Creditors Beware! Think twice before pulling that credit report on your judgment debtor

For many years judgment creditors have relied on the holding of Pintos v. Pacific Creditors Association, 606 F.3d 665 (9th Circuit, 2009) (aka Pintos II) which held that judgment creditors had a permissible purpose under the Fair Credit Reporting Act (“FCRA”) to obtain a consumer credit reports. Judgment creditors holding fully adjudicated debts have used credit reports for several purposes, including obtaining the debtor’s recent payment information and credit applications to aid in enforcement, performing expenditure analysis to determine the debtor’s imputed income, and the evaluation of settlement offers.

Unfortunately, a recently decided case may make this valuable tool unavailable to many judgment creditors. In Rodriquez v. Experian Information Solutions, 2016 WL 3976564,*1 (W.D. Wash. July 25, 2016), the court held that the Fair and Accurate Credit Transaction Act (“FACTA”), which amended the FCRA, limits the types of transactions for which third parties can seek credit reports. The Rodriquez Court in denying the judgment creditors motion to dismiss, concluded that after FACTA’s passage, third parties must not only establish that a transaction “involves” a consumer, they must also demonstrate that the transaction at issue is a “credit” transaction as defined by FACTA.

Therefore, if this holding is ultimately adopted within the entire 9th Circuit, judgment creditors will not only lose an excellent method for obtaining information necessary for the enforcement of their judgments, but will also face significant liability under the FCRA. There can be little doubt that the consumer debtor attorneys, in light of Rodriquez, are preparing to litigate multiple cases against “deep pocket” judgment creditors. Because our legal system has, in effect, allowed ex post facto liability against creditors for business activities previously held to be legal, judgment creditors (and their attorneys) are urged to undertake an immediate review of their relevant business practices.

In addition to reviewing internal policies and procedures, creditors should begin contacting their data/information providers to inquire into alternatives to consumer credit reports. Some of the more proactive information providers have taken notice of Rodriquez and have already begun developing products to meet the needs of their judgment creditor partners.

In summary, until the 9th Circuit Court of Appeals [or the U.S. Supreme Court] weighs in on the legality of judgment creditors obtaining consumer creditors outside of the parameters set forth in Rodriquez, Creditors are strongly urged to use caution when obtaining credit reports and proactively explore alternatives to standard consumer credit reports.