A borrower recently filed a putative class action against Fannie Mae under the Fair Credit Reporting Act (FCRA) in federal court in Washington, D.C., alleging that Fannie engaged in unauthorized inquiries into borrowers' credit after the borrowers' debts to Fannie had been discharged in bankruptcy. These allegations represent the latest iteration of a series of recent lawsuits under the FCRA challenging post-bankruptcy discharge activity on consumer debts, and may signal a new wave of similar lawsuits against other industry members. Previous cases have focused on post-discharge reporting of consumer debts, while this latest case is focused on whether the creditor had a permissible purpose to obtain a consumer report after a discharge.

The plaintiff alleges that he filed a Chapter 7 bankruptcy and received a discharge in 2013 which covered his debt to Fannie. The plaintiff alleges that, nearly three years after the discharge, Fannie made an unauthorized inquiry on the plaintiff to consumer reporting agency Equifax. The plaintiff alleges that this post-discharge inquiry without plaintiff's consent did not serve any legitimate business need on the part of Fannie, and thus did not have a permissible purpose under the FCRA. The plaintiff alleges that the alleged unauthorized inquiry resulted in an invasion of his privacy, and increased his risk of injury resulting from a data breach given that financial institutions like Fannie are often the target of cybercriminals.

The plaintiff purports to bring the action on behalf of a class of all persons whose consumer credit report from any of the three major credit reporting agencies (Experian, Equifax, and TransUnion) reflects an unauthorized consumer credit report inquiry within the last five years by Fannie after a bankruptcy discharge. The plaintiff's complaint asserts both negligent and willful violations of the FCRA, and seeks actual and statutory damages, as well as equitable relief to prevent further impermissible pulls.

The Consumer Financial Services and Mortgage Banking Groups at Ballard Spahr are involved in many of these cases, and actively monitor them as they evolve and unfold in courts across the country. The Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).


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