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Consumer Credit Regulation: INTRODUCTION

This set of summaries encompasses state statutes that allow lenders other than depository institutions to extend unsecured open-end consumer credit, by credit card or otherwise, for cash advances. It excludes open-end credit statutes that are limited to:

Student Loan Law: 12.2.3 Eligible Loans

Borrowers with FFEL Program loans, Direct Loans, Perkins Loans, and HEAL loans are eligible for a total and permanent disability (TPD) discharge.38 This includes consolidation loans. Parents with PLUS loans may apply for discharges based on their own disabilities, but not for those of their children. For a PLUS loan, the disability of only one of two obligated parents does not discharge the debt.39

Fair Credit Reporting: 12.4.3.2 Was the Agreement Properly Formed?

An arbitration requirement is a matter of contract, and like any contract, it is not binding on the parties unless the contract is properly formed. This requires assent from both parties, usually by valid signatures.519 Clearly a consumer has not assented to an arbitration agreement where a thief who stole the consumer’s identity, and not the consumer themselves, entered into the agreement.520

Fair Credit Reporting: 12.4.3.3 Has the Company Waived the Arbitration Requirement?

A company cannot participate in court litigation on a matter and then suddenly change its mind and require the case to be sent to arbitration.524 The Supreme Court has ruled that the consumer need not show prejudice from the company’s actions for the court to find waiver.525 Similarly, the company may have waived the arbitration requirement where the consumer initiates arbitration and the company refuses to pay its share of the filin

Fair Credit Reporting: 12.4.5.3 Tips on Conducting an Individual Arbitration When Court Litigation Unavailable

Where an enforceable arbitration agreement forecloses class arbitration, class action litigation in court, and individual court litigation, adequate client representation may require raising the consumer’s claims in an individual arbitration proceeding. Another reason to conduct an individual arbitration is that, even if an arbitration agreement is not enforceable, it may take years to resolve this issue before reaching the merits.

Fair Credit Reporting: 12.5.2.2.2 Causal relationship

The consumer must show a causal relation between the violation of the statute and the loss of credit or other harm.591 Most courts hold that the plaintiff need not show that the erroneous negative information is the only cause of the loss, but only that it was a substantial factor.592 Although testimony from the prospective credit grantor who denied an application for credit is desirable,593 reasonable inferences from circumstantial evidence

Fair Credit Reporting: 12.5.3.2.2 Post-Safeco decisions

Subsequent to Safeco, defense efforts to resolve willfulness on motion practice generally have not been successful when the statute’s meaning and directive on the point in contention are clear, when the statute has been construed by a court of appeals or perhaps several district courts.

Fair Credit Reporting: 12.1.3.3.1 Introduction

Much of the discovery available and regularly sought in litigation against CRAs is also available from creditors, debt collectors, and other furnishers. The advice to practitioners suggested above applies equally to claims against furnishers. In addition, furnishers may have discoverable recordings of conversations with the plaintiff.123

Fair Credit Reporting: 12.1.3.5 Discovery Regarding Willfulness

If willfulness is alleged in the action, and the court has not found that the defendant’s reading of a controlling statutory provision was “objectively reasonable,” the subjective intent of the defendant should be explored by counsel in discovery. Intent is not, in this context, rendered irrelevant by the holding in Safeco Ins. Co. v.

Fair Credit Reporting: 2.3.3.1 Generally

A consumer report is one “bearing on a consumer’s credit worthiness” and other factors.53 Consumer is defined in the FCRA as an individual54 and must, at a minimum, be “an identifiable person.”55 Therefore, a report on an anonymous computer username may not be a consumer report.56 One court held that a file that contains information on several persons who share a common name and state, and that does

Fair Credit Reporting: 3.2.3.2.3 Credit Account or “tradeline” information

The credit account information or “tradelines” detail the consumer’s payment history with certain creditors, including mortgage, auto loans, installment loans, credit cards, and retail store cards. For each creditor, the file contains the creditor’s name. The file also indicates whether the account has been sold to another creditor or whether another party is involved other than the nominal creditor. For example, the file might state “Walmart/Capital One” The average credit file contains thirteen past and current credit accounts.34

Fair Credit Reporting: 3.2.3.2.5 Inquiries

A consumer report will show “inquiries,” i.e., records of users who have requested the report within the last two years for employment purposes and within the past year for other purposes, such as applications for credit.55 There are two general types of inquiries: “hard” and “soft” inquiries.56 However, with one exception,57 this distinction is not set forth in the FCRA,58 but is instead a matter of industry

Fair Credit Reporting: 3.6.5.3 Truncation of Consumer’s Social Security Number

Upon the consumer’s request, the CRA must truncate the disclosure of the consumer’s file so that it does not include first five digits of the consumer’s Social Security number (SSN).612 However, the Act does not require the CRA to mask the entire SSN.613 If the consumer does not request truncation of the SSN and the CRA truncates it, there could be a claim for violation of section 1681g(a)’s requirement to disclose all information in the consumer’s file.614

Fair Credit Reporting: 12.1.3.1 Generally

Through interrogatories, depositions (including depositions by videoconference equipment to conduct remote depositions15), requests to produce documents and electronic files, requests for admission and third-party subpoenas, the consumer’s attorney can discover substantial relevant information that is useful to prove a claim. Practitioners should be cautious in accepting defense answers to interrogatories and responses to requests for documents at face value.

Fair Credit Reporting: 12.7.3 Maximizing the Chances of an Adequate Fee Award

A plaintiff’s attorney can take several steps to maximize an attorney fee recovery in an FCRA case. The first step is to keep excellent time records that document all time appropriately spent on the case by each attorney and paralegal involved. Some courts will deny any award under a fee-shifting motion if itemized time records are not submitted and the court is therefore unable to determine the reasonableness of the hours requested.932 Do not include time for which a private client could not be billed.

Fair Debt Collection: 13.5.1 Overview

Lawsuits within a bankruptcy case are called “adversary proceedings.”268 Adversary proceedings are initiated by complaint and are governed by rules that closely parallel the Federal Rules of Civil Procedure. Depending on the specific circumstance of the case, the bankruptcy court may be a preferable forum for litigating claims related to abusive debt collection. Not only do bankruptcy judges regularly see the problem of debtors in trouble, but they are also generally more aware of the unfair creditor practices that often take place.

Fair Debt Collection: 13.5.2 The Supreme Court’s Decision in Stern v. Marshall

In Stern v. Marshall285 the Supreme Court issued another ruling in a series of decisions construing the bankruptcy courts’ authority to adjudicate fully certain types of legal claims raised in the course of a bankruptcy proceeding. Bankruptcy court judges are not “Article III” judges with life tenure, and the Supreme Court has on occasion found that this status imposes a limit on the types of controversies in which they can render final judgments.

Fair Debt Collection: 13.7.1 Overview

Sometimes after a debtor has filed for bankruptcy, debt collectors’ actions violate both a provision of the Bankruptcy Code and federal or state debt collection laws. For example, a debt collector’s attempt to collect a discharged debt violates the discharge order and may also constitute harassing, oppressive, or abusive conduct under the FDCPA. A debt collector may file a debt collection lawsuit against the debtor after they have filed for bankruptcy, giving rise to both an automatic stay violation and an FDCPA claim.

Fair Debt Collection: 13.7.2.4 The Ninth Circuit Decision in Walls

By contrast, the Ninth Circuit in Walls v. Wells Fargo Bank,370 concluded that a contempt action in the bankruptcy court provided the sole remedy for violation of the discharge injunction.371 The Walls court based its decision, with respect to the FDCPA claim, on the view that a debtor should not be permitted to create a private right of action for a violation of the Code’s discharge injunction, when none exists under the Bankruptcy Code, by using another federal statute.