Follow-up to TU's $5.3m Verdict

Discussion in 'Credit Talk' started by cable666, Aug 4, 2002.

  1. cable666

    cable666 Well-Known Member

    Sunday's Los Angeles Times has a follow up article on the $5.3 million verdict against Trans Union CRA for violations of the FCRA. This is the Oregon woman who sued after fighting with TU for 6 years to get wrong information removed from her file.

    http://www.latimes.com/business/la-fi-perfin4aug04.column?coll=la-headlines-business

    You have to register (free) to read the LA Times web site. I'm not going to cut-n-paste the article cause I don't want CreditNet getting in trouble for posting copyrighted material. So just register and read it. It is free, quick, and they use a cookie so you don't have to log on more than once (just like CreditNet does).

    In the article, the plaintiff discusses why she sued and how she won.

    I was thinking about this case over the weekend. It stands to reason that any merging algorithm is going to produce flaws. It also stands to reason that the CRA's are not going to give up on merging data. The concept is a critical part of their business. Therefore, they are going to screw up a number of credit reports. It is inevitable.

    But the systems in place to correct those errors seem to be missing or lacking, as this woman discovered. The also seem to have a very lackadazial attitude about these errors. They seem to feel that they get most of it right, and that is good enough. If you are the person who is in the percentage that gets damaged, this is not good enough.

    I was thinking about how the CRA's plan to address this problem on dealing with the garbage produced by their merge systems. How is this for a scary thought? What if they decide it is cheaper and easier to simply exempt these people from reporting? In other words, when notified of an error that is a result of their merge process, they simply disable the reports for these people.

    This has two benefits for the CRA. First, according to their own statements this only effects a small percentage of their database, so they can still claim comprehensive credit reports for a large percentage of the population. Second, they comply with the FCRA. There are no laws that require a CRA to maintain a credit report on you. If you are one of these "problem" people, they can simply disable your report. You will have no credit report. Nor could you produce one.

    This has good and bad consequences for the people they disable. If you have bad credit, it disappears. If you have good credit, then you might as well have bad credit cause no one is going to know it. You will find it just as difficult to get a mortgage with no credit history as someone who has a bad credit history.

    That would be very frustrating to be a non-person simple because your information doesn't work in their system.

    To me, the CRA attutide is similar to the decisions car makers make when deciding on how much safety to put into a car. If they can save $5 on a part that fails 0.05 percent of the time and blows the occupants up sky high, then that is ok. Unless of course you happen to be on the 0.05 percent of the population that gets killed.

    Thanks all for the awesome board, CA trolls and all.
     
  2. Touchdown

    Touchdown Well-Known Member

    Thanks for posting the link to that article. $5.3M, wow!
     
  3. Butch

    Butch Well-Known Member

    For Educational purposes only.
    (For those who don't wish to register)


    Kathy M. Kristof:
    Personal Finance
    Woman Blazed a Paper Trail to Clear Her Credit

    Judy Thomas has three words of advice for consumers who are trying to eradicate incorrect information from their credit reports: Document, document, document.

    "Every conversation I had, I have a note on," Thomas said of her six-year battle to correct her credit report. "It may not be perfect form. It might not even have a date on it, but it included all the information that I could get."

    The 57-year-old Oregon real estate broker last week won the largest award in history for violations of the federal Fair Credit Reporting Act--$5.3 million--in a case against Trans Union, one of the nation's three big credit reporting companies. Chicago-based Trans Union said it was disappointed with the ruling but has not determined whether it will appeal, spokesman Clark Walter said.

    Lawsuits filed under the Fair Credit Reporting Act, which typically allege that a credit reporting company failed to correct inaccurate items on consumer credit reports as required under the law, are relatively rare, attorneys note. Big cases, in which the consumer wins more than a token amount, are even rarer. Only a handful of consumers have won more than $100,000, said Andy Henderson, a Los Angeles attorney who has litigated several such cases. Many cases are settled before trial for undisclosed amounts.

    The reason few cases go to trial is that they're complicated and costly to litigate, attorneys said. Consumers rarely have enough money to pay hourly legal fees, so lawyers take only those cases they think are strong enough to promise decent contingency fees, which are based on a percentage of the damages awarded.

    Still, the number of lawsuits and size of damage awards are growing as more people discover errors on their credit reports--the detailed credit histories that determine whether a consumer can get a loan to buy such things as a house or car, and what interest rate they'll have to pay.

    The rapid spread of identity theft--in which stolen personal information is used to open bogus credit accounts--has contributed to the rise because the thief's credit activity appears on the victimized consumer's report.

    Thomas' story reveals the reason consumers who have never thought about their credit records need to keep tabs on what the credit reporting companies are saying about them. It also provides a guide for handling problems when they arise.

    During the trial of Thomas' lawsuit, a Trans Union representative testified that the company uses computerized algorithms to match credit data with the right consumers. But because numbers are sometimes juxtaposed, miskeyed or misread, these programs disregard a certain number of mistakes, including name, address, Social Security number or birth date.

    The result: Two files can become merged because one consumer's name or Social Security number is similar to another's. And similar is a relative term, said David A. Szwak, a consumer attorney in Louisiana. For instance, Szwak sued a credit company for confusing Myra S. Coleman with Maria S. Gaiytan. The company maintained at that trial that Myra could be a nickname for Maria.

    "The mismerge of credit reports is a very big problem," Szwak testified during the trial of Thomas' suit. "I have seen hundreds of cases like this."

    Thomas' woes started when she moved to Oregon from California. Another woman living in the Northwest had a similar first name--Judith--and a similar Social Security number, and that's all it took, she said, for their credit files to be merged.

    The next thing she knew, Thomas had an "a.k.a." or "also known as" appended to her file that said she had an alternate identity and another address. The other woman was born in the same year as Thomas, but not on the same date. Her Social Security number differed from Thomas' by one digit. She had a different last name and lived in Washington.

    She also had serious credit problems--which began to show up on Thomas' credit report.

    "You think about it," Thomas said. "Social Security numbers have nine digits. How many numbers could be one digit off yours? How likely is it that one of those people has your first name? That was their corroboration that it was me. It was another Judy in the Northwest. That's all it took."

    More frustrating, Thomas said, was the way Trans Union handled the problem. According to trial testimony, she repeatedly explained that she was not the other Judy, but Trans Union failed to take the other woman's information off her credit file. And creditors continued to treat Thomas as a poor risk.

    But what set Thomas' lawsuit apart was what she did to try to correct the problem, her attorneys said. She tracked down the other Judy and wrote her a letter. The other Judy wrote back attesting to the fact that she was a different person--no relation--and didn't belong on Thomas' credit file. Thomas sent that letter, along with her own protest, to Trans Union. She kept copies.

    She made phone calls. She kept notes. When she was unable to get the credit company to eliminate the other Judy's credit woes from her report, she contacted the creditors directly--providing the correct information about who she was and pointing out that she was not related to the other woman. The creditors acknowledged, in writing, that Thomas was right. She sent the letters to Trans Union with a note--and kept copies.

    She created a file folder. It expanded to fill a briefcase and then a storage box. She never threw out a letter or her notes.

    "It was my security blanket," she said. "I figured that if I needed credit during that time, I could take it to the lender and show them what I had been through."

    In the end, it was a jury that sorted through Thomas' box of records chronicling the frustration of a woman who was misidentified for six years--despite a protracted effort to prove who she was and wasn't. The federal jury in Portland awarded her $300,000 in compensatory damages and $5 million in punitive damages.

    The lesson? If you find your credit report sullied by someone else's data, do what Thomas did, said attorney Mike Baxter, co-counsel in Thomas' case: Document, document, document.

    Times staff writer Kathy M. Kristof, author of "Investing 101" (Bloomberg Press, 2000), welcomes your comments and suggestions but regrets that she cannot respond individually to letters or phone calls. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof @latimes.com. For past Personal Finance columns visit The Times' Web site at www.latimes.com /perfin.
     
  4. GEORGE

    GEORGE Well-Known Member

    IRS WILL TAKE $1,300,000 OR MORE!!!

    I guess $4,000,000 aint bad!!!
     
  5. Butch

    Butch Well-Known Member

    They'll take HALF on cases of this size.

    Good point Geo.

    :)
     
  6. GEORGE

    GEORGE Well-Known Member

    1/2 ???????

    ...and the lawyer takes 20+%

    SO HOW MUCH DOES SHE OWE???
     
  7. Butch

    Butch Well-Known Member

    Yes Geo.

    After the lawyer takes his cut the remaining is subject to Federal, State and whatever taxes.

    The result will be a "marginal" rate of about half.

    Sux, I know.
     

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