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A Potential Game-Changer for Victims of False Credit Reports

A Potential Game-Changer for Victims of False Credit Reports

By Lucas Rhoads, Ferraro Fellow, and Leslie Brueckner, Senior Attorney

Got bad credit based on crimes you didn’t commit? If you do, you’re not alone. But a new lawsuit just joined by Public Justice may finally give consumers the power to hold credit reporting agencies accountable and force them to correct inaccuracies that ruin thousands of lives every year.

Our client, Randy Cleary, is a Michigan resident who had his identity stolen over thirty years ago by a criminal who used Mr. Cleary’s name in a traffic stop. As a result of that identity theft, Mr. Cleary has been thrown in jail, issued myriad traffic citations, had his drivers’ license revoked numerous times, and been forced to change his name twice.

But that was just the beginning of Mr. Cleary’s troubles. Unbeknownst to him, the false information linking Mr. Cleary with crimes he didn’t commit were picked up by CoreLogic, a credit reporting agency, and included in Mr. Cleary’s credit report. When he recently applied for housing, he was rejected because his credit report contained inaccurate criminal convictions—none of which were actually committed by him.

Mr. Cleary sued CoreLogic in Michigan federal court under the federal Fair Credit Reporting Act (FRCA}, seeking damages and asking the court to prevent CoreLogic from publishing the false information in the future. CoreLogic responded, in a motion to dismiss, that FCRA permits private plaintiffs, such as Mr. Cleary, to obtain only damages and not to correct false information. The company asked the court to throw out Cleary’s demand that his credit report be fixed, allowing CoreLogic to leave its false records intact—and continue to report the inaccurate information in the future.

We think that’s outrageous, and that’s why we agreed to represent Mr. Cleary and get him the relief he deserves. In our opposition brief to the court, we argued that CoreLogic’s interpretation of the FCRA undermines the core protections that Congress intended in passing the statute in the first place. Moreover, we argued, this interpretation places the enforcement of consumers’ rights solely within the purview of the Federal Trade Commission, an overburdened federal agency that brought only 87 enforcement actions in 40 years. Even the most pessimistic assessment of Congress cannot conclude that this is how lawmakers intended to protect consumers.

The federal court in the case just denied CoreLogic’s motion as premature, but said that CoreLogic can refile it later—which the company undoubtedly will do. And if Mr. Cleary ultimately wins this issue, countless other consumers will benefit, too.

That’s because each year, thousands of Americans suffer as a result of false information on their credit reports, often as a result of identify theft. And once a bad credit report comes out, it can ruin your chance to get a job, buy a car, obtain insurance, get a loan—the list goes on and on.

Making matters worse, once false information makes its way into your credit report, it can—as Mr. Cleary’s story vividly illustrated—be almost impossible to fix. Credit reporting agencies often refuse to correct inaccuracies, so the same false information gets repeated over and over again, sometimes causing reputational and financial ruin.

When that happens, a consumer’s only recourse is to file a lawsuit in federal court—if you’re lucky enough to find a lawyer to take your case, that is. But even then—and here’s when things get truly Kafkaesque—most courts have held that they lack the power to require credit reporting agencies to fix a consumer’s records, even in cases involving willful misconduct on the part of the credit agency.

If you think that’s wrong, we agree—and we think Mr. Cleary’s case is just the right one to fix it once and for all. That’s because we discovered a potential game-changer in our research into Mr. Cleary’s case.

The federal courts are currently split on this question. Back in 2000, the U.S. Court of Appeals for the Fifth Circuit issued a terrible decision holding that courts don’t have the power under the FCRA to order credit reporting agencies to fix their records. A number of lower courts have followed that decision, leaving consumers high and dry.

But here’s why we think we can win this: It turns out that the Fifth Circuit was never made of aware of key legislative history showing that Congress specifically intended to empower consumers to “enforce” the FCRA—language that proves that courts do have the power to compel credit agencies to fix their records.

For the first time, Public Justice has brought this legislative history to light, in our defense of Mr. Cleary, which will make his case the very first to consider this key piece of evidence. If the court agrees with us, we will establish vital precedent protecting the ability of consumers to correct inaccurate credit reporting and potentially tee up a pivotal battle in the Sixth Circuit Court of Appeals—a court that has already questioned the reasoning of the Fifth Circuit’s earlier decision.

The result could be huge. A victory for Mr. Clearly would also be a victory for every single American who relies on the accuracy of credit reports at crucial moments in their lives. Moreover, it would put credit reporting agencies on notice that they must assure the accuracy of these vitally important reports. Otherwise, consumers will see them in court—and, for the first time, get all their relief that they need and deserve.

Public Justice is co-counsel on the case with Ian Lyngklip and Priya Bali of Lyngklip & Associates Consumer Law Center in Southfield, Mich., who filed the action on behalf of Randy Cleary.