After the FACTA: A Judgment Creditor Must Establish a “Credit” Transaction to Get a Credit Report

credit-deniedOn July 25, 2016, the United States District Court for the Western District of Washington held that before obtaining a consumer’s credit report, a third party judgment creditor must establish that the transaction at issue is a “credit” transaction under the Fair and Accurate Credit Transactions Act (“FACTA”) and Fair Credit Reporting Act (“FCRA”).  Rodriguez v. Experian Information Solutions, 2016 WL 3976564, *1 (W.D. Wash. July 25, 2016).

In June 2014, Plaintiff Jesse Rodriguez (“Plaintiff”) noticed four outstanding debts listed on his credit report, which was prepared by Experian Solutions, Inc. (“Experian”).  Each of the four outstanding debts listed on Plaintiff’s credit report were for parking violations allegedly incurred by the Plaintiff.  The report listed the debts as “ALLIANCE ONE RECEIVABLES”.  AllianceOne Receivables Management, Inc. (“AllianceOne”) is a debt collection agency.  Plaintiff alleged that he had contacted Experian to dispute the appearance of the debts on his Experian credit report in June, October and December of 2014, as well as March and April of 2015.  Experian allegedly did not remove the outstanding parking violations from the Plaintiff’s credit report.  On May 27, 2015, Plaintiff submitted a complaint through the Consumer Financial Protection Bureau’s (“CFPB”) website.  In response, Experian stated that it had removed the four outstanding debts from Plaintiff’s credit report.  Plaintiff maintained that the parking violations remained on his credit report.

Plaintiff alleged that AllianceOne engaged in efforts to collect the outstanding parking violations while his CFPB complaint was pending.  Plaintiff alleged further that AllianceOne used his Experian credit report for the purpose of collecting the outstanding parking violations.  On August 4, 2015, Plaintiff filed suit against Experian and AllianceOne (collectively, “Defendants”) alleging that Defendants had violated the FCRA.  At issue in Rodriguez is Plaintiff’s allegation that AllianceOne’s violated the FCRA by requesting Plaintiff’s credit report for an impermissible purpose.  AllianceOne moved to dismiss, arguing that, under Pintos v. Pacific Creditors Association, 606 F.3d 665 (9th Cir. 2009), it was a judgement creditor, and its request for the credit report is automatically proper where the debt is fully adjudicated.  AllianceOne argued that outstanding parking violations are fully adjudicated debts.  Plaintiff countered that under FACTA, which amended the FCRA, the definition of “credit” limits the types of transactions for which third parties can seek credit reports.  Plaintiff argued that it was not permissible for a third party to request a consumer’s credit report for the purpose of collecting a debt arising from a parking violation because the debt obligation did not stem from a “credit” transaction.

The District Court agreed with Plaintiff, holding that a defendant’s status as a judgment creditor does not automatically indicate that a debt collection agency has a permissible purpose for obtaining a consumer’s credit report.  The court concluded that, after FACTA’s passage, third parties must not only establish that a transaction “involves” a consumer, they must also demonstrate that the transaction at issue is a “credit” transaction.  15 U.S.C. § 1681b(a)(3)(A).

Nathan Alexander

Nathan Alexander

Nathan’s experience includes an emphasis in general commercial litigation, securities, trust & estate, intellectual property and professional malpractice matters. Nathan both prosecutes and defends against claims for businesses large and small, trustees, investment advisors and other fiduciaries. Nathan handles matters involving contract and licensing disputes, franchising disputes, consumer protection claims, fiduciary duty claims, intellectual property claims (including trademark, trade dress, unfair competition and copyright) and banking litigation. Nathan practices before state and federal courts and arbitration panels throughout the country, as well as before state and federal regulators.

Chad Richards

Chad Richards

As an associate in Dorsey’s Regulatory Affairs Group, Chad assists clients in a wide range of matters, including complex energy litigation, enforcement, and compliance. Chad also assists clients on corporate and regulatory matters in the energy sector.

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