District Court (Or.) Says FCRA Gives Debt Collector No Right to Offset for Plaintiff’s Settlement with CRAs; Says Debt Collector Failed to Report Account as Disputed; and Might Violate FCRA’s Permissible Purpose Rules By Pulling Credit Report on ID Theft Victim

In Vasquez-Estrada v. Collecto, Inc., 2015 WL 6163971, at *2 (D.Or., 2015), Judge Stewart addressed some FCRA rules for furnishers in the context of identity theft.

Defendant also argues that plaintiff has been compensated for these same damages through his settlement with the CRAs in separate litigation. However, the settlement with the CRAs resolved only claims under the FCRA, not under the FDCPA, and for different conduct. Moreover, the settlement amount included attorney’s fees and compensation for plaintiff’s wife, who was a co-plaintiff in that action. Even if plaintiff sought duplicate damages, there is no express or implied right to an offset of amounts that plaintiff may have received in settlement from other FCRA defendants. See Thomas v. Trans Union, LLC, Case No. 00–CV–1150–JE, at *18 (D Or Jan. 29, 2003); Irvin v. Mascott, 94 F Supp2d 1052, 1058 (ND Cal 2000). Defendant has failed to produce evidence that defendant did not produce any of plaintiff’s damages and cannot reduce plaintiff’s damages based on a settlement with the CRAs as a matter of law.

The District Court also found that the debt collector violated the FCRA for failing to report the Account as disputed in response to a dispute provided through the CRAs.

When responding to an ACDV, a furnisher must correct a credit file that lacks the notation of a bona fide dispute to avoid misleading the CRA. Gorman, 584 F3d at 1162–63 (following Saunders ). Neither of the collection agencies in Saunders and Gorman had otherwise notified the CRAs of the dispute, such as through automatic updates. Nonetheless, the duty under § 1681s–2(b) is not a general duty to report a dispute at any time and in any way, but to correct an inaccuracy when placed “upon notice of dispute” from a CRA. Id at 1154. Responding to the CRA without correcting an omission is “misleading in such a way and to such an extent that [it] can be expected to have an adverse effect.” Id, citing Saunders, 546 F3d at 150.  Even though defendant had previously reported plaintiff’s dispute to the CRAs, the 2013 ACDV did not contain the most current information, possibly because of the 60–90 day delay described by Belmore. Plaintiff’s credit report would continue to show the debt as undisputed until Experian processed defendant’s notification. Thus, responding to the 2013 ACDV without correcting the omission of the “XB” code was “incomplete or inaccurate” within the meaning of the FCRA, entitling plaintiff to summary judgment on his First Claim for negligent noncompliance.

Finally, the Court found that a debt collector can violate FCRA’s permissible purpose rules by pulling a credit report on a identity theft victim when it is on notice of the possibility of a fraudulent transaction.

Defendant argues that under the plain language of the statute, its purpose is permissible as long as it intended to collect a debt that it believed was valid and “involved” plaintiff. District court cases have read this same excuse into the statute. See Crehin v. ARS Nat’l Servs., No. 8:13–CV–01497–SVW, 2014 WL 104073, at *2 (CD Cal Jan. 9, 2014) (“A good faith belief that a debt exists is thus sufficient to satisfy these provisions.”); Trikas v. Universal Card Servs. Corp., 351 F Supp2d 37, 42 (E.D.N.Y.2005) ( “[T]he plain language of [15 USC § 1681b(a)(3)(A) ] … focuses on the intent of the party obtaining the consumer report.”); Korotki v. Attorney Servs. Corp., 931 F Supp 1269, 1276 (D Md 1996) (“[S]o long as a user has reason to believe that a permissible purpose exists, that user may obtain a consumer report without violating the FCRA.”). However, these opinions do not discuss or follow Pintos or Andrews.  Plaintiff interprets Pintos and Andrews to deem the collection of a victim’s fraudulent debt as an impermissible purpose, regardless of the user’s intent or good faith belief. However, neither Pintos nor Andrews addressed how a collection agency’s good faith belief that the debt is valid relates to whether it has a permissible purpose under § 1681b(a)(3)(A). Andrews did address the issue of the CRA’s “reasonable belief” that the user had a permissible purpose, but that standard applies only to the CRA. Likewise, the user’s intent was not an issue in Pintos because the defendant collection agency was collecting plaintiff’s personal debt.  Nonetheless, § 1681b(a)(3)(A) defines a permissible purpose in terms of “a person” who “intends to use the information” for a permissible purpose. As stated by another district court interpreting the same FCRA section, “the inclusion of the verb ‘intends’ is significant, because a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.” Trikas, 351 F Supp2d at 42 (internal quotation marks and citation omitted). Under the usual tenets of statutory interpretation, the court must consider defendant’s intent in this case.  Pursuant to its routine, defendant obtained plaintiff’s consumer report to assess plaintiff’s ability to pay what it believed was his debt. Belmore Depo., pp. 20–21, 38–40, 95–96. Defendant argues that plaintiff cannot produce evidence that defendant lacked that intent. Recently, a district court in this circuit interpreting Pintos and Andrews allowed a similar claim to survive a motion to dismiss based on plaintiff’s allegation that the user of the consumer report, Citibank, “either knew or should have known” that plaintiff was the victim of identity theft and had not applied for the credit that it was trying to collect.” Rand v. Citibank, N.A., No. 14–CV–04772 NC, 2015 WL 510967, at *3 (ND Cal Feb. 6, 2015). Citibank argued that the intent requirement for the user is lower than the “reasonable belief” standard required for CRAs by Andrews. The court did not agonize over that distinction because it found that plaintiff’s allegations met the higher standard.  Plaintiff has produced evidence that at the time defendant requested plaintiff’s consumer report on August 21, 2012, it was on notice that the debt was fraudulent. A reasonable juror could conclude that, based on the letters defendant received from plaintiff disputing the collections efforts in 2011, defendant knew or should have known that this account was the result of identity theft and that obtaining plaintiff’s credit report was not authorized under the FCRA. Accordingly, defendant is not entitled to summary judgment as to this violation.