Mistaken Identity and the FDCPA and FCRA

In March, the District of Oregon reviewed whether a situation of mistaken identity rises to the level of an FDCPA and FCRA violation.  Under the facts of Drake v. Enhanced Recovery Company, LLC, No. 6:15-CV-1899, 2018 WL 1402586 (D. Or. Mar. 19, 2018), the resounding answer was “no.” 

Read the decision here. 

Factual and Procedural Background 

Raymond Drake incurred and failed to pay a debt to AT&T. AT&T placed the account with Enhanced Recovery Company, LLC (“ERC”) for collection. AT&T provided ERC with the amount owed, the name of the debtor, and a Los Angeles address. AT&T provided no other information. 

In order to obtain the most current information for the debtor, ERC submitted the information provided by AT&T (debtor’s name and Los Angeles address) through a “scrub” with one of the credit reporting agencies. The scrub provided a more current address for a Raymond Drake in Salem, Oregon.

The problem? Unknown to ERC, the Raymond Drake from Oregon – the plaintiff in this case – was not the debtor, but rather a different person with the same name.

Without a reason to know that the information received from the CRA was incorrect, ERC sent a collection letter to plaintiff. Plaintiff called and sent a letter to ERC stating that he was not the debtor. ERC internally notated the account as disputed, treated it as a dispute of validity, and sent verification of the debt to plaintiff. Plaintiff again called ERC to state that the account was not his. In response to the second phone call, ERC informed plaintiff that they would cease further collection attempts. 

About 20 days after the second phone call, ERC reported the account as “disputed” to the CRAs. Four months later, ERC requested that the CRAs delete this information about the account. 

Plaintiff filed a lawsuit against ERC alleging, among other things, that ERC violated the FDCPA and FCRA with its actions. ERC moved for summary judgment for all claims. 

Decision 

The court granted ERC’s motion for summary judgment on all claims, including the FDCPA and FCRA claims. 

The court failed to see a violation of the FDCPA. Plaintiff alleged that ERC reporting the account to the CRAs after the dispute was a false, deceptive, and misleading representation in violation of 1692e. The court specified that in order to have a violation of 1692e, the communication must have been in connection with the collection of a debt. Since the recipient of the allegedly violative representation was the CRA, not plaintiff, the court found that it was not made in connection with the collection of a debt. Additionally, the court found that the representation – meaning, the reporting of the dispute – was not false, therefore it could not violate 1692e. For the same reasons, the court found that there was no unfair or unconscionable means used by ERC to collect the debt, thus no violation of 1692f.

Turning to the FCRA, the court reviewed plaintiff’s allegation that ERC obtained his credit report without a permissible purpose. Plaintiff failed to persuade the court for two main reasons. 

First, the court differentiated between a credit report and basic contact information furnished by CRAs. The court cited several decisions where more information than that received by ERC did not constitute a credit report. If the information received by ERC was not a credit report, then the argument that ERC obtained the credit report without a permissible purpose necessarily fails.  

Second, the court found that there was a permissible purpose for pulling this information. A well-established permissible purpose codified in the FCRA is when the requestor “intends to use the information with... [the] review or collection of an account of the consumer.” The court found that ERC requested the information to get contact information related to the account, and therefore ERC had a permissible purpose.

Plaintiff’s allegation that ERC misused his social security number fell dead in the water. ERC never received plaintiff’s social security number. As stated above, the only information provided by AT&T was the amount owed, the debtor’s name, and an address. ERC never submitted plaintiff’s social security number because it did not have a social security number to submit when it made its information request to the CRAs.

The court likewise found no basis for plaintiff’s defamation claims against ERC. Defamation necessarily involves a false statement. Since the information reported was true, the defamation claim fails.

Analysis

With a very well-reasoned decision, the court came to a conclusion that a plaintiff cannot recover for an error unless the collector had knowledge or a reason to know of the error. Additionally, this case provides some additional clarity regarding permissible purpose and what does and does not qualify as a “credit report” under the FCRA.

Shelly Gensmer, Senior Director of Legal for ERC, offered this statement:

"ERC is pleased to see an industry-positive ruling on the topic of permissible purpose under the FCRA. The FCRA and FDCPA put a dispute process in place for the very reasons outlined in this case. Agencies that comply with the law’s requirements regarding how a dispute is treated should certainly not be punished for taking the prescribed actions as outlined in the FCRA and FDCPA. ERC is hopeful that this ruling will open the door for more industry-positive rulings for its peers facing similar allegations."