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Fair Credit Reporting: 17.2.8.3 Liability Not Limited to Credit Repair Organizations

Liability under the Act is not confined to credit repair organizations, but applies to “any person” who fails to comply with the Act,289 and certain Act provisions place requirements on any person.290 Thus, liability may extend to any person or entity that is directly or indirectly involved in deception or other violations of the Act—such as assignees of a credit repair organization’s contracts,291 related corporations involved in a deceptive credi

Fair Credit Reporting: 17.2.8.4.1 Introduction

Credit repair organizations often include clauses in their consumer contracts that require any dispute to be resolved by binding arbitration, thus attempting to keep consumer litigation out of the courts. This subsection first reviews three challenges to arbitration clauses that the Supreme Court has rejected and then summarizes other potential challenges. Another NCLC treatise, Consumer Arbitration Agreements,305 examines the enforcement of arbitration clauses in more detail.

Fair Credit Reporting: 17.2.8.5.2 Actual damages

Any loss that results from the violation of the Act can be awarded as actual damages. Where a consumer was lured by a credit repair organization into buying a car, but backed out of the deal after discovering the falsity of the company’s representations, money she spent in repairs before canceling the contract would be actual damages.337 The amount paid to the credit repair organization may be awarded as damages even if the consumer does not prove any injury beyond paying that amount.338

Fair Credit Reporting: 17.2.8.5.3 Punitive damages

Punitive damages are available whether or not the consumer proves actual damages or has paid any money to the organization.340 The Act explicitly authorizes punitive damages not just in individual suits, but also in class actions.341 The right to punitive damages, like other rights under the Act, is non-waivable.342

Fair Credit Reporting: 17.2.8.6 Attorney Fees

Any person who fails to comply with the Act is liable to the consumer for attorney fees and costs as well as damages.348 This liability is expressed in mandatory language. Courts are likely to apply the familiar lodestar analysis in determining the amount of fees.349

Fair Credit Reporting: 17.2.8.7 Class Actions

The Act specifically contemplates class actions.351 It sets forth a special rule for determining the amount of punitive damages in a class action: the aggregate amount the court allows for each named plaintiff, plus the aggregate amount it allows for each other class member without regard to any minimum individual recovery.352 Class actions must meet the usual requirements of Rule 23 of the Federal Rules of Civil Procedure.353 The ease of establish

Fair Credit Reporting: 17.2.8.8 Jurisdiction

Unlike the other titles of the Consumer Credit Protection Act that provide for enforcement through private rights of action,359 CROA does not contain a specific grant of jurisdiction in the federal district courts.

Fair Credit Reporting: 17.2.8.9 Pleading

Allegations of CROA violations involving fraudulent, deceptive, or misleading statements may have to be pleaded with particularity pursuant to Federal Rule of Civil Procedure 9(b) and similar state rules.364 Courts split on the analogous question whether allegations of violations of state deceptive practices statutes must meet Rule 9(b) standards, with the better-reasoned decisions finding that deception is a less-demanding standard than fraud, and so need not meet the same pleading requirements.365

Fair Credit Reporting: 17.2.8.10 Statute of Limitations

The statute of limitations for an action under the Credit Repair Organizations Act is five years from the occurrence of the violation.369 Where the violation relates to the organization’s material and willful failure to disclose, the five-year period begins to run when the consumer discovers the misrepresentation.370

Fair Credit Reporting: 17.2.8.11 Jury Trial

As is the case with regard to other titles of the Consumer Credit Protection Act, CROA is silent as to the right to trial by jury. Consistent with the Seventh Amendment and the case law under these related statutes, a jury should be available.371

Fair Credit Reporting: 17.2.9 Prohibition Against Waivers

The Act provides that any waiver by a consumer of any right or protection under the Act shall be treated as void and may not be enforced by any state or federal court or by any other person.372 The mere act of seeking a waiver is a violation of the Act.373

Fair Credit Reporting: 17.2.10 Relation to State Laws

CROA does not preempt state credit repair statutes, except to the extent that the two are inconsistent, and then only to the extent of such inconsistency.382 This standard is examined at § 17.3.8, infra. On the other hand, exemptions in state credit repair laws cannot be read into the federal statute.383

Fair Credit Reporting: 17.2.11 Federal and State Enforcement of CROA

The Federal Trade Commission (FTC) enforces CROA under the FTC Act, whether or not the organization otherwise comes under the FTC Act’s jurisdiction.386 The FTC has charged many credit repair organizations and their principals with misleading consumers by falsely and deceptively claiming the ability to improve credit records and by not honoring refund guarantees, not only under CROA and the FTC Telemarketing Sales Rule, but also under its general authority to proceed against unfair and deceptive practices in or affecting commerce.

Fair Credit Reporting: 17.3.1 Overview

Most states have passed their own statutes, often termed the state Credit Services Organizations Act, to deal with abuses by credit repair organizations.391 These statutes typically follow the federal CROA closely in some respects, but also differ in significant ways, often imposing additional requirements such as registration and bonding.

Fair Credit Reporting: 17.3.2 Coverage

All or nearly all state credit services organization statutes duplicate federal CROA’s coverage of organizations that offer to improve an individual’s credit rating.399 Most of the state statutes also cover organizations that assist or offer to assist consumers in obtaining extensions of credit. As a result, loan brokers and credit card finders must comply with these state statutes, including registration, bonding, and right to cancel requirements.

Fair Credit Reporting: 17.3.4.1 Generally

A highly significant question is whether car dealers, home improvement contractors, and other sellers who arrange credit for their customers are covered by state credit services acts that apply not only to entities that offer credit repair services, but also to entities that offer to arrange credit for consumers. This question depends on careful analysis of the exact language of the statute.

Fair Credit Reporting: 17.3.4.2 Requirement of Payment of Fee for the Credit Services

Ohio was the first state to develop case law on the question of whether the consumer must pay money specifically for credit repair services in order for the organization to be considered a credit repair organization. Unlike most state credit repair statutes, Ohio’s credit repair statute at one time required that the consumer pay money, without specifically saying that the money had to be for the credit services.

Fair Credit Reporting: 17.3.4.3 Do Retailers Fall Within a Specific Statutory Exemption?

Dealers holding a license under a state retail or motor vehicle installment sales act to extend credit often argue that they fall within an exemption for entities that are authorized to extend credit under state or federal laws.430 However, such an exemption may not apply to a seller, such as a home improvement contractor, who merely arranges a direct loan between the consumer and a third-party lender.