Consumer Finance Litigation

The U.S. District Court for the Western District of Pennsylvania recently held that obtaining a credit report for assistance in the collection of a debt constitutes a permissible purpose under § 1681b(a)(3)(A) of the FCRA. In Fritz v. Capital Management Services, LP, No. 2:12-cv-1725, 2013 WL 4648370 (W.D. Pa. Aug. 29, 2013), the plaintiff filed suit against the defendant debt collector alleging violations of the FCRA after the defendant inquired into her credit history upon placement of plaintiff's account with the defendant. It was undisputed that the plaintiff never authorized the defendant to obtain her credit report. The defendant filed its motion for summary judgment arguing that it had a permissible purpose to obtain the plaintiff's credit report. The plaintiff first argued that the affidavit filed in support of the defendant's motion for summary judgment was insufficient because the affiant lacked personal knowledge and was not the custodian of records. Rejecting this argument, the court found that the defendant only needed a "qualified witness," and that the affidavit was based on a review of business records, which were admissible hearsay. The plaintiff then argued that the defendant lacked a legitimate purpose in obtaining her credit report. At the outset, the court said that the FCRA authorizes obtaining a credit report when the person "intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the . . . collection of an account of, the consumer." See 15 U.S.C. § 1681b(a)(3)(A). The court found that the credit transaction at issue clearly involved the plaintiff because the plaintiff initiated the transaction by obtaining the credit. The court also rejected the plaintiff's argument that the defendant could not obtain her credit report because she did not have a contractual relationship with the defendant. Specifically, the court found that a collection agency retained by the creditor "typically has a permissible purpose for obtaining a consumer report." 2013 WL 4648370, at 4 (quoting Hinkle v. CBE Grp., No. 11-091, 2012 WL 681468 at 3 (S.D. Ga. Feb. 3, 2012)). Despite the plaintiff's arguments to the contrary, the court also said that the definition of "account" found in § 1681m(d)(4)(e)(1)(A), when read within the broader context of the statute, included credit card accounts. Accordingly, the court found that the defendant had a permissible purpose in obtaining her credit report and, therefore, did not violate the FCRA. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.