Question about intent to sue

There is an excellent FTC opinion letter to this. Pay particular attention to the section I highlighted:

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580

Bureau of Consumer Protection
Division of Financial Practices


October 27, 1998

Dear Mr. Greenblatt:

This is in response to your letter requesting the staff's opinion concerning the application of certain provisions of the Fair Credit Reporting Act ("FCRA") to the following scenario:

Brokerage clients suffer substantial losses on a financial product sold to them by their brokerage firm. A large number of investors obtain legal counsel and notify their brokerage firm of their losses. An early dispute resolution conference is scheduled with each brokerage client. Prior to the meetings, and with civil litigation seeming imminent, the legal department at the brokerage firm obtains the consumer credit report of every complainant. Some complainants do not have any debt, negative balance or outstanding margin balance in their accounts. The primary purpose for obtaining the credit report is to identify the financial status of each complainant prior to settlement negotiations. Settlement offers are prepared, at least to some extent, based upon the content of the consumer credit reports.

Specifically, you have asked three questions that we will address here. Those questions are quoted verbatim in italics below, followed by the staff's analysis.

1. Whether the requests for the consumer credit reports comply with the requirements of the Fair Credit Reporting Act, §604, 15 U.S.C. §1681b?

No. Neither the dispute resolution conference, the imminent threat of civil litigation, nor the desire to craft a settlement offer provide the brokerage firm with a permissible purpose to obtain a brokerage client's consumer report under Section 604.

In the 1990 Commentary on the FCRA, the Federal Trade Commission ("Commission") stated that "[t]he possibility that a party may be involved in litigation involving a consumer does not provide a permissible purpose for that party to receive a consumer report on such consumer . . . because litigation is not a 'business transaction' involving the consumer." 16 C.F.R. § 600 App., 55 Fed. Reg. 18804, 18816 (May 4, 1990). This statement extends to all aspects of litigation, including the pre-litigation discussions and settlement preparations that you describe, and was not altered by the recent amendments to the statute.



Basically, what it is saying is just because a consumer initiates a lawsuit, or even threatens one against a company, that does not give that company the right to pull the consumers credit report.

Now it does not specially address soft/hard inquries, so (a soft inq) may be a grey area. They may argue that no one other than you, the consumer, gets to see the soft inquiry, and that it does not affect your score, however you could counter that arguement with the fact that even a soft inquiry allows the company that pulled it to view your whole credit report, which contains personal and sensitive information that they have no permissible purpose to receive.

Finally, having that letter from them (which I assume pre-dates the day the inq. was pulled) is gold. How could they possibily argue in front of a judge that they had a "right" to pull an inq. when they had already said to you in writing that the account was had in error.

Here is the link to the complete FTC opinion letter I posted above:

http://www.ftc.gov/os/statutes/fcra/greenblt.htm

Here is another link to Christine Bakers website. She had a similar issue with Wells Fargo pulling an inquiry (hard) after she initated a lawsuit against them for reporting an account incorrectly.

http://www.bayhouse.com/credit-forum/showthread.php?threadid=229

 

Hi bhargavap,

It depends on a few things. Is this regarding an ACTIVE collection account where you still owe money, or is the acct closed.

Please describe the circumstances so we can help you.

???

 

Butch,

Even if he/she has an open balance on an account, wouldn't the pulling of an inquiry be considered continued collection activity? Which is something that is disallowed during the valdation period? Does the FTC not have anything to say on this (I'm not saying they do, I just thought they did)?

 

mindcrime2,

Here's a possible scenario which I'm trying to prove...

1. CA can't validate paid collection, so deletes from CRA 1
2. CA later pulls AR soft inq on CRA 1
3. CA then reports on CRA 2
4. Consumer disputes as "not mine" on CRA 2
5. CA now verifies consumer's name and SS# with CRA 2.

I think you hit the nail on the head with "personal and sensitive information." We already have a lawsuit filed for that and other violations, so we'll see how it goes. But if anyone knows for sure that pulling an AR on EQ, would result in the CA getting the SS# without having to provide it first, I could sure use the proof to help out with my court case.

(Not intending to hijack the thread.)

DemPooches

 

If the account:
1. isn't yours
2. was paid
3. was possibly yours but was never validated

or what yours is
4. in error and the creditor or collection agency agrees to delete

then it's a whopping violation. They're not allowed to pull your credit simply at a lawsuit threat.

they're also not allowed to pull your credit if a closed account is reporting incorrectly.

the idea falls under the fcra "permissible purpose" and permissible purpose refers to "eligibility of" services, an account... etc. The only exception is an ongoing open account... they can pull it as much as they want to in any form they want to... but in the scenario... you've got them.

However, what you can win depends on their willingness to settle and/or the judge you get.

 

That's what we needed to know. Since the account is closed they may NOT pull. If an account is OPEN and you file suit which cuases them to pull an inq. they would just "SAY" it was a review. I don't think we could argue that. See?

As has been said the whole thing has to do with whether or not a company should be getting your personal information at all, "Permissable Purpose".

It has nothing to do really with whether the inq is soft or hard.

You now have violations.

Good Luck,

 

I remember a member of the board (forget who) saying an OC receives the same information from your report when pulling an AR (soft inq.) as they would as if they pulled a hard. Now, I would guess this would also be the for a CA who pulls a soft on your report.

Maybe someone can confirm this for us?