Part 2 CRAs

Reasonable Procedures do not Require 100 % Accuracy

"If a CRA reports an item of information that turns out to be inaccurate, it does not violate the FCRA if it has established reasonable procedures in reporting the item. A plaintiff must prove an inaccuracy, failure to follow reasonable procedures, an injury, the injury was caused by the inaccuracy

Duty 1 Maintain Reasonable Procedures

"Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about who the report relates" This is the most heavily litigated section of the FCRA with hundreds of cases filed each year. Cases can result in substantial damages. A jury in Oregon awarded a plaintiff to $18 million in punitive damages against Equifax.

Five Groups Affected by FCRA

Consumer Reporting Agencies, End Users, Furnishers, Resellers, Consumers

Duty 3. Conduct Re investigations

Consumers are permitted to dispute the "completeness or accuracy" of any information in their file In response, the CRA must "conduct reasonable re investigation to determine whether the disputed information is accurate".

Requirements for Background Screeners

Furnishing a consumer report for employment purposes imposes more specific certification requirements. A consumer reporting agency may furnish a consumer report for employment purposes only if the end user certifies that : 1. has obtained the consumer's written consent. 2. will provide the consumer with a summary of rights under the FCRA before taking averse action 3.will not use the report to violate equal employment opportunity law.

Technical Accuracy may not be enough

Some courts hold that CRAs can be liable for reporting technically accurate information if it is nevertheless "misleading" or "incomplete" This can include reporting an account as "litigation pending" without indicating that the consumer had initiated the lawsuit. Example includes reporting of "duplicate" convictions or criminal charge that lacks disposition(Misleading) Example includes someone who had a conviction but the felony is later expunged or dropped to a misdemeanor( incomplete)

Five Basic Duties of CRAs

1. Maintain "reasonable procedures to assure maximum possible accuracy" 2. Provide consumer reports to only those with a "permissible purpose" and consisting only of the information that can be reported under the law. 3. Conduct "re investigations" in the event of a consumer dispute. 4. Make "disclosures" to consumers. 5. Properly dispose of consumer information.

Duty 4 Make Disclosures to Consumers

15 1681g entitles consumers to see what is in their "file" CRAs are required to provide consumers with: 1. All the information in their file 2. The identity of the sources of that information, except sources used in investigative consumer reports. ~This has been the subject of extensive litigation regarding the non disclosure of vendors in connection with a file disclosure. 3. The identity of each person who has obtained a copy of the report: for employment purposes, within the preceding two years; for any other purpose, within one year 4. A summary of rights under the FCRA.

Reasonable Procedures:Public Records Data for Employment Purposes

15 USC 1681k In addition to maintaining reasonable procedures generally, CRAs that prepare consumer reports for employment purposes that include public record data must either : 1. At the time such information is reported to the end user notify the consumer that the information is being reported OR 2. Maintain "strict procedures" to insure that the public record information is "complete and up to date"

Compliance with Re investigation Requirement

A CRA responding to a dispute must make a good faith effort to determine the accuracy of the disputed item. Checking with the original sources or other reliable sources. may require more than asking that original source. must be more than a "cursory investigation of the reliability of information"

Compliance with the Permissible Purpose Requirement

CRAs must maintain "reasonable procedures" to insure that only those with permissible purpose get consumer reports Examples of reasonable procedures: Conduct on site visits/inspection Check end user's business license or incorporation documents. Check end user's references. Check publicly available information regarding the end user(telephone directory) Examine application and supporting documentation for discrepancies. Periodic Audits Monitoring of use activities.

Examples of things that are not permissible Purposes.

Curiosity Litigation; however, consumer reports can be sold to those engaged in debt collection, without triggering the FCRA. ~this has been the subject of litigation. the debt collector may still only obtain a report in connection with its attempts to collect debt Marketing( subject to certain exceptions)

Compliance with the Permissible Purpose Requirement cont.

End users must , identify themselves, certify the purpose for obtaining the report and certify that the information in the report will be used for no other purpose. ~FTC staff report indicated that a blanket certification may be acceptable(no need to obtain a certification for each individual report, it may not always be regarded as sufficient. ~Criminal sanctions, including 2 years imprisonment for employees of CRAs who knowingly provide consumer reports to those who do not have permissible purpose.

Duty 2: Sell only to End Users with a "Permissible Purpose"

Examples: In response to subpoena or court order. In accordance with written instructions from a consumer who is the subject of the report. A credit transaction with the consumer. For employment purposes( with written authorization of the consumer. For insurance underwriting purposes. National Security investigations.

Duty 5 Proper disposal of Consumer Information

Information contained in consumer reports is highly confidential and must be disposed of properly In disposing, CRAs must take "reasonable measures" to protect against unauthorized access to the information Examples of reasonable procedures include: burning, pulverizing, or shredding. destroying or erasing electronic data so it "cannot be read or reconstructed" contacting with a records disposal company

Additional Duties Attendant to Investigative Consumer Reports

Prohibited from: Furnishing an investgative consumer report unless the end user certifies that it has compiled with the disclosure requirements Violating any equal employment opportunity laws including certain public record information, unless it has verified the accuracy of the information, obtained consumer consent, or maintains strict procedures to assure the accuracy of the information including adverse information obtained through a personal interview unless it has followed reasonable procedures to corroborate the information or the person interviewed is the best possible source of the information.

Compliance with Re investigation Requirement cont.

The re investigation must be completed within 30 days or the disputed information removed from the file. The CRA is required to consider any information provided by the consumer. The CRA can terminate the re investigation if the dispute is "frivolous or irrelevant( disputing information that accurately reflects a public record may be considered "frivolous or irrelevant. Inaccurate information must be promptly deleted. The CRA must notify the consumer of the results. The CRA must note on subsequent reports that the information is disputed unless it determines that dispute is "clearly frivolous"

Investigative Consumer Reports

Whenever a consumer reporting agency prepares an investigative consumer report, no adverse information in the consumer report (other than information which is a matter of public record) may be included in a subsequent consumer report: unless such adverse information has been verified in the process of making such subsequent consumer report, or the adverse information was received within the three month period preceding the date the subsequent report is finished" This applies when preparing a new investigative report, i.e, if a consumer or end user asks for a copy of an existing report then re verifying is not require. Derogatory information older than three months, other than public record information, must be verified.