Important Appeals Court ruling!!!

washingtonpost.com
Court Backs Full Checks On Credit Complaints
http://www.washingtonpost.com/wp-dyn/articles/A35219-2004Feb12.html


By Caroline E. Mayer
Washington Post Staff Writer
Thursday, February 12, 2004; Page E04


A federal appeals court yesterday ruled that a credit card company must
diligently investigate consumer complaints about inaccurate credit files
before concluding they have no merit.

Three judges on the 4th U.S. Circuit Court of Appeals in Richmond
unanimously found that MBNA, the giant Delaware credit card issuer,
failed to conduct a reasonable investigation of a consumer's records
because it conducted only a cursory review of its files.

The case involved Linda Johnson, owner of a hair salon in Newport News,
who was unable to get a favorable mortgage rate after she found that her
husband's overdue credit card account at MBNA had marred her clean
credit file.

The decision goes to the heart of a continuing controversy about the
growing number of errors on credit reports -- and how earnestly lenders
have to check their files to correct mistakes. For many years, creditors
have only verified that the information on their records matched the
data at the three national credit bureaus; typically, they do not check
original documents to make sure the information was correct in the first
place.

"This is a huge win for consumers," said Evans Hendricks, editor of
Privacy Times. Not only is it the first ruling by a federal appeals
court on this issue, he said, but it involves the nation's
second-largest credit card issuer.

MBNA spokesman Jim Donahue said the company had no comment, as it had
not yet had a chance to review the decision.

In the Johnson dispute, the credit bureau forwarded her complaint to the
card issuer for investigation. MBNA replied that it had every reason to
believe that Johnson had co-signed for the account in 1987, even though
its papers do not go back that far.

Johnson sued MBNA and won a jury verdict of $90,000 last year. The
company appealed, saying its duties to investigate and report consumer
complaints "are very limited -- and intentionally so under the scheme
enacted by Congress."

The appeals court panel, disagreed, saying: "The plain meaning of
'investigation' clearly requires some degree of careful inquiry by
creditors. . . . It would make little sense to conclude that, in
creating a system intended to give consumers a means to dispute -- and
ultimately correct -- inaccurate information on their credit reports,
Congress used the term 'investigation' to include superficial,
unreasonable inquiries by creditors."



© 2004 The Washington Post Company

Also See Johnson case at: http://caselaw.findlaw.com/data2/circs/4th/031235p.pdf

Denise Richardson
deniserichardson1@netzero.com