Credit reports have a profound effect on individuals’ access to credit, affecting quality of life, relationships, and the availability of investment opportunities such as home ownership. To protect consumers, the Fair Credit Reporting Act¹ (FCRA) primarily regulates credit reporters (namely Equifax, Experian, and Trans Union) and creditors (referred to in the FCRA as “Furnishers”) and others who handle or rely on credit reports. Claims under the FCRA are not fact intensive, can be prosecuted very efficiently, and can make good additions to your practice if you are willing to work with other lawyers.

A look at the statistics suggests that claims under the FCRA are surely among the most underused consumer tools available to combat unfair business practices. A 2013 Federal Trade Commission study found that 23 percent of consumers identified an error on at least one of their credit reports.² Such errors include the inclusion of other peoples’ debts and mortgages, incorrect addresses, and incorrect Social Security numbers. Alarmingly, five percent of consumers found an error that could result in them being required to pay additional interest and even in outright credit denials.

Despite this prevalence of mistakes, credit reporters have been named as defendants in Wisconsin’s federal district courts only 84 times in the past five years.³ Although the FCRA does not provide a claim for every person who finds an error on his or her report, it is likely that of the 4.4 million consumers in Wisconsin, there are thousands who have valid claims under the FCRA but do not know what to do about it.

Lawyers should have good information and a strategy to choose a new practice area and grow into it. For any new practice, this includes a brief primer on the law, a realistic expectation of damages awards, and a client development strategy. In addition to these, included here is advice for expanding your practice wisely.

What Makes a Valid Claim?

Although the FCRA does not provide an action merely because a credit reporter has made an error, it does require credit reporters, among other things, to “maintain reasonable procedures to assure maximum possible accuracy of the information”⁴ and “conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate … or delete the item.”⁵ This reasonableness standard provides credit reporters a defensein the instance of inaccurate information, but claims do arise when consumers can show a credit reporter’s pattern of failing to fix credit reports after valid disputes have been made.

A potential client who approaches you with credit report issues may have disputed the inaccuracies in the credit reports already. The best practice is to review their disputes for completeness and accuracy and, if sufficient, bypass one’s own prefiling dispute process. Although I recommend putting disputes in writing, one client presented a record of 23 phone calls to a credit reporter’s dispute center, which co-counsel and I believed were sufficient to file. If no prefiling dispute has been made, a lawyer should prepare a claim by drafting at least two dispute letters, which the client should sign, to send to each credit reporter. My practice is to send the second 60 days after the first, and to file suit against each credit reporter that fails to fix the report within 30 days after the second letter is sent.

Note also that “maximum possible accuracy” applies broadly to all information on the credit report, not only to harmful or sensitive information. Therefore, claims are available broadly even to consumers who cannot show financial harm.

Likely Damages and Fees at Trial or in Settlement

The FCRA provides actual damages, statutory damages, and attorney fees against credit reporters and furnishers for negligent violations of the FCRA and adds punitive damages for willful violations.⁶ A trial lawyer who can convince a jury of the willfulness underlying the credit reporters’ systems’ inadequacies could end up joining other lawyers around the nation who have been able to obtain awards of millions of dollars in punitive damages from these multibillion-dollar businesses.⁷ Of course, that is only one potential trial outcome, with juries frequently seeing negligence rather than willfulness in credit reporters’ violations or even submitting a verdict of no liability.

As a result of the wide range of damages awards, and the small set of facts in dispute, claims under the FCRA frequently settle, when defense counsel believe they could lose at trial. For a case in which a client’s credit was damaged, a lawyer with a record of trial success could expect a settlement in the tens or low hundreds of thousands of dollars for a “mixed file” or “merged file” case.

In a mixed file case, the credit reporter has erred by putting another person’s information on the client’s report. In a merged file case, the credit reporter has merged the reports of two people into one credit report. For a case with no credit damage, a competent lawyer should be able to clear up the credit report and obtain attorney fees and costs early in the litigation timeline.

Most lawyers working FCRA claims are paid on contingency. As on all matters, it is important to manage client expectations. Clients who have heard about the million-dollar judgments are likely to have unrealistic goals, but most clients seek only to have their credit reports cleared up, making any damages awarded the icing on the cake. As a result, clients are happy to pay attorney fees or high percentages on contingency. When was the last time your clients were thrilled with 55 percent of the damages award?

Identifying Clients with FCRA Claims

Given the scant filing history relative to what one might expect after seeing the FTC study results, the large majority of potential FCRA clients must be unaware that they have an issue in the first place or that help is available to them. Instead of waiting for clients to identify a need, I have begun recommending that all my clients check their credit reports for errors. Time allowing, we take 20 minutes to do this at the end of our first meeting.

The Fair and Accurate Credit Transactions Act of 2003, which updated and amended the FCRA, required the credit reporters to provide to consumers the ability to obtain each of their three reports for free, once annually, which they have done at www.annualcreditreport.com.⁸

Using this site with clients is simple. They verify their identity with a set of questions about their financial history that only they should know, such as banks from which they have borrowed and places they’ve lived, and receive each report after a unique set of questions. Instruct clients to not choose the option of paying for the “scores” (none of which are the FICO score on which lenders rely). You and the client should review the report’s inaccuracies and discuss if and how the client needs your help.

Breaking Into FCRA Practice

The technical nature of the facts underlying each claim makes it difficult for lawyers new to the field to successfully prosecute a claim without co-counseling with an experienced firm. Although there are very few facts at issue, it is difficult to corral them into a clear and convincing story. This is a result of the byzantine processes the credit reporters use to obtain, verify, and use a consumer’s credit information, and a testament to the quality of the FCRA defense bar.

To gather all the facts, lawyers must at a minimum familiarize themselves with the documents that the credit reporters use and exchange with furnishers. They must also know specialized discovery questions, deposition strategy, and important trial court testimony to obtain.

Clients who have heard about the million-dollar judgments are likely to have unrealistic goals, but most clients seek only to have their credit reports cleared up, making any damages awarded the icing on the cake.

The precise difficulty is in working backward to show that the credit reporters’ failure to fix your client’s report is a result of their willful failure to maintain reasonable dispute resolution procedures (just saying “it wasn’t good enough” is not good enough). In addition, the excellent FCRA defense bar sees cases brought by unprepared lawyers as an opportunity to make favorable law and therefore will be unlikely to settle these cases for more than a cleaned-up report and the claim’s nuisance value, if at all.

I filed my first FCRA claim in 2011, before I learned any of this. The case kicked along for a few months, without much expectation of settlement past a cleaned-up credit report, until some late-night research uncovered a multimillion-dollar verdict on a very similar claim. The next day, I contacted the lawyer who obtained this verdict and invited him to join as co-counsel. With credible expert counsel now on my side, the parties sped along to a favorable settlement in a few months.

I have co-counseled with this lawyer on all my FCRA claims since, handling most of the day-to-day work, relying on his expertise and reputation, while continually bolstering my own. I am certain that this path is better for my clients, who receive expert representation, and for me. I have found a great mentor, a first-rate education, and a safety net to ensure I don’t fumble a great case. (For those determined to go it alone, the National Consumer Law Center has created an excellent resource on the FCRA.)

FCRA claims have been an invaluable addition to my practice. For now, I highly value the working mentorship of an excellent lawyer and enjoy the peace of mind of sharing my cases with an expert. In a few years, I’ll be the expert mentoring a novice. With many potential cases bubbling just under the surface, a very high effective hourly rate, and a national consumer law bar that has been welcoming to lawyers new to the practice area, FCRA claims may be the perfect addition to your practice.

Endnotes

¹ 15 U.S.C. §§ 1681-1681x.

² www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-accurate-credit-transactions-act-2003-fifth-interim-federal-trade-commission/130211factareport.pdf.

³ Experian: 36, Equifax: 26, Trans Union: 22. Results pulled from a PACER search for each credit reporter as a named party in Wisconsin.

⁴ 15 U.S.C. § 1681e(2).

⁵ 15 U.S.C. § 1681i(a)(1).

⁶ 15 U.S.C. § 1681n; 15 U.S.C. § 1681o.

⁷ E.g. Miller v. Equifax Information Servs. LLC, No. 3-11-CV-01231-BR, U.S. District Court for the District of Oregon; Thomas v. Trans Union LLC, 197 F. Supp. 2d 1233 (D. Ore. 2002).

⁸ 15 U.S.C. § 1681g.