeted scope,” providing support for states to adopt credit reporting legislation protecting consumers.394 The rule specifically notes that state laws that forbid or restrict CRAs from including information about medical debts, evictions, rental debts, or criminal records generally would not be preempted.

Truth in Lending: 10.4.4.1 General

Violations of the requirements governing the notice of right to rescind constitute the second category of “trigger” violations giving rise to the extended rescission right.602 The integrity and accuracy of the notice of right to rescind should be protected so as not to undermine the consumer’s rights.

Truth in Lending: 10.9.1 Overview

If the creditor refuses to acknowledge the consumer’s rescission of the transaction, the consumer can sue for rescission in either federal or state court.1399 A declaratory judgment1400 or a quiet title action1401 may be appropriate.

Mortgage Servicing and Loan Modifications: 11.2.4 Appraisal

A determination of the current fair market value of the client’s home is important for determining what claims the homeowner may be able to assert as well as what outcomes are realistic for the homeowner. When dealing with abusive lending, property flipping, or foreclosure rescue scams, it is also a good idea to obtain an estimate of the home value at the time of the transaction. Some loan modification programs are also based, at least in part, on the value of the home.

Mortgage Servicing and Loan Modifications: 11.2.5.1 Payoff Amount

The payoff amount is typically the amount the homeowner is required to pay to satisfy the loan and obtain a release of the mortgage or reconveyance of the deed of trust. In addition to principal and interest owed on the loan, the payoff amount will include any prepayment penalties, late fees, or other fees that the servicer believes are due. It may be useful to compare the current payoff amount to any previous payoff statements that the homeowners obtained to determine if any improper fees or charges have been assessed.

Mortgage Servicing and Loan Modifications: 11.2.5.2 Payment History

A complete life-of-the-loan payment history should be obtained from the current servicer. The payment history should provide a complete breakdown of all transactions from the date of the original loan closing to the present. The payment history should show each payment received as well as how that payment was credited.

Mortgage Servicing and Loan Modifications: 11.2.5.3 Contact History

Most servicers maintain a contact history detailing communications with the homeowner and other third parties. The contact history may also list important events in the loan’s history such as the date letters were sent to the borrower or the date the loan was referred to a default servicer. Automated calls to the borrower may also be recorded in the contact history. Note that different servicer departments (e.g., collections, loss mitigation, foreclosure, tax, insurance) may maintain separate contact histories. When possible, it is best to obtain a consolidated contact history.

Home Foreclosures: 3.3.1 Overview

The plaintiff in a judicial foreclosure action must establish as an element of its case that it has authority to enforce the note and that it is the current assignee of the mortgage. The court must make findings to this effect before allowing a foreclosure to proceed. Because many state laws treat transfer of a promissory note as carrying with it an assignment of the related mortgage, a plaintiff may be able to establish its authority to foreclose based solely on its right to enforce the note.45