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9th Circuit affirms judgment for defendant in FCRA suit
On February 8, the U.S. Court of Appeals for the Ninth Circuit affirmed summary judgment in favor of a consumer reporting agency (defendant). The suit accused the defendant of violating the FCRA by willfully and negligently disclosing a 10-year-old criminal charge that had been dismissed six years prior to an inquiry made on the plaintiff’s credit report. The plaintiff allegedly submitted an application for housing in 2010, which was denied. In 2010, the defendant provided a tenant screening report, which included details of a criminal charge from 2000, which was outside the seven-year window of the FCRA. However, the plaintiff’s criminal charge was dismissed in 2004, which was within the seven-year reporting window. The plaintiff sued under the FCRA, alleging that the defendant reported criminal information older than seven years, failed to maintain procedures designed to avoid violating the FCRA and ensure the maximum possible accuracy of the information in the report, and failed to conduct a reasonable reinvestigation after receiving a consumer dispute.
In ruling for the defendant, the 9th Circuit stated that “to prove a negligent violation [of the FCRA], a plaintiff must show that the defendant acted pursuant to an objectively unreasonable interpretation of the statute.” The 9th Circuit held that Section 1681c(a)(5) of the FCRA “does not specifically state the date that triggers the reporting window.” Further, the appellate court looked to guidance from the FTC and the CFPB, which “appeared to permit reporting the charge” at the time.
As the appellate court explained, whether the consumer reporting agency correctly interpreted § 1681c(a)(5) to permit the reporting of a criminal charge that was filed outside of, but dismissed within, the statute’s seven-year window, arose as a matter of first impression. However, the consumer reporting agency introduced evidence that its interpretation was consistent with industry norms and standards. Likewise, FTC guidance on the question, at the time, appeared to permit reporting the charge. The appellate court noted, therefore, that it “cannot say, nor could any other reasonable fact finder, that on this record defendant’s violation of [the FCRA] was negligent, much less willful.” As a result, the 9th Circuit affirmed summary judgment in favor of the defendant.
Chopra highlights consumer protection topics
On February 10, CFPB Director Rohit Chopra answered questions during a Washington Post Live session on several consumer protection topics. Citing auto lending as a top concern for the Bureau, Chopra noted that it is important for consumers to be able to shop around, refinance loans, and navigate a competitive market. He also discussed recent Bureau initiatives related to junk fees and overdraft/insufficient funds fees, and said the Bureau intends to sharpen its supervisory scrutiny in these spaces. Chopra stated that, as part of a fair and competitive market consumers want to know when they are being charged these fees, noting that financial institutions have started to transition away from dependency on these types of fees and instead implement programs that will allow a bank to determine what shortfall they will allow on an individual consumer basis. He added that the Bureau may eventually see if rulemaking will increase competition and upfront pricing.
Chopra also discussed the role agencies play in the future regulation of cryptocurrency. He noted that while most of the cryptocurrency market is currently related to speculative trading, this could change if one of the big tech payment platforms decides to expand its services to cryptocurrency. Chopra highlighted several concerns, including how payment data from these systems will be used, how money will be transacted, and how consumers will report fraud. He stated that the Bureau is closely monitoring this space and any regulation will be an interagency effort. While Chopra also discussed the need for transparency with respect to how big tech companies are tracking, monetizing, and harvesting consumer data, he stated it is too early to tell whether there is a need for rulemaking in this area. Chopra also discussed topics related to the buy-now-pay-later industry and student lending, and stated that the Bureau is monitoring both areas carefully.
District Court grants MSJ to creditor in FCRA case
On February 4, the U.S. District Court for the Middle District of Florida granted a defendant creditor’s motion for judgment on the pleadings in a case alleging FCRA violations. The plaintiff alleged that the payment status for a tradeline appearing on her credit report incorrectly showed it as “90 days past due” despite the account being paid and closed. She filed suit against the defendant and two consumer reporting agencies (CRAs) claiming the information furnished by the defendant to the CRAs was inaccurate and that the CRAs prepared and issued credit reports containing “inaccurate and misleading information.” Under the FCRA, entities that furnish information to CRAs are required to ensure the accuracy of the information. If an entity receives a notice of dispute from a consumer it is required to conduct an investigation and report the results to the CRAs—actions, the plaintiff claimed, the defendant failed to do. She further contended that the “pay status” field—which she claimed “is ‘specifically designed to be understood as the current status of the account’”—was causing her credit score to be lower than if it was marked as closed. However, upon review, the court determined that when objectively viewing the plaintiff’s credit reports in their entirety, it is apparent that the account is accurate and not misleading. According to the court, “the only reasonable reading of the [disputed] account is that the account was past due in September 2020, at which time the account was updated one last time and closed—zeroing out the balance. It does not indicate, as [the plaintiff] argues, that she is currently 60 days (or 90 days) past due.” Moreover, no reasonable creditor would look at the report and be misled into believing that the plaintiff had a present pending amount due, the court added.
Five agencies launch effort to address romance scams
On February 7, the CFTC, FinCEN, CFPB, ICE, and U.S. Postal Inspection Service launched the nationwide awareness effort “Dating or Defrauding?” to remind the public about the ongoing dangers of romance scams that target individuals through dating apps or social media. The agencies draw attention to new types of scams that have costs victims millions of dollars, and highlight recent FTC studies showing that 2020 was a record year for romance scams with the number of these types of complaints continuing to increase in 2021. According to a January FTC blog post (covered by InfoBytes here), more than 95,000 people reported about $770 million in losses to fraud initiated on social media platforms in 2021, with investment scams and romance scams having the most reported dollars lost. A recent FTC data spotlight showed that consumers reported losing $547 million to romance scams in 2021 alone. The agencies’ initiative provides guidance on how to recognize scams before individuals give away any money or assets, as well as measures to take if they have been victimized.
VA establishes threshold for reporting VA debts to CRAs
On February 2, the Department of Veterans Affairs published a final rule in the Federal Register amending its regulations around the conditions by which VA benefits debts or medical debts are reported to consumer reporting agencies (CRAs), and creating a methodology for determining a minimum threshold for debts reported to the CRAs. According to the VA, approximately 5,000 delinquent accounts are reported monthly to credit bureaus, and, in many cases, veterans complained about the loss of security clearance or an inability to obtain credit or rental housing. In amending the rule, the VA acknowledged that certain debts, such as medical debts, “are fundamentally different than consumer debt.” Under the new rule, debts are to be reported to a credit bureau if (i) they are considered to be “currently not collectible,” meaning the VA has exhausted available debt collection efforts; (ii) the debt is not owed by someone who has been determined to be catastrophically disabled or has a gross household income below a certain amount; and (iii) the debt owed is over $25. The rule is effective March 4.
On February 7, the CFPB published a blog highlighting the changes that the VA made in its final rule. Among other things, the blog discussed changes to VA’s debt collection practices, protections against surprise medical bills, and getting help with medical bills.
FDIC expands #GetBanked campaign
On February 2, the FDIC announced the expansion of its #GetBanked public awareness campaign into the Los Angeles, Dallas, and Detroit metropolitan areas in continuation of the agency’s efforts to increase financial inclusion to the unbanked population. The FDIC stated that the campaign “is focused on areas where research finds that a significant number of Black and Hispanic households are unbanked,” with the goal of “encourag[ing] unbanked consumers to consider opening a checking account.” With a series of English- and Spanish-language digital, audio, and video advertisements, the FDIC intends to reach unbanked consumers, specifically during the tax filing season. The campaign also includes resources to help consumers choose the best account to meet their needs and identify low-cost bank accounts.
CFPB studies criminal justice financial ecosystem
On January 31, the CFPB published a report studying the criminal justice financial ecosystem, which addressed financial challenges people and families face at every stage of the criminal justice process. According to Justice-Involved Individuals and the Consumer Financial Marketplace, contact with the criminal justice system is very common in the U.S. In 2019, 2.1 million adults were in jail or prison, 4.4 million were under community supervision, and 77 million adults (1 in 3) had a criminal record. These statistics, the Bureau stated, do not account for family members or friends who are often responsible for providing financial support for incarcerated individuals, and who often encounter financial impacts as a result. The Bureau reported that individuals often struggle to pay criminal justice debt and often face steep fines, including additional fees tacked on by third-party debt collectors that, if not paid, may result in incarceration. Additionally, the Bureau reported that the choice of financial service providers is limited within the criminal justice system, and that faced with little or no choice as to how to receive funds upon release from prison or jail, individuals often incur high fees to access their money and may experience difficulties resolving errors. Last October, the Bureau issued a consent order against a provider of financial services to prisons and jails, which alleged that the company engaged in unfair, deceptive, and abusive acts or practices in violation of the CFPA by charging consumers fees to access their own funds on prepaid debit cards that they were required to use (covered by InfoBytes here). The report also found that governments are increasingly shifting incarceration costs to the incarcerated individuals and their families. These costs, the Bureau said, are often sourced to private companies that inflate prices above typical market costs, and raise serious concerns about the transparency, fairness, and availability of consumer choice in markets associated with the justice system.
FTC bans auto marketer over deceptive mailings
On January 28, the FTC announced that it had banned a marketing services company and its owner from the auto industry for allegedly misleading consumers that their websites were affiliated with a government stimulus program and sending consumers deceptive mailings regarding prizes they had supposedly won. According to the opinion, the respondents violated the FTC Act by utilizing deceptive and unfair practices such as sending misleading mailings to persuade consumers to visit auto sales sites by suggesting that these sites were affiliated with a government Covid-19 stimulus program when in fact the sales were not part of any such program. The respondents also allegedly quoted monthly payments to purchase vehicles on credit, but did not provide key financing terms required by law that consumers need to determine the true cost of the advertised loans. Additionally, the respondents allegedly sent direct mail advertisements that deceptively indicated that consumers had won specific, valuable prizes that could be collected upon visiting the car dealership. The FTC noted that the respondents conducted such mailings, despite entering into three prior consent orders with state authorities identifying the ads as deceptive. According to the order, the respondents, are, among other things, banned from advertising, selling, or leasing automobiles for 20 years, and are prohibited from misrepresenting any material fact while marketing any product or service of any kind, as well as from any further violations of TILA’s disclosure requirements.
CFPB publishes list of consumer reporting companies
On January 27, the CFPB released its annual list of consumer reporting companies, which identifies reporting companies that collect and sell access to people’s data. According to the CFPB, the list can be used “to see what information these firms have, dispute inaccuracies, and file lawsuits if the firms are violating the Fair Credit Reporting Act.” The list also, among other things, permits people to identify which companies provide this information at no cost, as well as search for those that provide specialized reporting by certain markets, including employment, tenant, insurance, and medical. According to a blog post published by the CFPB, features of the list include, among other things: (i) information on how to request a report; (ii) tips for checking specialty reports; and (iii) identity verification information. The CFPB also noted that it previously highlighted consumer complaints concerning nationwide reporting companies. As previously covered by InfoBytes, the CFPB released a report, pursuant to Section 611(e)(5) of the FCRA, covering certain consumer complaints transmitted by the Bureau concerning the three largest nationwide consumer reporting agencies.
District Court grants final approval of $12 million class action settlement
On January 25, the U.S. District Court for the Southern District of Ohio granted final approval to a $12 million class action settlement resolving allegations that a calculation error in a national bank’s (defendant’s) software wrongly assessed the plaintiffs’ eligibility for loan modifications. The settlement class, which includes the defendant’s customers who, between 2010 and 2018, allegedly qualified for a home loan modification or repayment plan as required by government-sponsored enterprises or other federal agency requirements, but did not receive an offer for those services from the defendant. The plaintiff class accused the defendant of failing to “adequately test, audit, and verify that its software was correctly calculating whether customers met threshold requirements for a mortgage modification.” Additionally, the plaintiff alleged the bank discovered the issues in 2013, but did not make the issue public until 2018. According to the plaintiffs’ unopposed motion for preliminary approval, the deal will provide $9.1 million to class members with each class member receiving between $1,000 to $19,000, and 22.7 percent of the total settlement sum going towards attorney costs and fees.