As the CFPB Turns … And Other Consumer Financial Services News

In this week’s episode of As the CFPB Turns questions remain regarding Director(?) Richard Cordray’s constitutional authority to act as the Director of the CFPB.  House Financial Services Committee Chairman, Jeb Hensarling, R-Texas, advised Cordray that the D.C. Circuit’s recent decision, which found that President Obama’s recess appointments to the National Labor Relations Board were unconstitutional, applied to the CFPB director as well. Mr. Hensarling advised Director(?) Cordray that “absent contrary guidance from the United States Supreme Court, you do not meet the statutory requirements of a validly serving director of the CFPB, and cannot be recognized as such.” Thus, Mr. Hensarling advised Director(?) Cordray that he was not allowed to testify before the House Financial Services Committee. Mr. Hensarling’s comments received the expected cheers from the right side of the legislative aisle and jeers from the left. Stay tuned for next week’s episode to find out whether Director(?) Cordray and Mr. Hensarling will meet for beers at the White House. On to other news …

A new case trying to establish a class action under the FCRA was filed in the Central District of California (Moreland v. CoreLogic, Inc. (Case No. 8:13-cv-00470)). The attorneys for Moreland include Caddell and Champman, the Consumer Litigation Associates, P.C., and Francis & Mailman, P.C.  Counsel for defendant, CoreLogic, is Morrison and Foerster LLP (our fellow lender lover). Please note, commentary in this article is based upon the opinion of the author and the author alone, and should not be attributed to her firm, colleagues, clients, parents, spouse, friends, or dog. (Although, my dogs are pretty smart, so they likely agree with me.)

Moreland, the consumer, submitted a rental application and was informed that due to the information contained in a “Lease Decision” report the landlord had received from credit reporting agency (“CRA”) CoreLogic, the consumer would not be able to rent an apartment on her own. The landlord allegedly stated that it could not determine whether Moreland was being truthful about her identity due to the number of addresses and identities listed in the CoreLogic report. 

The main claims raised in the Complaint are generally summarized as:

• Impermissible Purpose:  Moreland claims that CoreLogic has a practice of  not obtaining from landlords a permissible purpose certification for the limited permissible use of Lease Decision reports, as required by the FCRA. Moreland argues that CoreLogic knows that landlords are using its reports for impermissible purposes, because CoreLogic’s report instructs landlords not to use the report directly for the purposes of making any housing decisions. (Does this sound like circular logic
• Inaccurate Reports: Moreland claims that the CoreLogic report inaccurately identified her as having several different aliases, including male names, and CoreLogic should have known that Moreland was clearly a woman. (Moreland’s first name is Susan.  Apparently, Moreland has never heard of “A Boy Named Sue.”) Thus, the Complaint contains the type of  mixed file claims that are typical against CRAs under the FCRA. 
• Lack of Access: Moreland claims that it was too difficult for her to obtain access to a copy of her credit report from CoreLogic. She claims that CoreLogic’s procedures for obtaining a free copy of her credit report was too burdensome.  She was required to complete a paper request form, sign the form under the penalty of law, mail the form to CoreLogic (gasp!  someone was required to use the US Postal system!!), and provide a photocopy of her picture identification. Moreland also claimed that the Consumer Disclosure Request Form CoreLogic provided was too long (12 pages) and complicated. (The Complaint glosses over the facts that Moreland was required to prove her identity so that individuals were not improperly obtaining a credit report about her, and the form was 12 pages long because it included the FCRA Summary of Rights that CoreLogic is legally required to provide under the FCRA. The “complicated” language she refers to was most likely the language that CoreLogic was legally required to provide.) 

Based on these facts, Moreland attempts to bring a class action lawsuit on behalf of all persons residing in the United States during the two years prior to the filing of the Complaint and continuing through the date of the resolution of the case: (a) who made a request to CoreLogic for his or her consumer file, but did not receive it; or (b) about whom CoreLogic sold a Lease Decision report. The Complaint also attempts to name separate classes for California residents.  (This separation of California members is undoubtedly an attempt by Moreland’s counsel to hedge their bets. The separation of the California members may allow the attorneys to argue that the claims under the California Consumer Credit Reporting Agencies Act (CCRAA) should be allowed to go forward, even if the federal claims under the FCRA are dismissed or the court refuses to certify a national class.) 

The Moreland case highlights the bigger issue for the consumer financial industry of whether a class action is possible under the FCRA. Due to the types of damages that are available under the FCRA, it would be extremely difficult, if not impossible, to bring a class action under the current form of the FCRA. For willful violations the FCRA authorizes: (a) actual damages sustained by a consumer of not less than $100, and not more than $1,000; (b) punitive damages; and (c) attorneys’ fees and costs. For negligent, but not willful violations, the FCRA authorizes: (a) any actual damages sustained by the consumer as a result of the failure; and (2) attorneys’ fees and costs.   

To meet the requirements for class certification, Moreland will have to demonstrate, among other requirements, that the questions of law and fact are the same for all of the class members, and that Moreland’s claims are typical of the claims of the other class members. The United States Supreme Court has made it clear that class certification is not appropriate where the court would be required to conduct a mini-trial within a trial for each class member to ascertain each class member’s damages. Thus, it would be extremely difficult, if not impossible, to prove that every single eligible class member had the exact same type and amount of actual damages as did Moreland. 

Due to the fact-specific nature of damages under the FCRA, courts are reluctant to certify class actions under the FCRA. One of the recent debates in the industry is whether class certification is even possible, and whether the FCRA should be amended to ban class actions under the FCRA. Of course, consumer advocates argue that the legislature should create a statutory exception under the FCRA that would allow for class actions. We have been watching this issue and will keep you informed on any key court decisions. We will also keep you informed of important developments in the Moreland case (such as whether consumers should be forced to use the US Postal system).