FACTA & Debt Collector Inquiries

Can a debt collector run your credit report?  This question has been asked many times here on the Broken Credit Blog and it has generally been posited that ‘debt collection’ is a permissible purpose under the FCRA.  A recent filing in Pintos v. Pacific Creditors Association, Case no 04-17485 (September 21, 2007, Ninth Circuit) changes things a wee bit in favor of the consumers of the world.  And oh yes, debt collectors [I know you read my blog too so pay attention] this is your warning!  Be afraid; be very afraid…

Below is an excerpt from the Opinion by Richard R. Clifton, Circuit Judge:

Maria E. Pintos appeals the district court’s summary adjudication of her claims under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq. Pintos contends that Pacific Creditors Association violated the FCRA by obtaining, without any FCRA-sanctioned purpose, a credit report on her from Experian Information Solutions, Inc., a credit reporting agency. Pintos also argues that Experian violated the FCRA by furnishing the report to PCA.

The district court granted summary judgment in favor of the defendants. Relying on our decision in Hasbun v. County of Los Angeles, 323 F.3d 801 (9th Cir. 2003), the court held that PCA was authorized to obtain Pintos’s credit report under15 U.S.C. § 1681b(a)(3)(A) because it was attempting to collect a debt from Pintos. Hasbun held that debt collection was a permissible purpose for obtaining a credit report, but we decided that case prior to the enactment of the Fair and Accurate Credit Transactions Act of 2003 (“FACTA”), Pub. L. No.108-159, 117 Stat. 1952. FACTA makes clear that debt collection is a permissible purpose for obtaining a credit report under § 1681b(a)(3)(A) only in connection with a “credit transaction” in which a consumer has participated directly and voluntarily. Because PCA obtained a credit report on Pintos unrelated to any such transaction, we reverse the district court with respect to Pintos’s claims against PCA and remand for further proceedings with respect to damages and to Experian’s liability.

Debt Buyers’ Association International, an industry trade group for junk debt buyers, has issued the following ‘member alert’ with regards to this ruling:

The Pintos Court held that the FACT ACT only allows for credit reports to be obtained in connection with collection attempts when there was an underlying “credit transaction” under the FACT ACT. Further, the Court held that a towing debt was not part of a credit transaction. The Court also found Experian liable for allowing the impermissible pull.  Debt buyers are encouraged to review with their counsel their practices in pulling credit bureau reports in light of this decision.

In other words, watch out junk debt buyers!  No more credit report peekabo-inquiry-bombs unrelated to a credit transaction; and keep your inquiries off the credit reports of the Broken Credit Blog fans!  You know what I’m talkin’ about junk debt buyers!  FACTA gonna smackya!

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.