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Credit reports during collection actions may be off-limits

A recent court case out of Washington state may not have much effect on Michigan cases at the moment, but it could eventually lead to a Congressional fix for the Fair Credit and Reporting Act.

When creditors are trying to collect judgments, one of the best tools they have is a debtor's credit report. The report can show that a debtor has tried to get a new loan or has opened a savings account. These reports can lead a creditor to locate income information on a loan application that doesn't quite jive with how broke the creditor is told during debtor's examinations.

In 2009, the U.S. Court of Appeals for the Ninth Circuit ruled that creditors could access a debtor's credit report, even without the permission of the debtor. In July 2016, another case ended quite differently. The plaintiff in the case owed money for four parking violations. The collection company ran an Experian credit report. Both Experian and the collection company were sued by the debtor for violating the FCRA.

The collection company moved for the case to be dismissed because of the ruling in 2009. The U.S. District Court for the District of Washington didn't see the 2009 ruling in the same light as the collection company. The district court ruled that a credit report can only be obtained if the debt was because of a credit transaction. Since the parking violation debts weren't considered a credit transaction, the court ruled that the collection agency's actions could be a violation of the FCRA.

Before creditors try to determine where else they want to obtain debtors' information, they should remember that this is only one court's ruling and it's likely the case will be appealed to the Ninth Circuit.

If you, as a creditor, are accused of violating the FCRA, an experienced attorney can help you learn about your legal options and how to fight the allegations.

Source: Forbes, "Credit Reports Of Debtors Off-Limits In Other Than Credit Transaction Judgments Says Rodriguez Court," Jay Adkisson, Oct. 29, 2016

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