Preserving credit where credit'sdue

http://www.dailypress.com/news/dp-59206sy0feb13,0,1347014.story?coll=dp-headlines-topnews
Here's a picture of her lawsuit: http://www.dailypress.com/news/dp-johnson0213a,0,3055666.photo?coll=dp-headlines-topnews

Preserving credit where credit's due
Court ruling may offer consumers more protection
By Novelda Sommers
Daily Press
February 13 2004

NEWPORT NEWS -- A federal appeals court has addressed for the first time the issue of how rigorously a credit card company must investigate a consumer complaint about inaccurate credit files.

As a result, consumers could have an easier time disputing information on their credit reports because lenders will have to show proof when consumers complain. The case, brought by Newport News resident Linda Kay Johnson, clarifies a part of the Fair Credit Reporting Act that says credit issuers must investigate complaints. Until now, "investigate" could have meant a cursory records check. The court's decision demands more in-depth investigations when consumers ask for them.

"This is very far-reaching," said Evan Hendricks, publisher of Privacy Times, a newsletter that tracks fair credit reporting and freedom of information news. "It's the first time they've said the law has plain meaning."

The 4th Circuit Court of Appeals in Richmond on Wednesday upheld an earlier ruling that MBNA, one of the nation's largest issuers of credit cards, failed to conduct a reasonable investigation when Johnson disputed her responsibility for her husband's $17,000 debt.

For Johnson, who owns Hair Raisers hair salon in Newport News, the ruling ended a three-year ordeal that began when an MBNA representative telephoned her. The representative demanded Johnson pay a MasterCard balance because Johnson's husband had filed for bankruptcy and was removed from the account.

It was the first time Johnson had heard of either the credit card or her husband's bankruptcy.

Johnson contends her husband applied for the card before the couple married in 1991. MBNA, based in Delaware, argued that Johnson co-owned the card with her husband. However, the company said it could not produce records from when the account was opened in 1987 because such documents are only kept five years.

"I never used it," Johnson said. "Never saw it."

After divorcing her husband, Johnson found she could qualify only for high interest rates on a home loan because MBNA had reported to the three major credit reporting bureaus that Johnson owed money and wasn't making payments.

Essentially, said Johnson's attorney, Leonard Bennett of Newport News, the company was using unfavorable credit information to pressure Johnson into paying.

"They disable your borrowing," Bennett said. "Which in many ways is worse than being sued."

A jury last year awarded Johnson $90,300 for damages, and MBNA appealed.

An MBNA spokesman and a Richmond attorney who represented the company did not return phone messages Thursday.

MBNA argued that fair credit laws require creditors only to briefly review their records when faced with a complaint.

Company officials said their investigation was rightfully confined to confirming whether Johnson's name and address in MBNA's computers matched the name and address given by the credit bureaus when they received the complaint, and that MBNA's databases showed Johnson's name on the account.

By law, the appellate judges wrote, if a creditor cannot verify disputed information, credit agencies are to delete the item or modify it after further investigation.

A jury, the judges wrote, "could reasonably conclude that if the MBNA agents had investigated the matter further and determined that MBNA no longer had the application, they could have at least informed the credit reporting agencies" that MBNA couldn't verify Johnson was responsible for the account.

Norm Magnuson, vice president of public affairs for the Consumer Data Industry Association, a trade group representing credit reporting bureaus, wasn't surprised by the ruling and doesn't expect widespread changes.

"Our position has always been that if there's an inquiry from the consumer, the credit reporting agency and furnisher (of credit) have to fully reinvestigate the inquiry," he said. "I think most businesses are doing that."

The ruling will cause many lenders to review their investigation methods, said Nessa Fedd, senior federal council for the American Bankers Association.

"Because of identity theft, I think banks are already re-investigating more carefully than they used to," she said, noting that several years have passed since Johnson says her problems began.

Johnson hopes to refinance her home loan, on which she pays 13.99 percent interest because of her damaged credit scores.

"My credit was perfect -- pristine," Johnson said. "If you know your rights, you fight for your rights and you will win."

Novelda Sommers can be reached at 247-4767 or by e-mail at nsommers@dailypress.com
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