In order to pull someone’s credit report, the debt collector has to have a federally permissible purpose according to the Fair Credit Reporting Act. OK…we all know that. We cannot go spelunking for our ex-girlfriends and such for amusement. As a general rule, it used to be that a collector could pull a credit report on any debtor. This is an easy concept. This is not the law anymore.
The 9th Circuit Court of Appeals recently decided Pintos v Pacific Creditors Association. In that case Ms. Pintos’ car was towed. She failed or refused to pay the towing company so they sold her car. Apparently, the car did not fetch enough money to pay her towing bill. The towing company turned the debt over to Pacific Creditors Association (“PCA”). PCA pulled her credit report. The 9th Circuit held that this was a mistake. Under the Fair and Accurate Credit Credit Transactions Act (“FACTA”) the newest revision of the Fair Credit Reporting Act, a collector may only pull a credit report in connection with a “credit transaction.” Ms Pintos did not ask the towing company for credit; rather she helped herself to it. Ms. Pintos lost her claim at the trial court but not in the Court of Appeals.
FACTA became law in 2003. Prior to FACTA, we only had the the Fair Credit and Reporting Act (“FCRA”). Under FCRA, the defendant PCA, would not have been in violation of the law for pulling Pintos’ credit report. Under FACTA, it is in violation of the law.
Yesterday, I got a CYA letter from Transunion advising me of this issue. I can see why it is up in arms. Ms. Pintos not only sued PCA, but also sued Experian for providing her credit bureau to PCA.
MORAL OF THE STORY – Before pulling a credit bureau in connection with a consumer transaction, take note of whether the transaction at issue was a voluntary request for credit that has gone bad or whether it was an involuntary debt incurred by the debtor. If it is the former, you may legally pull a credit bureau. If it is the latter, you had better think twice before doing so.