Debt Collectors Must Have a Permissible Purpose to Obtain a Consumer Credit Report
The Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681b, and its state counterpart, RCW 19.182.020, list the permissible purposes for obtaining a consumer credit report, such as pursuant to a court order, with the consumer's written permission, in a credit transaction involving the consumer, to review or collect an account, and for legitimate business purposes in a transaction initiated by the consumer. However, the Fair and Accurate Credit Transactions Act of 2003 (FACTA) and recent Ninth Circuit case law have narrowed the scope of permissible use for collection purposes. Debt collectors (including attorneys whose activities put them within the definition of "debt collector" under the Fair Debt Collection Practices Act, 15 U.S.C. 1692a) collecting an account based on a credit transaction initiated by the consumer have a permissible purpose to obtain and use a credit report in the debt collection process. Others may not
The Pintos Decision Limits Use of Consumer Credit Reports to Transactions Initiated by the Consumer
In Pintos v. Pacific Creditors Ass'n, 504 F.3d 792 (9th Cir. 2007), the Ninth Circuit Court of Appeals ruled in favor of a consumer whose credit report was obtained by a collection agency to assess whether she had sufficient assets to be worth pursuing for collection of unpaid towing charges. The Ninth Circuit held that FCRA allows debt collectors to obtain credit reports only "in connection with a credit transaction involving the consumer," and ruled that the collection agency violated the FCRA because it had no ongoing credit transaction with the debtor and also because FACTA requires that a credit transaction be initiated by the consumer for the debt collector to have a permissible purpose in obtaining a consumer report, which comports with the FCRA's underlying goal of protecting consumer privacy.
Debt Collectors Can Use Credit Reports With the Consumer's Written Authorization
Under FCRA, a permissible purpose exists where the debt collector has the consumer's written authorization, even in a credit transaction not initiated by the consumer. Under RCW 19.182.030, it is illegal to obtain a consumer report in a transaction not initiated by the consumer without the consumer's authorization. If a debt collector is using a credit report based on the consumer's authorization, that is a permissible use regardless of which party initiated the transaction.
FTC Staff Opinions Limit Use of Consumer Reports in Debt Collection Context
According to Federal Trade Commission Staff Opinions, neither a dispute resolution conference, the imminent threat of civil litigation, nor the desire to craft a settlement offer provide a permissible purpose to obtain a consumer report, and in a case where a landlord's attorney seeking to collect a disputed debt arising from a month-to-month lease after the tenant had vacated had pulled a credit report, there was no permissible purpose to obtain a credit report to consider suing the former tenant (even though there was a permissible purpose to obtain one earlier at the time the tenant applied for the lease).
Gramm-Leach-Bliley Act Limits Use of Credit Report Header Information
As a result of the Gramm-Leach-Bliley Act of 1999, it is improper to access the so-called "header information" (name, date of birth, address, social security number, employment) in an individual's credit report without a permissible purpose such as for consumer authorized credit approval or locating witnesses and victims for a documented civil or criminal action. And secondary use of a consumer report may be impermissible even if the report was initially obtained for a permissible purpose. Secondary use, including use of consumer data in credit header reports, violates one of the basic tenets of Fair Information Practices: that personal information obtained for one purpose should not be used for another purpose without the consumer's consent.
Obtaining a Credit Report or Other Consumer Information Under False Pretenses is Illegal
Under RCW 19.182.130, obtaining information from a consumer reporting agency under false pretenses is subject to a fine up to $5000 and/or a year in jail. Under Gramm-Leach-Bliley, it is illegal to use false, fictitious, or fraudulent statements to get consumer information; use forged, counterfeit, lost, or stolen documents; or ask another person to do so. Pretexts (such as pretending to be someone else to trick a consumer into providing information) are also illegal. This applies to any "consumer information" obtained under false pretenses from any source. Private investigators and attorneys have been prosecuted and disciplined for participating in pretexts, such as lying on the phone to extract personal information from consumers.
Transferring Identifying Information for an Improper Purpose is a Federal Crime
Under RCW 19.182.140, credit reporting agency personnel who knowingly and willfully provide credit report information to unauthorized persons are also liable for a fine and/or imprisonment. The Identity Theft and Assumption Deterrence Act makes it a federal crime when someone "knowingly transfers or uses, without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, any unlawful activity that constitutes a violation of federal law, or that constitutes a felony under any applicable state or local law." It is illegal for a debt collector to use a consumer's personal information or gives it to someone else, without lawful authority, for any purpose that violates federal law.
Violation of Credit Reporting and Privacy Laws Can Result in Civil and Criminal Liability
Consumers whose credit reports and personal information have been illegally obtained, used, or transferred can sue for damages and report criminal violations to state and federal authorities. Violating FCRA is a per se unfair or deceptive act or practice under the Washington Consumer Protection Act, RCW 19.86, entitling the consumer to treble damages up to $25,000, plus costs and attorney fees. Consumers may be able to bring a private action for damages for a violation of privacy laws, or refer violations to the state Attorney General's office for action.
What to Do if Your Credit Report Has Been Misused or Privacy Rights Have Been Violated?
If your credit report has been improperly obtained or used by a debt collector, or your privacy rights have been violated, consult with an attorney or report the violation to the Attorney General's Office or FTC.