Small Claims - Credit and Debt

All Americans have certain rights with respect to their credit. All have a right to privacy. Protecting this privacy right is the design of most legislation surrounding this issue.

The most obvious question is do creditors have the right to check your credit report? The answer is yes, and most creditors obtain this information from credit reporting agencies. The federal Fair Credit Reporting Act is one of the principle laws which protects your rights.

Credit Reporting agencies do not check for references from personal friends or neighbors. But credit investigation agencies check these sources as well as court records and all other public records, such as tax records.

Creditors must advise you that as part of their decision to extend credit they will search your credit report. Also, you must be provided with a copy of this report. The Credit Report is designed only to track your payment record on other accounts which you have had.

Certain violations of law may occur if a creditor obtains information about you for unlawful purposes. A violation of federal and usually state laws occurs when a person or company draws information on you without your knowledge. You may have a cause of action against a person or company who has obtained information on you, without your knowledge. However, certain parties may obtain information about your credit without your consent, so long as they notify you. State laws vary on this point.

You should be able to obtain a credit report for your information without even applying for credit. Very recent laws now require more accurate credit reporting in understandable language, as well as a requirement that certain credit reports be provided at no charge.

Fixing Your Credit

Often, once you receive a copy of your credit report, you will discover a number of errors. The burden is upon you to take affirmative action to set the record straight.

First, you should take all action in writing. There must be written documentation of all errors or problems, otherwise no action will be taken by the credit agency. Understand that you must write to the Credit Bureaus which publish this information. Furthermore, if you have been turned down for credit, you can write to the agency which provided your credit report and dispute the item(s) with them, in writing.

Your writing should include a clear explanation of your problem accounts, and an explanation of why there is a problem. Naturally, you should provide any copies of documents which support your case. Never send originals of any document in your possession. You can produce them later in court if ever necessary. You should ask the agency or Bureau to investigate these items. This letter does not mean you will simply have the item removed. It means the agency will seek documentation from the reporting party, usually another creditor to verify the accuracy of the account.

Generally, the credit agencies have a duty to act immediately and must respond to your request for an investigation into the problem(s) you identified within 30 days. If they have not responded within 30 days, you may be able to institute an action to have the items in dispute removed from your report. This can be a costly step, however, and should be fully explored with your Plan Attorney before taking such action. Many state laws may affect your rights to sue. Often a second letter to the Bureau or agency informing them of the expiration of the 30 day period, may result in the Bureau removing the item from your credit report, because they cannot verify its accuracy.

Assuming the agency or Bureau responds to your first letter, they will either accept your request and remove this item from your report, or they will indicate that the item will not be removed. They do not always have to tell you why the item will not be removed, and they will usually refer you to the credit manager of the creditor reporting the derogatory information.

Assuming that you are unsatisfied with the response of the Bureau or the agency, you have the right to submit to the Bureau an explanatory statement of the derogatory item(s) on your report. There are certain restrictions and you should keep these items in mind when you do so.

First, the written statement is limited to less than one hundred words, and is not one hundred words per item. Second, the statement will be printed in exactly the form submitted, so if you have language problems or writing problems, you should have another person assist you. Third, be sure to understand that these are creditors that are likely to read this information. Calling another creditor a profanity or some other remark is not likely to assist your chances to get new credit. No matter how much a salesman wants to make a sale, the store's credit manager will make the decision to lend you money.

Also, avoid remarks like "I lost my job for two months and got behind," or "My wife was sick and we had medical bills." Late payments or no payments are rarely excused for an inability to pay, regardless of how sympathetic your excuse is. Understand each creditor is usually making their decision based on your ability to pay, in the event that one of these problems may occur after they loan you money.

Finally, be careful in deciding whether to submit a written explanation, since it may remain on your report for many years. It cannot be removed in many instances, and years after the item is no longer an issue on your report, the written explanation may call attention to a problem that otherwise would be missed or dismissed by a new creditor several years from now.

Should you have any questions, state credit agencies can often be of assistance. Also, the Federal Trade Commission administers the Fair Reporting Act and they can be contacted for information also. See the Government section of your telephone book for numbers and addresses of these entities.

Can You Sue a Credit Bureau or Agency For Reporting Incorrect Information?

If you were denied a loan because of a derogatory item or items reported to a potential creditor by a Credit Bureau or Credit Agency, can you sue them?

This is not an easy question to answer. However, some guidance is in order. First, determine the value of the item you could not obtain due to this report. If it is a toaster or bicycle or other item and if it is under $200, it is often not a good idea to sue, not because you have no case, but because the missed time from work or your affairs, coupled with the fees associated with suing are often not worth it. This choice is always yours, assuming you have a case, and you should act accordingly.

If you decide to sue, despite the low value, you may want to read the section regarding how to bring a Small Claims action and how to present your case.

Likewise, if the item which you were denied was in excess of the Small Claims jurisdictional amount, i.e., or over $5,000 to $10,000, you should fully discuss this matter, at no charge, with your Plan Attorney.

If the item which you were denied because of this report is greater than $200 but less than the jurisdictional limits of the Small Claims Court in your area, and you want to see if you have grounds for a lawsuit, the following analysis might help.

First, examine where the problem is, and who is committing the problem. A Credit Bureau relying on information provided by a past creditor is generally permitted to do so, and is usually not liable to you for reporting such information.

Analyze the documents which you have in your possession which prove the item is reported incorrectly. If the report says "not paid for 60 days" and you have canceled checks for every payment ever made proving that you were never 60 days late, your evidence appears to be solid. [It is also doubtful, but certainly possible, that a credit agency or bureau would ignore such definitive information from you.] Thus, you may have a case against someone for such a derogatory report [although we have not yet analyzed who the responsible party is.] But if you have no canceled checks to prove your case, and you have a credit agency telling you that the creditor has indicated that they have computer entries of all of your payments and that they can read this information to you, and that you appeared to be 60 days late for one period, you may not be able to prove your a case against any person or company. [Remember, just because the information is on a computer print-out does not make it correct. But it does create a hurdle for you to overcome in proving your case.]

It is not only your job, but also your burden, to prove that the computer entries may have been wrong, that a person at the creditor made wrong entries, or to prove some other reason to refute their computer evidence. These types of cases are brought to the courts on a daily basis, so many people like yourself feel they have been wronged. The purpose of this information is to provide helpful information so you can make the decision to sue or not, and not to make this decision for you.

[Remember, there are certain rules in suing, serving and presenting evidence. Review the realated topics to see if your evidence measures up to what is likely to be necessary.]

If the evidence shows that a party had incorrect information in its possession, and you brought the correct information to this party's attention, and the party still refuses to report the information properly, you should seriously consider legal action, including a request for punitive damages. Again, Small Claims may be the forum if the damages are proper, but you might check with your Plan Attorney for punitive damages explanations.

What can you sue for if a person or company has reported wrong information and refuses to correct it?

Assuming you have a liable party, you can sue for many types of damages, depending upon how you frame your lawsuit. First, you may be able to sue for the benefits of what you lost. For example, if you were applying for credit to obtain a computer to do a job for which you would receive payment, it is possible to recover these damages.

Other types of damages may be more difficult to obtain. Although you should probably seek such damages, such as an award for loss of enjoyment of a long bike ride if an uncorrected item on your credit report causes a bike shop to deny you credit for a bike, these damages may be difficult to measure. Remember, with damages you should know what the law will allow. In most Small Claims matters, the judge will apply the appropriate damages laws to your case.

If you were denied a home loan due to an credit report, whether you can sue for the loss of a particular interest rate, which over time may cost you several thousands of dollars, is definitely a case which should be discussed with a Plan Attorney. Even a small percentage of interest over years can cause substantial losses.

Can you recover attorneys' fees? Often, if the original creditor has caused the problem and you are suing, you might request a copy of the credit agreement, and any other writings between you and that entity. There may be attorneys' fees provisions in such documents which apply to your case, and allow the "prevailing party to recover attorneys' fees". Before you decide to bring this point up, however, be as certain as you can that you will be the prevailing party. Otherwise, you may end up paying the other party's attorneys' fees.

Also, certain state laws allow you to recover attorneys' fees. The very general rule is that unless your written document, or a specific law allows attorneys' fees, there is no absolute right to attorneys' fees, for either party. The rule is always to request such damages, so long as your request does not cause your case to be thrown out of Small Claims Court because it exceeds the court jurisdictional limits.

Can you recover for lost work, court time and investigation time? While it does not hurt to supply the court with an itemized list of such time, and proof of each item on the list, [e.g., a letter from your employer] judges realize that all parties had the same general expenses in appearing in court. Judges vary on such awards, but usually do not make such awards.

Of course, extraordinary costs will usually be carefully considered by judges. For example, the airline ticket of a witness might be awarded as part of a damage award, but not always. The rule is ask, and bring proof.

What about damages for the emotional upset and stress and related problems this credit agency has caused? In certain causes of action, damages for mental anguish and personal or physical injuries may be recoverable. These would be in cases where serious conditions of headaches, trauma, nausea and other related symptoms occur. If you believe your case involves these injuries to a serious degree, you should immediately contact your Plan Attorney. However, you should remember that every lawsuit is upsetting and frustrating and you may not be able to recover these damages without objective proof. In short, the choice to sue is yours, but you should be prepared to understand that awards of money may not be available to you, just because you were frustrated.

What about even more remote damages, such as miscarriages as a result of being distressed, or getting into a car accident while locating a witness for this case, or other such damages? These damages are even more removed from a typical damage award. The same rules apply as in the previous answer. You should know that judges will draw the line at connecting certain injuries to certain lawsuits.

Points to Remember

• Creditors must advise you that they will search your credit report.
• To correct your credit report, submit your information in writing.
• Generally, credit agencies must respond within 30 days.
• Written explanations may remain on your credit report for many years.
• You may decide to sue a credit agency for reporting incorrect information. You must prove the information is incorrect.
• Attorney's fees and damages for emotional upset and stress may be recovered in some circumstances. Check with your Plan Attorney, if you have suffered substantial and serious or unusual emotional upset.