Samuel Dorvil, at 27 years old, already is making a living buying and flipping houses.
But the Pompano Beach man must use cash to purchase the homes because he has found it very hard to establish credit.
He discovered why when he pulled his credit report in 2012.
The credit reporting agencies, Equifax Credit Information Services LLC, Experian Information Services Inc. and TransUnion LLC, said he owed money on three credit cards he never owned.
After writing numerous fruitless letters to the companies to clear up the matter, Dorvil filed a lawsuit. “After three years, I kind of just got frustrated,” he said.
Dorvil is not alone. Increasingly, consumers are filing lawsuits under the federal Fair Credit Reporting Act to force credit reporting agencies to fix reports that are allegedly erroneous. The litigation dots the federal docket in South Florida every day.
Every litigant has a story. It could be a victim of identity theft. Or, like Dorvil, incorrect information came from an unknown source. Many people are discovering errors now that the effects of the recession are lifting, plaintiff attorneys say.
“Now that it’s finally turning around and consumers are done with their foreclosures, they are starting to clean and repair their credit,” said attorney Matthew J. Militzok, a partner at Militzok & Levy in Hollywood.
Some consumers are discovering errors when they pull their credit reports, but fixing them isn’t easy.
“Consumers are resorting to suing the bureaus to fix those errors because it appears to be their only recourse,” he said.
Militzok said he has filed about 80 lawsuits on behalf of consumers since Jan. 1, reflecting the value of credit reports these days.
Experian’s attorney in the Dorvil case responded to his lawsuit when it was in Broward Circuit Court before removal to federal court in January. Experian attorney Maria H. Ruiz, a Miami partner at Kasowitz, Benson, Torres & Friedman, countered Dorvil’s claim by asserting qualified immunity under federal law governing the duties of report users in credit transactions. She said Experian was not liable for mistakes on the report.
A bad credit report can do more than nix that Best Buy credit card or a car lease. A low credit rating can kill a mortgage application or even a plum job opportunity and cost a consumer hundreds of dollars for higher interest rates.
The all-important credit score for consumers is often derived from reports from all three credit reporting agencies.
Hard To Penetrate
Robert Sola, an attorney in Portland, Oregon, has been filing lawsuits against the credit reporting agencies around the country. He said some of his clients are victims of identity theft, but others just had the misfortune of having a name or Social Security number similar to another person who has bad credit.
A bad credit report can be particularly troublesome for people trying to find a new job with businesses running credit checks on job applicants. Sola said the last thing a job applicant wants to talk about in a job callback is how an unpaid medical bill on a credit report belongs to another “John W. Smith.”
He said consumers also can be hurt by companies that offer to do background screening, a mushrooming industry that acerbates credit mistakes.
All this contributes to the bottom line of the three major credit reporting agencies. Equifax reported $267 million in profit in 2010 and Experian $718 million in 2012. TransUnion doesn’t reports its profits, but its 2011 revenue was $1 billion.
They are monolithic companies that consumers find hard to penetrate when trying to fix an error. “The way their system is set up, it’s all automated,” Sola said.
The FCRA lawsuits are getting the attention of the credit reporting companies.
“The laws are really strict. Disputes have to be investigated,” Sola said. “In cases where you have false information on the record for years, that’s a clear violation of the FCRA.”
He and Militzok said most lawsuits are settled by striking incorrect information under a law allowing damages of up $1,000.
The rare case will produce punitive damages. One of Sola’s clients won $2.7 million in punitive damages against Equifax in 2007.
Angela Williams disputed inaccuracies on her Equifax report starting in 1994 when she discovered they contained debts and charge-offs that were not hers. The bad debts actually belonged to a woman named Angelina Williams, whose Social Security number was two digits off Angela’s numbers.
Orange Circuit Judge George A. Sprinkel IV issued sanctions against Equifax for failing to disclose internal documents in discovery, leaving the jury to decide only damages.
Credit reporting companies face not only individual lawsuits but more complex litigation as well.
A class-action lawsuit filed in May on behalf of consumers against Equifax has been assigned to U.S. District Judge Donald Graham in Miami. Attorney David W. Bianchi, a partner at Stewart, Tilghman, Fox, Bianchi & Cain in Miami, claimed Atlanta-based Equifax failed to properly safeguard consumer information as required by law.
Equifax is represented by John Anthony Love, a partner at King & Spalding, in Atlanta. He did not return phone calls for comment by deadline.
Neither did attorneys for TransUnion and Experian concerning lawsuits filed against them by individual consumers.
In the class action, consumers claim credit reports were sold to Virtual Lending Source LLC and Direct Lending Source Inc. The companies “offered sham illusory services that promised plaintiffs refinancing or debt relief services — all for exorbitant fees,” the complaint reads.
The lawsuit follows a $1.6 million settlement by Equifax and the same two companies with the Federal Trade Commission, which issued results of a study in February that concluded 5 percent of consumers have mistakes on at least one of the reports from the three leading agencies.
Credit Bureau Services Inc. of Oakland Park also is suing the three reporting agencies. The company is a reseller, combining credit scores and selling the information to the mortgage industry. Its lawsuits claim the agencies are violating the Clayton Antitrust Act by operating as a monopoly.
The Florida company alleges companies such as itself “have tried to eke out a living by accommodating the increasingly burdensome exercise of monopoly power by the repositories, facing not only escalating, supra-competitive prices for credit reports that bear little or no relation to their competitive market price,” the lawsuit states.
Attorney Mitchell Berger, partner at Berger Singerman in Fort Lauderdale, represents Equifax in the litigation filed in Fort Lauderdale federal court and shifted to federal court in Sacramento.
He pointed to the finding by U.S. District Judge Robin Rosenbaum in her order dismissing the lawsuit. Rosenbaum negated a Credit Bureau Services claim that Equifax conspired with its reseller to cut out the competition, finding “the purpose of the plan was instead to improve security for consumer information.”
Plaintiffs refiled the lawsuit in Sacramento in April.
Sola said even as more consumers like Dorvil are becoming aware of their right to sue credit reporting agencies to correct mistakes, thousands more could take advantage of the law.
Militzok encouraged all consumers to check their credit reports. He said many of the ads on television offering free reports are really paid subscription services. However, all consumers can get a free credit report through annualcreditreport.com.