Fair Credit Reporting Act (FCRA): an overview

The Fair Credit Reporting Act is a federal law that regulates consumer credit reporting agencies, such as Experian, Equifax, and TransUnion. The FCRA also regulates those who provide information to the credit reporting agencies and those who use the information in a consumer credit report.

Studies have shown that nearly 80% of consumer credit reports contain errors of some kind. Examples of the type of errors found include accounts mistakenly listed as delinquent, loans listed twice, and inaccurate personal information. As the credit reporting industry has increased their use of automated procedures, additional problems have arisen. One common such problem is when information for one person is listed on another person’s report (known as a merged or mixed file).

There are a couple of reasons why inaccurate information ends up on a credit report. First, the information provided to the credit reporting agency may itself be inaccurate. Second, the CRA might assigned the reported information to the wrong consumer’s file. Whatever the reason, these mistakes may lead to a person being denied for credit or receiving credit on less favorable terms.And increasingly, many employers are reviewing a job applicant’s credit history when making employment decisions, which creates the possibility of a person being denied a job based on incorrect credit report information.

Unfortunately, the FCRA does not require credit reporting agencies to report accurate information. It merely requires them to use reasonable procedures to ensure the maximum possible accuracy. The Act is a bit toothless in this regard. Where the FCRA does have some teeth, however, is in its investigation requirement. Under the FCRA, if a consumer disputes information in their report to a CRA, the agency must investigate the dispute and, if verified, correct the disputed information. Despite this clear-cut obligation, many consumer disputes do not result in the inaccurate information being removed from their report. One possible reason for this is that the CRA’s customers are lenders, not consumers. For this reason, reporting agencies have an incentive to over-include items at the expense of accuracy.

Fortunately for consumers, the CRA’s failure to conduct a reasonable investigation is a violation of the FCRA and the consumer may bring a lawsuit to hold them liable for their bad conduct. If the consumer proves that the CRA willfully failed to conduct a reasonable investigation of the dispute, the consumer is entitled to $1,000 in statutory damages or the consumer’s actual damages (such as loss of credit or money paid under a higher interest rate). If, however, the credit reporting agency was merely negligent in failing to conduct a reasonable investigation of the dispute, the consumer is only entitled to their actual damages. If no actual damages are suffered, the consumer will lose the suit. In addition, the FCRA requires the credit reporting agency to pay successful consumer litigant’s reasonable attorney fees and costs.

If you learn of a mistake on your credit report, your first step is to dispute it with the credit reporting agency. This post explains how to do it. If the CRA fails to correct the error after receiving your dispute letter, you may consider talking to an attorney who handles FCRA cases. The attorney will be able to recommend next steps to get the mistake fixed and will be able to advise you if a FCRA lawsuit is an option.

 

 

 

Conditional delivery: how car dealers use it to scam buyers

If you’ve ever bought a vehicle from a dealer and financed the purchase, chances are you signed something called a conditional delivery agreement. If you read this agreement carefully, it states that the dealer has the right to cancel the sale if the dealer can’t assign your auto loan to a lender on terms agreeable to the dealer. In other words, if the dealer changes its mind about the deal, it has the right to unwind the transaction. This provision, typically in the fine print of the sales contract, is the source of one of the most widespread auto dealer abuses today and applies to both new and used car sales.

Here’s how the scam works: you agree to buy a vehicle and you fill out a credit application for financing. The dealer tells you that you’ve been approved for the loan and you sign the loan agreement and other typical sales paperwork, which contains the conditional delivery language. You either don’t notice this provision because it’s in the fine print or the dealer tells you it’s nothing to worry about. So you give them a cash down payment and turn over your trade-in. The dealer gives you the keys to your new car and you drive it home thinking you’re all set.

But you’re not. A few days later, the dealer calls you and tells you that your financing “fell through” and that you need to bring the vehicle back and sign a new loan agreement. If you complain, they might threaten to repossess your new vehicle or even to call the police and report it stolen. So you go back to the dealership. And you learn that your trade-in has already been sold and that the new loan that they’re demanding that you sign has a higher interest rate than the one you originally agreed to. Although you don’t want to sign this new agreement, you don’t have a choice because your trade-in is gone and they’ve threatened to repossess your new vehicle and keep your downpayment if you don’t agree to the new, less favorable, loan on the spot. You need the new vehicle to get to work and to drive your kids to their activities, so you reluctantly sign the unfavorable new loan.

Dealers call this practice conditional delivery or spot delivery. Consumer advocates call it a “yo-yo” scam. Either way, it’s a blatantly unfair and one-sided practice. The dealer doesn’t want you to think about the deal overnight, it wants the deal closed on the spot. On the other hand, the dealer wants to keep its options open after you’ve driven the car off the lot. It doesn’t want to be rushed into a hasty deal. The conditional delivery agreement makes the deal final for the buyer, but not for the seller.

Sometimes the yo-yo scam is simply the dealer re-thinking the terms of the sale after the fact. Other times, it’s a deliberate scheme from the beginning to inflate the finance costs. There’s evidence that dealers target customers with poor credit or low income. In other words, dealers use the yo-yo scam to rip off people who can least afford to be ripped off.

Although the conditional delivery provision in the contract gives the dealer some legal cover, there are ways to attack this unfair practice through a lawsuit. If you’ve been a victim of a yo-yo scam, you should discuss the situation with an attorney right away.

Minnesota’s Lemon Law: An Overview

Most people use the term “lemon” to describe any vehicle that has repeated problems. But in Minnesota the “lemon law’ is a statute that protects buyers of new vehicles that have problems that can’t be fixed.

There are five basic elements to a lemon law claim in Minnesota:

  • (1) The defect has to arise and be reported to the manufacturer or authorized dealer within two years of the date of purchase or within the term of the manufacturer’s warranty, whichever date is earlier. Although there are certain circumstances where this time period can be extended, in general, the lemon law doesn’t protect you against problems that crop up after two years.
  • (2) You have to give the manufacturer a reasonable opportunity to fix the defect. If you’ve given the manufacturer four or more opportunities to fix the same problem, or if they’ve had your vehicle for 30 or more days, the law presumes that they have had a reasonable opportunity to fix the issue. On one of these attempts, you have to give the manufacturer written notice of the problems. Also, if the problem affects the steering or braking systems, you may only have to allow one repair attempt.
  • (3) The defect has to still be present after the manufacturer has had a reasonable opportunity to fix it. In Minnesota, at least, the court is going to want to know whether there is still a problem.
  • (4) The problem has to substantially impair the use or value of the vehicle. This is a subjective test that is fact-specific and is usually decided on a case-by-case basis.
  • (5) The defect can’t be caused by your negligence or misuse of the vehicle. You can’t abuse or neglect your vehicle and then blame the manufacturer for not being able to fix it.

Before starting a lawsuit under Minnesota’s lemon law, you have to engage in an Alternative Dispute Resolution process if the manufacturer offers one. The manufacturer of your vehicle will be able to give you information about their informal dispute process. This ADR process is not binding, though, and you can bring a lawsuit in court if you believe the ADR result is unjust.

If you bring a successful lemon law claim, you have the choice of a refund or replacement. The refund has to include the full purchase price of the vehicle, although there may be an offset for the mileage you’ve driven the vehicle. If you elect a replacement vehicle, it has to be one of comparable to the one you’re returning. In addition, the manufacturer has to pay for your attorney fees and costs for bringing the lawsuit. This is important because most lemon law attorneys are able to take the case on a contingency fee, where you pay no attorney fees out of pocket.

Prior accident used vehicles: what you need to know

One of the most serious types of auto fraud is the concealment of a vehicle’s prior accident history. A previous wreck will negatively affect a vehicle in three main ways:

  • Diminished value: A vehicle with a prior accident history will almost always be worth less than a clean vehicle. The reason is simple: most people won’t buy a vehicle with a prior accident, and they definitely won’t pay clean retail price for it. Depending on the circumstances, a prior accident may diminish a vehicle’s value by fifty percent.
  • Safety risks: It’s very difficult and expensive to repair major collision damage, especially if the accident caused frame or structural problems.  Once a car’s structure is compromised, it may not be possible to restore its original integrity. This can pose serious safety risks if the vehicle is ever in another accident. The damaged frame will probably not perform as the manufacturer intended it to, which can expose passengers to significant injuries or even death.
  • Branded title: In many circumstances, a prior accident will result in a branded vehicle title. In Minnesota, for example, if an insurance company appears in the chain of title, the title will have a “salvage” stamp on it. A “salvage” stamp will require additional steps, such as an inspection, before a title can be issued. And a branded title will make the vehicle more difficult to sell and will significantly diminish its value.
Minneapolis auto fraud lawyers

Pamela Carls – flickr.com

Because of these issues, the only way to profitably sell a prior accident vehicle is to conceal its wreck history from the buyer. A dealer can buy a rebuilt wreck for less than wholesale price, conceal the accident history, and charge clean retail price for the vehicle. Or the dealer can pay pennies on the dollar for a still-damaged vehicle at a salvage auction, make cosmetic repairs, and sell the vehicle to an unsuspecting buyer as a clean vehicle at full retail price. As long as the dealer is willing to check its conscience at the door, it can increase its profit margin by selling prior accident vehicles.

If you find out that your used vehicle has previously been in an accident, the first thing you should do is get it inspected by a reputable body shop or collision center. If you’re in the Twin Cities, I recommend Schoonover Bodyworks. Tell the collision center that you suspect that the vehicle has been in an accident and that you want them to examine it to confirm. If the body shop confirms that the vehicle has been in an accident, ask them whether there is any structural damage or safety concerns. Also ask whether the signs of the accident would have been apparent to a knowledgeable car dealer. And be sure to get an estimate for any recommended repairs.

Then, call or go to the dealer who sold you the car. Tell them about what you’ve learned and ask whether they knew about the prior accident. Ask them what they will do to fix the situation, but don’t commit to anything on the spot.

It’s also a good idea to discuss the situation with a lawyer with experience handling auto fraud cases. There’s a good chance that you will have legal claims against the selling dealer and those claims may require the dealer to pay your attorney fees. Once you know what your legal options are, you can decide whether it makes sense to try to negotiate a resolution with the dealer or to assert your claims in court.

And if you’re in the market for a used car, here are some steps you can take to avoid buying a prior accident vehicle in the first place:

  • Do your homework: buy a CarFax or AutoCheck report for the vehicle. Most prior accidents are noted on these reports, although there is a lag time between the date of the accident and when it shows up on the report. So don’t rely exclusively on the CarFax report. You should also ask to see the vehicle’s title to make sure it isn’t branded. But remember: just because it has a clean title, doesn’t mean that there wasn’t a prior accident.
  • Ask the dealer: be sure to ask the sales rep about prior accidents. If he tells you that there aren’t any, ask him how he knows that. It’s also good to have the dealership note the lack of accident history in writing in the purchase papers. Also, be sure to read the paperwork very carefully. Some dealers will slip a disclosure of the prior accident into the fine print.
  • Get an independent inspection: ask to have the vehicle inspected by a mechanic or body shop of your choosing. You will have to pay for this yourself, but it’s worth it. Prior accident damage is easy to spot by a trained professional who knows what to look for. An ounce of prevention is worth a pound of cure.

These steps don’t guarantee that you won’t end up with a rebuilt wreck, but they definitely increase your chances of getting a safe, reliable used vehicle.

 

Stop collection calls for someone else’s debt

Photo by Chris Potter

Photo by Chris Potter

On of the most frequent consumer complaints received by the Consumer Financial Protection Bureau is debt collectors attempting to collect a debt from the wrong person. It’s unclear whether these collectors are intentionally pursuing the wrong person or that they’ve made a mistake. But if you’re getting calls or letters from a collector for someone else’s debt, you probably don’t care why it’s happening, you just want the collection attempts to stop. Here are some suggestions to stop collection attempts for debt that isn’t yours.

Collection calls or letters for someone else’s debt

If a debt collector is calling or writing you about a debt that you don’t owe, the first thing you should do is tell them very clearly that they have the wrong person and that this is someone else’s debt. Be polite but firm. The collector may ask you to confirm the last four digits of your social security number or a similar personal identifier. While it may be unwise to give the collector your full social security number, there probably isn’t too much risk in giving them  the last four digits to confirm that the debt isn’t yours. The collector may ask you if you know the actual account-holder and how to reach them. While you’re under no obligation to do so, you may consider passing along the other person’s information if you know it.

In addition to verbally telling the collector that it is someone else’s debt, you may consider sending a follow-up letter confirming what you told them. Identify yourself in the letter and then write something like: “you called me on this date at this number. I am not the person who owes this debt. Please stop contacting me.” If you know any details about the account in question, include a reference to those in your letter to be sure the collector can properly identify the account. Send this letter certified mail with a return receipt and keep a copy of the letter and receipt for your records.

You should also keep detailed records of any additional collection attempts after you’ve notified the collector that the debt isn’t yours. Keep track of the time, dates, and duration of any additional calls and save any voice messages. If you think the calls are robocalls, make a note of that and why you think so. Also, keep copies of any letters or other documents that they send you.

It’s also a good idea to check your credit reports to make sure the other person’s debt isn’t listed on your reports. Use Annual Credit Report to get free copies of your credit reports from the three major credit reporting agencies. Once you have the reports, make sure that the other person’s account isn’t showing up on your credit report. If it is, you should send a dispute letter to each of the credit bureaus incorrectly reporting that account. Take a look at this post for more information about how to dispute incorrect information on your credit report.

If you’ve told the debt collector that you are not the person who owes the debt and the collection attempts continue, it’s time to talk to a consumer rights attorney to discuss the situation in more detail. In addition to helping you stop the collection attempts, a consumer attorney can advise you whether you have any claims against the debt collector. If the debt doesn’t belong to you, you’ve told the collector that, and the collector still keeps calling, it deserves to get sued and be held accountable for harassing an innocent consumer.

Collection lawsuit for a debt that isn’t yours

If you get served with a collection lawsuit for someone else’s debt, you need to take additional steps. You should do everything suggested above, but you also have to submit an answer to the lawsuit. In Minnesota, the answer must be submitted within 20 days. An answer is a formal legal document that responds to each of the allegations in the complaint. If the debt isn’t yours, you should be able to deny most of the allegations in the lawsuit. You should also note somewhere in your answer that the debt is someone else’s. Even if you don’t owe the debt, you have to answer the lawsuit. Failure to respond to the lawsuit will likely result in a default judgment against you. A default judgment can be difficult (and expensive) to overturn, even if the debt isn’t yours. It may also lead to garnishments and other unpleasantness.

Because the consequences of a collection lawsuit are quite serious, you should strongly consider discussing your situation with a consumer lawyer. A consumer lawyer can help you prepare an answer to the lawsuit and also advise you if you have possible counterclaims against the debt collector for pursuing the wrong person.

 

 

Use the TCPA to stop robocalls for someone else

Unwanted robocalls and texts are one of the most frequent consumer complaints received by the Federal Communications Commission. In 2014 alone, the FCC received about 215,000 complaints about autodialer calls and texts. These calls are particularly annoying when the caller is trying to reach someone else. Often, these wrong-number robocalls are from debt collectors trying to collect a debt from the previous user of a phone number or from telemarketers pushing their products.

In response to the overwhelming number of consumer complaints, the FCC recently strengthened consumer protections against wrong-number robocalls by clarifying the Telephone Consumer Protection Act. The TCPA is a federal law that prohibits auto-dialed calls to your cellular phone without your consent. Until recently, however, there was a loophole of sorts for wrong-number calls. Callers could argue that they had the consent of the person they were trying to reach and that was good enough to satisfy the TCPA’s consent requirement.

Thankfully, the FCC closed this loophole. The FCC has made clear that callers are liable for robocalls to reassigned numbers when the current subscriber of the number has not consented, even if the caller has no notice of the reassignment. This reaffirms the TCPA’s basic premise of giving consumers control over the calls that they receive.

Under the TCPA, you can obtain an order from a court that requires the caller to stop placing wrong-number robocalls to your cell phone. In addition, the TCPA provides for damages of at least $500 per illegal robocall. This $500/call penalty is designed to deter illegal robocalls and to incentivize consumers to help the FCC enforce the TCPA through private lawsuits.

We are Minneapolis consumer protection lawyers. If you are getting wrong-number autodialed calls please get in touch today to discuss your rights.

Fight odometer fraud with the Federal Odometer Act

According to a 2002 study by the National Highway Traffic Safety Administration, there are over 450,000 cases of odometer fraud each year. The study estimates that the increased cost consumers pay to buy vehicles with odometer rollbacks is over a million dollars per year, which makes it one of the top crimes against property in the United States.

Fortunately, car buyers have a powerful tool to combat odometer rollbacks–the Federal Odometer Act. The Odometer Act has several major protections against odometer fraud:

• It prohibits odometer tampering

• The Act forbids false statements about an odometer reading during a sale

• It requires that a transferor disclose a vehicle’s odometer reading each time it’s transferred

• The Act establishes notice procedures when a repair results in a change to the odometer reading

The Odometer Act allows a person victimized by odometer fraud to bring a lawsuit against anyone who has violated the Act with intent to defraud. Successful litigants are entitled to $10,000 or three times their actual damages, whichever is greater. Further, the rollback artist has to pay for the buyer’s attorney fees and court costs. In addition, the Odometer Act provides for federal agency enforcement and many states, including Minnesota, have criminal penalties for odometer fraud.

We’re Minneapolis auto fraud lawyers who have successfully litigated odometer fraud cases. Get in touch today if you think you’ve been taken advantage of by a odometer rollback.

When Buying a Used Car, Watch Out for Worthless Service Contracts

Buy a new or used car these days and you can expect the salesperson to pressure you to buy a service contract or “extended warranty.” For a fee, which is usually rolled into the financing, these products provide repairs or maintenance for a certain period of time, say 2 years or 24,000 miles. But they rarely provide much benefit to the buyer and often only serve to pad the dealer’s bottom line.

Source: Flickr

Source: Flickr

Here’s an example of what I mean. In a recent case, our client bought a used vehicle with over 100,000 miles on it. The client also bought a service contract for an additional $2,500 or so. The service contract lasted for 5 years or an additional 100,000 miles. Our client rolled the cost of the service contract into his loan for about $50 a month. At this point, you might be thinking this sounds like a pretty good deal.
However, the fine print of the service contract provided for a maximum reimbursement of only $3,000, less a $100 deductible. So the maximum reimbursement was actually $2,900. Further, a great deal of possible mechanical problems were excluded from coverage.
 So, our client paid $2,500 for the right to be reimbursed $2,900. In other words, he paid $2,500 to potentially receive an additional $400, but only if: (a) a problem occurred; (b) the problem occurred during the term of the service contact and (c) the problem wasn’t excluded from coverage. He would have been better of declining the service contract and putting the $50 a month into a savings account. The savings account could have been used for any repair at any time. And if no repairs are necessary, he could have used the money for something else.
Before agreeing to buy any service contract, make sure you understand the total cost (not just the monthly cost), the total amount of coverage, and what is covered and what’s not. Don’t rely on the salesperson to tell you these things, read the terms for yourself. And if you don’t understand the terms, it probably doesn’t make sense to buy it.

Bankruptcy trustees are “clawing back” tuition paid for debtors’ kids

According to an article in the Wall Street Journal, Bankruptcy Trustees are using a legal argument called “fraudulent transfer” to take back tuition payments clients have made 7027599019_ffc018d450_mto their children’s colleges. This can be a shock to people, but trustees do things like this all the time.

Here’s how it works:

Under bankruptcy law, all the property you have at the time of your bankruptcy filing is part of the bankruptcy estate. If you have property above certain exemption amounts, the trustee can demand turnover of that property. This would seem to incentivize people to get rid of assets before filing bankruptcy. You can understand the temptation for someone to sell their boat to their brother for $1.00. (more…)

5 Tips for Streamlining Your Bankruptcy

Go Fast!

Photo by Eric Ward aka a4gpa

The number one thing that slows down a bankruptcy case is the speed with which clients can assemble the necessary documents. By following these five tips, you can ensure that your bankruptcy moves quickly, and that you’re prepared for any issues that could arise during the process.

Go Paperless.

It’s time to get rid of that mountain of paperwork and bills. Sign up to receive digital statements from your bank and financial accounts, and request to receive your pays stubs digitally. It also pays to switch your utilities, mortgage, car payments and regular payments to e-bills. This allows you to stay up to date on your assets and liabilities, and makes submitting your documents to your attorney as easy as sending an email. (more…)