Friday, August 6, 2010

Pintos v. Pacific Creditors Revisited: Fair Credit Reporting Act Permissible Purposes

Readers of this blog may recall my criticism of the Ninth Circuit's decision in Pintos v. Pacific Creditors Association, No. 04-17485 (April 30, 2009), in which the court held that debt collection does not necessarily constitute a permissible purpose under the Fair Credit Reporting Act (FCRA) to obtain a consumer's credit report from one of the major credit bureaus. The decision came up for en banc review earlier this summer.

Not surprisingly, the court denied the petition for review, but the opinion denying review, as well as the dissents thereto, are particularly noteworthy. The majority added a lengthy footnote to its earlier opinion, clarifying that its analysis is limited to permissible purposes under 15 U.S.C. § 1681b(a)(3)(A), which allows a credit report to be obtained by a person who "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 extension of credit to, or review or collection of an account of, the consumer." The footnote continues, "we need not determine whether PCA had a permissible purpose under any other §1681b subsection. On remand, Defendants may argue that PCA was authorized to obtain Pintos’s report under a different subsection." This seems to be more than a subtle suggestion that there is another permissible purpose that is applicable to the case at bar, although the majority does not clue us in to any specific provision.

Next to note, the Chief Judge dissented from the majority's denial of en banc review, on several grounds. First, he hearkened back to the dissent to the original opinion, which took issue with the majority's distinction between obtaining a credit report in the process of collecting a judgment (permissible, in the eyes of the majority) and obtaining a credit report in the collection of an account before there was a judgment (not permissible according to the majority). As I previously wrote, the court's prior decisions did not support this distinction, nor did the FTC's commentary (nor common sense, for that matter). Next, the Chief Judge directed the majority's attention to §1681a(m) and §1681b(c). Both of these sections make reference to accessing a credit report in connection with a "credit or insurance transaction that is not initiated by the consumer," and §1681a(m) provides that that phrase does not include a report obtained for the purposes of collecting an account. In other words, debt collection always involves a transaction initiated by the consumer, according to the language of the FCRA. In missing this point, according to the Chief Judge, the majority has "flunk[ed] Statutory Interpretation 101."

Another judge wrote a second dissenting opinion, essentially stating that it's in everyone's best interests- including the consumer's- to allow debt collectors to obtain credit reports in the collection process, because it helps keep costs to collect down, and if the costs are increased, that increase will eventually be passed on to consumers. As a creditor's attorney, I like that argument, but I don't think it sticks. A similar argument can be made against the FDCPA's prohibition on harassing debtors- if collectors were allowed to threaten debtors, collectors would probably have an easier time collecting accounts (at least some), and this would decrease the costs to collect, causing a savings that would sooner or later reach consumers. Actually, similar arguments can be fashioned with respect to most consumer protection statutes reductio ad absurdum- they have some negative effect because they make reaching the consumer more difficult. Of course, this line of reasoning is never employed in construing these statutes; nor should it be.

Musings on statutory interpretation and logical constructs aside, it seems likely that we have not seen the last of this case. According to this post, Ninth Circuit en banc reviews that are denied with a dissenting opinion in which certiorari is granted are overturned by the Supreme Court an astonishing 90% of the time- and this one has two dissents. We'll see.

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1 comment:

Anonymous said...

Do you have an opinion on permissible purpose of credit reports for tort judgment creditors, say from a subrogation lawsuit?

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