Last week a federal judge in Indiana refused to dismiss a lawsuit that alleged a debt collector had violated the Fair Credit Reporting Act (FCRA) by obtaining a copy of a consumer’s credit bureau report without a permissible purpose. The case is Pigg v. Fair Collections & Outsourcing of New England, Inc. (Case No. 16-cv-01902, U.S.D.C., Southern District of Indiana.

A copy of the court’s Order can be found here

Background

Plaintiff Vivian Pigg had entered into a lease agreement with her landlord, Ashford Keystone Apartments, and later incurred a debt as a result of a default on the lease agreement. The debt was transferred to defendant Fair Collections & Outsourcing of New England (Fair Collections), and Fair Collections attempted to collect the debt from Ms. Pigg. On June 18, 2015, Ms. Pigg reviewed her TransUnion report and noticed that Fair Collections procured her credit report on April 15, 2015. Ms. Pigg claims that Fair Collections never received permission from Ms. Pigg to obtain her credit report. Ms. Pigg also claims that Fair Collections procured her credit report without a permissible purpose. 

The FCRA claim was brought under 15 U.S.C. § 1681b(f). The relevant portion of the statute reads as follows: 

[A]ny consumer reporting agency may furnish a consumer report . . . [t]o a person which it has reason to believe intends to use the information 

(1) in connection with a credit transaction involving the consumer on whom the information is to be furnished and

(2) involving the

(a) extension of credit to or

(b) review or collection of an account of the consumer. 

Fair Collections filed a Motion to Dismiss Count I (the FCRA claim) of plaintiff’s First Amended Complaint.

Fair Collections argues that Ms. Pigg “admits that she defaulted on her rental agreement with her former landlord” and that “[Fair Collections] began attempting to collect from her the unpaid rent on behalf of [her] former landlord.” Fair Collections then argues that “[t]hese admissions demonstrate that [Fair Collections] obtained [Ms. Pigg’s] credit report for the permissible purpose of ‘collection of an account.’” 

The plaintiff argued that in order for the credit agency to furnish a consumer report to a person, it “must be in connection with a credit transaction involving the consumer, and then, either involving extension of credit to that consumer or review or collection of an account of that consumer.” Ms. Pigg claims that Fair Collections ignores the first requirement that the consumer report must be in connection with a credit transaction and focuses solely on the language “collection of an account.” Ms. Pigg argues that a lease agreement is not considered a “credit transaction.” 

The court summarized the two positions as follows: 

“The parties dispute the interpretation of this statute. Fair Collections believes that to have a permissible purpose to retrieve a consumer’s credit report, the information must simply be in collection of a debt, and without the requirement that it be in connection with a credit transaction. Conversely, Ms. Pigg’s interpretation of the statute is that in order to have a permissible purpose, the information must be both in connection with a credit transaction and involving the collection of an account.” 

The Court’s Opinion

The court agreed with the plaintiff. Citing the case of Miller v. Wolpoff & Abramson, LLP, 309 Fed. Appx. 40 (7th Cir. 2009) the court wrote:

“Here, the Court emphasizes that Fair Collections’ only developed argument is that under 15 U.S.C. § 1681b(a)(3)(A), the debt need not be in connection with a credit transaction. The Court, however, agrees with the court in Miller that insofar as 15 U.S.C. § 1681b(a)(3)(A) is concerned, a credit transaction is a necessary prerequisite. Fair Collections did not present any arguments or authority to demonstrate that Ms. Pigg’s debt is in connection with a credit transaction. Its only other argument with respect to whether Ms. Pigg’s lease agreement is a credit transaction is that Ms. Pigg “is being extended a form of credit which will ultimately be collected from her,” but it cites not authority to support this proposition. 

The court is not making a finding as a matter of law that Ms. Pigg’s lease agreement with her former landlord is not considered a credit transaction. It also does not foreclose the possibility that Fair Collections had another permissible purpose under the FCRA to retrieve Ms. Pigg’s credit report. Rather, it finds that based upon Fair Collections' narrow argument, it has failed to present any grounds to dismiss Ms. Pigg’s FCRA claim.

For the reasons detailed herein, Fair Collections' Motion to Dismiss Count I of Plaintiff’s First Amended Complaint is DENIED.” 

insideARM Perspective

This is an interesting case discussing the permissible reasons to obtain a consumer’s credit bureau report. To be clear, this Order is NOT a final adjudication. The court was very clear that it did not, as a matter of law, determine that the lease agreement with her former landlord is not considered a credit transaction. The Order is simply ruling on a defendant’s motion to dismiss the case. The issues will ultimately be adjudicated through a different pre-trial motion or trial on the merits.

However, the lesson or “take-away” from this case should be a review of the permissible reasons for obtaining a consumer’s credit bureau report and maintenance of policies and procedures to ensure compliance with those reasons. To be safe, a conservative position would be to NOT obtain a credit bureau report unless both prongs of the above referenced statute are clearly met.


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