Proof that CRA's WANT derog entries

§ 10. Incentives to collect adverse information held reasonable

In the following case, the court held that a consumer credit reporting agency's quality and production control procedures, which encouraged the reporting of adverse information, did not violate the reasonable procedure requirement of 15 U.S.C.A. § 1681e(b).

Saying that the findings of the Federal Trade Commission (FTC) did not support a reasonable inference that a consumer reporting agency's procedures were likely to produce error, the court, in Equifax, Inc. v Federal Trade Com. (1982, CA11) 678 F2d 1047, set aside an FTC Final Order to Cease and Desist the agency's method of quality and production control, which rewarded employees for gathering adverse information, because the court found that the method did not violate the reasonable procedure requirement of 15 U.S.C.A. § 1681e(b). The FTC, which is empowered by 15 U.S.C.A. § 1681s to enforce the Fair Credit Reporting Act, issued the order after conducting, for more than 2 years, a nationwide investigation of the agency, one of the nation's largest. The investigation revealed that the agency sampled reports from its branch offices and ranked the offices into upper, middle, and lower third positions, according to the amount of adverse information produced. The production of adverse information was one factor considered regarding managerial incentive bonuses and salary recommendations by branch managers. The FTC contended that the agency's procedures violated 15 U.S.C.A. § 1681e(b), by creating an unreasonable risk that the employees would fabricate adverse information. However, the Administrative Law Judge (ALJ), who presided over the hearing which resulted from the investigation, found that the agency's quality control involved much more than simple tabulation of adverse information. Field representatives were trained to require scrupulous honesty and fairness. Each branch was periodically audited to check the integrity of its reports. Defects in the content or completeness of a report were also tabulated, as were clerical defects, and company policy called for any employee found to have falsified information to be terminated immediately. Moreover, the ALJ conceded that there was no evidence of falsified adverse information. The court said that the FTC investigation revealed that inaccuracies in agency reports, if anything, favored consumers, and that, in light of the enormity of the investigation, which involved hundreds of witnesses and thousands of pages of documents, and the fact that it failed to produce any substantial evidence of inaccuracies in the production of adverse information, it was not reasonable to conclude that the agency's procedures posed an unreasonable risk of inaccuracy."

Source:

American Law Reports
ALR Federal

Copyright © 1987 The Lawyers Co-operative Publishing Company

Annotation

REQUIREMENT OF § 607(B) OF FAIR CREDIT REPORTING ACT (15 U.S.C.A. § 1681E(B)) THAT CREDIT BUREAUS FOLLOW "REASONABLE PROCEDURES TO ASSURE MAXIMUM POSSIBLE ACCURACY"


Gary Knapp, M.B.A., J.D.