Monday, August 17, 2009
FCRA and FDCPA Lawsuits Skyrocket
Debt Collectors and Creditors Beware, FCRA and FDCPA Lawsuits Skyrocket
On December 16th of 2008 I predicted a sharp increase in consumer credit related lawsuits in 2009. Boy did I nail that one. According to Jack Gordon, CEO of WebRecon LLC, a service that tracks FCRA and FDCPA filings, “we’re on pace to eclipse 8,500 such lawsuits in 2009. That’s a record for any one year.”
The issue at hand seems to be two-fold. First, more consumers are viewing litigation as an investment in their own credit future. These are the folks who are fed up dealing with the typical credit dispute protocol, which might work fine for 98% of disputes but isn’t 100% effective. That percentage who can’t seem to have legitimate errors removed from their credit reports using the bureau’s required methods are starting to find it necessary to escalate their efforts into the courts in order to regain their good credit names.
The second bunch seems to be coming from the shake down artists. These are consumers who have damaged themselves through poor credit management and have hooked up with lawyers, on a contingency basis, to see if they can clean up by suing debt buyers, collection agencies, lenders and credit bureaus despite having no damages caused by the aforementioned parties. In many cases it’s less expensive to throw a little money at the plaintiff rather than taking the case all the way to court, where even a jury verdict in the defendant’s favor is hugely expensive.
It’s been my experience that roughly 6% of FCRA and FDCPA cases make it to court. Two of the 31 cases where I’ve been an expert witness have seen the inside of a courtroom. The overwhelming majority of cases are settled prior to going to court, are dismissed or are disposed of via summary judgment.
It probably doesn’t surprise you but the lawsuits are not all filed by unique consumers and unique lawyers. According to Gordon, “Approximately 38% of all FDCPA cases are filed by repeat litigants.” It seems that there are many lawyers and many consumers who are habitual filers, meaning that they have sued multiple times under the FDCPA and FCRA.
While it’s completely plausible that a consumer can simply attract bad creditors or illegal treatment from a collector, it doesn’t take a rocket scientist to figure out that many lawyers and consumers have figured out that it pays quite well to be a serial litigant. A simple Google search on “collection attorneys” yields over 2 million results. The bottom line, suing collection agencies seems to be good business.
As a former collection agency owner, Gordon saw a strong need for a service that helped collection agencies avoid serial litigants. This has lead to the 2008 development of the ”FDCPA Litigant Alert.” This service culls the Federal and state court records and pulls out all FDCPA and FCRA filings and twice a month compiles a list of cases. This list can be purchased by collection agencies and used to avoid the overly litigious consumers. “A lawsuit does not have to be legitimate to be very, very expensive”, says Gordon. I think many collection agency owners would agree.
Originally published at Credit.com
This article should not be interpreted as legal advice or testimony. It does not represent any conclusive opinion of the author or any of the credit experts from ExpertCreditWitness.com.
Comments:
Twyla, I can answer that. FCRA stands for Fair Credit Reporting Act. It's not a governing body but it is the law that regulates much about how our credit reports are used and managed. The governing body, or enforcement arm, is the Federal Trade Commission.
Mr. McConville: Can you explain what FCRA stands for? is it a governing body?
John's right. It may have first seemed that credit scores were only important to those applying for a home loan. Conusmers now realize that credit scores affect their insurance rates, employment, interest rates on other consumer debt (credit cards, auto loans) and on business lines of credit. Incorrect information, or reporting, can literally damage someone's life and destroy their ability to run their business. It is worth the time and effort in a law suit to hopefully save thousands. Even if the information reported is correct, more consumers are willing to challenge the credit data in hopes of improving their credit score. Engaging the services of the right credit expert witnesses, FDCPA expert witnesses and FCRA expert witnesses makes a difference.
I have to agree with John on all counts. I am speaking as a lender. The score requirements with conventional lending has gone from a minimum of 500 to 620. The 620 is really marginal because you get hit with a 1.5% discount based on the score. I also have had plenty of mortgage applicants that were able to show proof that the credit report contained errors but the underwriters can care less. They are now checklist processors instead of credit underwriters. I have heard more than once the words "We are slaves to the credit score". If your dispute errors with the bureaus and they do not fix, your only choice is to proceed in court. The FCRA, FACTA and FDCPA are really meant to protect consumers. Like with anything in life, some people abuse the system out of their own greed.
There is much more pressure on creditors and credit bureaus to report accurately now the country is in the credit crunch. As a result of the low supply of consumer and business lending, more and more individuals are becoming educated about credit and credit scores. The demand for credit lawsuits increases with the supply of "aware" consumers.
There is much more pressure on creditors and credit bureaus to report accurately now the country is in the credit crunch. As a result of the low supply of consumer and business lending, more and more individuals are becoming educated about credit and credit scores. The demand for credit lawsuits increases with the supply of "aware" consumers.
Renton, that's the million dollar question. I believe the volume is increasing for a couple of reasons... 1. consumers are more sensitive about their credit today than ever in the past and are willing to go to court to correct errors when the credit bureaus won't 2. Good credit is more valuable today and lenders want to see better credit scores. Correcting errors on their reports is worth the cost of litigation in many cases 3. The credit bureaus CAN make mistakes. This doesn't mean that they are always wrong, far from it. But, mistakes to happen 4. I think consumer advocate attorneys are more aggressive today than in the past. This is all keeping credit expert witnesses, FDCPA expert witnesses and FCRA expert witnesses very busy
I don't understand why the number of credit related lawsuits is picking up. I believe that they are, why would you make that up? But if these companies were breaking the credit related laws like the FCRA and FDCPA as much in the past then why has the volume been much lower? How many of these cases actually see a courtroom? How many of them actually have a need for an FDCPA expert witness or FCRA expert witness or some other credit expert witness?
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