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Class Action Granted by Court

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Atlanta Journal-Constitution Staff Writer

Franklin Clark went to court because he wanted the world to know he hadn't filed for bankruptcy. His case has evolved into a class action suit that involves millions of consumers and damage claims in the billions.

If Clark wins, it could change the way companies like Equifax keep track of your personal finances.

Clark never filed for bankruptcy, but he co-signed a truck loan for his son-in-law, who later did. Even though Clark said he made sure the truck payments were made on time and the loan was paid off, the connection to his son-in-law's bankruptcy came back to haunt him.

When Clark tried to buy a car for himself, he was turned down because his own credit report carried a bankruptcy case notation. For Clark, it was a humiliation made worse because "everybody" in the little town of Belton, S.C., heard about it.

"It was like I was white trash," Clark said.

The 58-year-old mechanic is the point man in a case that challenges the accuracy of reports issued by the three largest purveyors of credit data in the world.

Experian and TransUnion are defendants in addition to Atlanta-based Equifax. Information the companies use to compile their reports comes from banks, credit card companies, retailers and others that extend credit to consumers.

"We are confident that the language used in our credit reports is accurate and completely understandable to the lenders who use them every day, and that there is no merit to claims that say otherwise," Equifax said in a statement. Experian and TransUnion would not comment.

Inaccurate or imprecise credit reports have long been a sore point for consumer advocacy groups. That's because credit reports carry the bill-paying histories of virtually every consumer who has ever applied for credit, and they determine how much credit individuals are granted and at what cost.

The Fair Credit Reporting Act, which governs the credit reporting industry, requires companies to use "reasonable procedures to ensure the maximum possible accuracy" of credit reports.

There are estimates that a third or more of all credit reports contain errors, although attorneys for the plaintiffs acknowledged in court documents that no reliable statistics exist.

The Consumer Federation of America and the National Credit Reporting Association, a trade organization, will release a study on credit report accuracy Tuesday in Washington.

The study covers 500,000 credit reports. It shows "there's not 100 percent accuracy," said Stephen Brobeck, executive director of the Consumer Federation of America. He would not provide details of the study's findings.

Financial stakes high

What make's Clark's case more significant than other lawsuits alleging damage from credit report errors is that it was granted class status. Attorneys for Clark and his fellow plaintiffs believe it is one of only three so designated under the Fair Credit Reporting Act, and the largest by far.

Class action status raises the financial stakes and gives plaintiffs the strength of an army. Without the status, individuals are on their own against larger and better financed legal opponents.

"We don't think we had their attention until the judge certified the class," said Doug Smith, a Spartanburg, S.C., attorney and member of the plaintiffs' legal team.

The defendant companies admitted as much in an unsuccessful appeal of the class action certification. They argued before the 4th U.S. Circuit Court of Appeals that the class designation would impose "intense settlement pressure" and would invite additional suits.

"The class-certification order has transformed one or two individual claims, of very doubtful merit, into extremely high-stakes litigation with the prospect of damages verdicts exceeding $1.6 billion for each defendant," the companies argued.

"That's a bazooka aimed at the head of the defendants," said Emory law professor Richard Freer, a specialist in civil law procedure. "Once a class is certified, the defense faces enormous potential liability. The incentive for the defendants to settle this case goes through the roof."

For that reason, Freer thinks the case is unlikely to go to trial, which would begin in July if court-ordered mediation is not successful by Jan. 30.

'It made me . . . sick'

Fair Credit Reporting Act litigation is still in its infancy, according to Richard Rubin, a Santa Fe, N.M., lawyer who handles appeals for consumer plaintiffs.

To win in court, consumers must prove credit report errors are willful. The 4th U.S. Circuit Court of Appeals defined a willful act as one done "knowingly and intentionally . . . in conscious disregard for the rights of the consumer."

Congress amended the 1970 law in 1996 to include penalties of $100 to $1,000 for willful errors.

Each of the companies identified about 1.6 million to 1.7 million consumers who fall into the Clark suit. It's not apparent whether that means a total of 5.1 million individuals are involved, because the three companies often have reports on the same people.

People eligible to join the class action suit will be notified by Feb. 17, 2003.

All the consumers have three things in common, according to U.S. District Judge Margaret Seymour, who is hearing the Clark case in Spartanburg, S.C.

In granting class action status, Seymour held that the plaintiffs have not filed for bankruptcy; their credit reports include the notation "bankruptcy," and the notation does not indicate the account involved in a bankruptcy was jointly held.

In their appeal, TransUnion, Equifax and Experian contended that even if credit reports include a bankruptcy notation, lenders can differentiate between individuals actually in bankruptcy and those who co-signed a note for the bankrupt consumer or hold a joint account with that person.

Attorneys in Clark's case claim the distinction shown between who filed and who did not is not clear.

Clark thinks the answer is for the credit reporting companies to fix the system.

"It made me and my wife plum sick," said Clark, who has been out of work since September. "I just want to make them do what's right."

Emory's Freer says such a case could change how credit companies fill out their reports.

"If what (the defendants) are doing violates the Fair Credit Reporting Act, then the defendants need to change what they are doing," Freer said. "One way to make them do is to hit them with a big judgment."

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:o I am in the same boat as Clark cosign on a loan,bankruptcy.

Wells Fargo reported it as individual-filed chapter 7,charge off...

I disputed with the 3 CRAs

Equifax&Trans Union deleted it :p

Experian came back remains. :mad: I dont think they verified it.I disputed it again during CHOD will wait till Dec 29. Mailed WF a letter requesting agreement, accounting,contract etc... also wait till Dec 29

Going to sue W F in Jan if they don't remove it.

:p :p Looks like help is on the way :D :D

[Edit by MJMMDMM on Wednesday, December 18, 2002 @ 12:02 AM]

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