Chase Manhattan v Toby Nelson(long)

I read this post on the yahoo credit repair forum today. I thought it was worth sharing here. Original credit goes the the author listed below.
http://groups.yahoo.com/group/credit-repair/message/8181
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From: "Jesse F. Willette" <jfwlyr@j...>
Date: Sun Mar 10, 2002 5:18 am
Subject: RE:Chase Manhattan Mortgage v Toby Nelson (9th Circ CA US) No. 00-15946

To those of you who are interested here is what Chase v Nelson means:

(This is my first entry into the chat group).

First this case is very good for the consumers who are lucky enough to live in the Federal ninth circuit (i. e. the Southwest).

What happened with the original lawsuit: Plaintiff, Toby Nelson, in the trial court tried to frame a complaint for damages based upon a statutory remedies under the portion of the FCRA (15 USC sec. 1681s-2(b). To show you how difficult this was to do, two lawyers in two states (Nevada and New Mexico) tried to frame such a lawsuit three times. The trial court after the last attempt dismissed the complaint claiming that the plaintiff failed to state a lawsuit after the third try (it happens a lot). Plaintiff and plaintiff's lawyers apparently knew that the case would have to be appealed to get before a jury. (So you think Congress writes these statutes to benefit you? if you do, I hope you won't be in the market for bridges very soon).

What the law suit was originally about: Nelson had co-signed on a six-figure mortgage for the original debtor with Chase Manhattan Mortgage. The debtor failed to pay the debt (that's why you don't become a cosigner) and declared bankruptcy leaving Nelson to hold the bag on the debt. But, he honored his word, paid as agreed, on time and never late. (The kind of entries everyone would think would be good on a credit report, right? Nah...wrong!) The CRA's (The Big Three except TU who simply did not come up in the suit, so maybe them too) reported that the debt was subject of the original debtors discharge in bankruptcy,....but this was reported on Nelson's CRA's, and he had never declared bankruptcy, even tho it was the original debtor who BKd! Nelson unfortunately did not find out about it until he tried to apply for financing over a half a year later. Credit being denied based on Experian's report, he found out the bankruptcy that was not his showed up on Experian's CRA on him and he demanded the entry be deleted, advising he had never declared BK, and initiated his reinvestigation. This demand letter was cc'd to Chase.... four months later Chase responded saying it was their policy to report this type of default and it was essentially up to prudent lenders to follow up on the report to determine whether the consumer "...had actually filed the bankruptcy action...", and apologized for the inconvenience but would correct the report to reflect that only one of the borrower's bkd. (I.e., Chase's response simply means "tough", they can report what they want, any future lender can contact the consumer, and what are you consumer going to do about it! {besides, Chase never hires a law firm with less than four names in it and two pages required on the letterhead to list the associates and partners...) So go get your little guy lawyer, we know that Congress didn't expressly give you the right to sue us anyway, no matter what we say on your report). Nelson again applied for credit to buy a truck, and again was denied, based on similar information supplied this time by Equifax, which entry simply said "included in bankruptcy". O...kay?.. Nelson did get his little guys' lawyer(s) and filed his lawsuit (go to top paragraph to see what happened).

The appeal followed. Please understand first what the FCRA DOES NOT DO FOR YOU. It does NOT give YOU the consumer many legal rights to file a private lawsuit to protect your interests. In fact there is only a small window, and with very limited damages, for We The People: Yes you can sue a lender who denies you credit, or a CRA for information that they provide AND IS USED as the basis to deny you a loan BUT ONLY if YOU can prove that the CRA acted with knowledge of the falsity, or deliberately evaded their responsibility to know the information is false or were negligent in an egregious manner; or the lender essentially acted in the same manner.
In effect, legalized discrimination the good old fashion American way. Every so often (mostly less often) a plaintiff like Nelson comes along with the guts to say they can't do this to me and voila, the little guy's lawyer gets a chance to do some justice. However, Concress decided to let government agencies (state and Federal) enforce the statute as a public matter of interest...and since these agencies' policies change with the political faction in control, enforcement is quite political. But Nelson wasn't going to take it so he appealed with his little guy's lawyers. (We all should be equally grateful to Nelson's lawyers, since the damages you can collect under the statute are a minimum of $100 (about the price of a Starbuck's coffee) to a whopping maximum of $1000. No wonder lawyer's are lining up to take everyone's case under the FCRA; or is this a wrong with a phoney remedy? Yes you can get "reasonable attorney's fees" but these are determined by the court (and vigorously litigated by outfits such as Chase, and they aren't the worst ones out there), but go figure. In 1996 congress amended the FCRA and changed a simple, seemingly innocuous phrase in section 1681n and 1681o (which contains the consumers limited right to sue) and what was replaced was the phrase the CRA and lender with the phrase "any person". Nelson's lawyers had what they needed ... they're in. Congress screwed O big time and let the little guy in. (For those of you who really are patriots, not just flag waivers, you can actually go on line to the US Congress and read the Federal record and the legislative history behind the FCRA ... even visit the Library of Congress for back issues ... you know, exercise your citizenship a little ... it'll be good for you...don't just really on the other guy).

What the appeal means to us: So...Chase having thumbed their nose at Nelson and the Littleguy's law firms (of one lawyer each) ... they stood before the most conservative banc of the ninth circuit (not the liberal panel) Justices Noonan, author of the opinion concurred in by Justice Alfred Noonan, and Steve Trott (a former tough nosed L. A. County (not SF) DA, supporter of the death penalty, and even tougher former prosecuting US Attorney, but fair). Since courts do not have to hear an appeal, this panel apparently thought the case was meritorious and elected to review it. (No Virginia appeal courts do not have to take a case on appeal ... and 95% of the time they don't).
The ISSUE: DOES THE FCRA ALLOW (get that "ALLOW") A CONSUMER EVEN A RIGHT TO SUE A FORMER LENDER (OR BANK), I. E. A FURNISHER OF CREDIT INFORMATION, FOR FAILING TO CORRECT A CONSUMERS CREDIT REPORT TO ACCURATELY REFLECT THE INFORMATION IT CONTAINS. (Actually the issue is a little more complicated)

ANSWER: OH....YEEESSS.

The court noted that the way the statute was written it primarily created the enforcement of violations mechanism in the Federal Trade Commission and the Federal Reserve System (Board of Governors), and designated appropriate state agencies. Typically overworked branches of these agencies get the cases. Typically "problems" (i.e. violations of the law) are resolved informally with an occasional cease and desist order (amazingly, since CRA errors range between 15% to as high as 75% depending on the material involved {see the Consumers Reports web site for specific statistics} you would think there would be all kinds of Federal suits going on ... so why the vacuum? You get to figure it out.)

 

Part 2
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Well, Littleguy's law firm pointed out that the statute would not make sense under the 1996 amendment if the consumer could not bring his action because everything about the statute addressed the consumers remedies; and, the provision under which this law suit was brought (sec. 1681s-2(b), not sec 1681n or 'o', {remember the limited window for the little guy to sue}) was the only realistic way that the consumer could get that enforcement. Furthermore, by requiring the consumer first to go to the CRA directly and to contact the furnisher, a screening process was established to allow for frivolous and irrelevant disputes so that they can't become lawsuits. This process gave the furnisher the opportunity to correct inaccuracies and avoid any possibility of litigation altogether, for if the inaccurate is changed to accurate then the consumer has accomplished his objective. But by changing the language from CRA's and lenders to "any person" in the statute, Congress implicitly recognized that providers of information were included. furthermore, the only participants in the credit bureau and reporting scheme are the consumer, the prospective lender (or lender), the credit reporting agency and the furnisher of information. The consumer already can sue the CRA and the lender (prospective lender), and he would not sue him(her)-self, so who is left? Only the furnisher of the information = voila, Chase.

The FTC attorneys filed an amicus curiae brief and appeared with Nelson and the little guy's lawyers supporting his position. the court agreed with them. One more little victory (we just get the right to sue the bast...rds) for the little guy. Thank you Mr. Nelson.

The FCRA is typical of a lot of legislation sold to us as a benefit to the consumer ... a lot of hype but no real teeth (i bid Reg. Z, truth in lending to the same effect). Do you think a multinational, multi billion dollar corporate conglomerate really gives a damn about a $1000 maximum damage suit? Probably not. But the publicity can sting. It's bad for their baloney image ... and the truth of Mr. Nelson's situation is a vivid lesson that ought to be in the market place. So, Why not put it there?

Good luck to all of you who are fighting back ... my kudos and admiration.