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Can a third party debt collector obtain your credit report?

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I've found conflicting information about whether a third party debt collector can legally obtain your credit report. What do you think?

CACV accessed my credit report. In fact, my TransUnion report says that they've looked at it regularly and have obtained my credit report.

They're now taking me to court for an Arbitration Confirmation Award, and so I did some legal research, hoping to find even more grounds for a counterclaim.

It looks like, according to the FCRA, Fair Credit Reporting Act (FCRA) § 604. [15 U.S.C. § 1681b] that they can't access it unless they have a valid reason to do so...for instance, if the consumer voluntarily seeks credit or has an active credit account.

I've found some caselaw to support that conclusion:

The Ninth Circuit Court of Appeals found that the FCRA only allows debt collectors to obtain credit reports "in connection with a credit transaction involving the consumer." Pintos v. Pacific Creditors a$$'n, --F.3d--, 2007 WL 2743502 (9th Cir. 2007).

The case doesn't do a lot for me, since I'm from Missouri, but I thought it might help someone else.

A few months ago, I'd found another case on this topic and the court found that a creditor can't access your credit report for the purpose of considering a lawsuit, (in other words to find out if you're worth suing) but I can't remember the name of that case. If I find it again, I'll post it here.

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Read this: (Written by pit bull collection lawyers)


Use of Credit Reports for Collection Purposes is Limited

Monday, March 2, 2009

Collectors routinely review credit reports to aid in debt collection. Credit reports can provide valuable location information such as a new address, place of employment or telephone number, as well as information useful in assessing the "collectability" of a debtor. However, not long ago, the Ninth Circuit Court of Appeals made clear an important limitation related to such efforts. That court held that credit reports may only be ordered in situations where the "debtor voluntarily participates in an extension of credit." Pintos v. Pacific Creditors Association, 504 F.3d 792 (9th Cir. 2007). Pintos confirms collection agencies may only pull credit reports if the consumer "chose to initiate the credit transaction voluntarily."

The issue of when it might be inappropriate to order a credit bureau to aid in collection came before the court due to the unpaid registration of Maria E. Pinto’s sport utility vehicle. The police found the vehicle parked on the street with that expired registration and ordered the vehicle towed. In doing so, P&S Towing obtained a lien on the vehicle for its towing and impound services. P&S Towing eventually sold the vehicle, but the sale did not cover the amount owed, thus creating a deficiency. The deficiency balance was transferred to Pacific Creditors Association (PCA), a collection agency, who ordered a credit report from Experian in December of 2002. When Pintos discovered that her credit bureau report had been ordered, she filed a complaint against PCA and Experian, claiming that such action violated the Fair Credit Reporting Act (FCRA). The District Court held that the collection of a debt was a permissible purpose under the FCRA to order and review a credit report, and dismissed the case on PCA’s motion for summary judgment.

Pintos appealed that decision. The Court of Appeals began its analysis by looking at the permissible purposes for ordering a credit report under the FCRA. The FCRA specifically authorizes the ordering of credit reports in situations where the collection "concerns a credit transaction involving a consumer." The problem for collectors is that the FCRA does not define "credit transaction," nor does it specifically provide that "account collection" is a permissible purpose for obtaining a credit report. The court then turned to the Fair and Accurate Credit Transaction Act of 2003 (FACTA) to define "credit transaction," since the underlying goal of the FCRA and FACTA is similar – to protect consumer privacy. The court held that a credit transaction "is a transaction in which the consumer directly participates and voluntarily seeks credit." Therefore, not all debt collection involves a credit transaction. The rationale behind this decision, the court explained, is that "a consumer who chooses to initiate a credit transaction implicitly consents to the release of his credit report for related purposes. By requiring this consent, 15 U.S.C. §1681 b(a)(3)(A) forges a ‘direct link’ between the consumer’s search for credit and the furnishing of his credit report."

Therefore, because Ms. Pintos did not voluntarily seek credit nor consent to her vehicle being towed, the transaction was not entered into voluntarily and thus the debt was not a "credit transaction." The court held that PCA was not authorized to pull the credit report to collect this type of debt, thereby overturning the district court’s decision. It is worth noting that the district court had relied heavily upon an earlier case, Hashburn v. County of Los Angeles. 323 F.3d 801 (9th Cir.2003). which was decided in 2002, prior to the enactment of the FACTA.

Although the Pintos case is not formally binding in other jurisdictions, its rationale and analysis would certainly be persuasive anywhere that the FCRA and FACTA apply. Therefore, compliance with its holding has been the consensus among collection firms throughout the country. Further, although the ruling has no affect on collection of such clear "credit transactions" as credit cards, loans and the like, it certainly muddies the waters for collection of certain other debts, such as medical bills.

Written by: Attorney Elaine Landis, Kohn Law Firm S.C.

Edited by trueq
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