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Ninth Circuit Reverses Approval of Settlement for Debt Collection Violations After Bankruptcy - Radcliffe v. Experian Info. Solutions

May 6, 2013

Vincent Howard and our Redlands consumer bankruptcy lawyers were interested to see a case involving blatant violations of debt collection and bankruptcy laws. In Radcliffe v. Experian Information Solutions, the Ninth U.S. Circuit Court of Appeals reversed approval of a settlement of a class-action lawsuit against multiple credit reporting agencies, saying the settlement split the interests of lead plaintiffs too drastically from those of the class members. The lawsuit was filed by a class of people who had debts reported on their credit reports even though the debts had been discharged in bankruptcy, which violated the Fair Credit Reporting Act. The Ninth disapproved the settlement because it created large incentive awards to class representatives, conditioned on their support for the settlement.

Many lawsuits underlying this litigation alleged that the three major credit reporting agencies--Experian, TransUnion and Equifax--issued reports showing delinquencies on debts that had already been discharged in bankruptcy. Some of the plaintiffs added that the agencies had failed to investigate despite notification of the errors. This was a violation of the Fair Credit Reporting Act and California's equivalent state law. The many lawsuits were consolidated and ordered into mediation, which first produced an injunction and later an agreement for financial damages. The financial settlement provided "actual damages" to all class members, though the actual awards were set amounts that depended on the type of problem created by the incorrect reports. Class counsel had the right to petition for attorney fees. And class representatives could petition for an award no greater than $5,000, conditioned on their support of the settlement. A group of class representatives and objectors objected to the settlement but were overruled.

On appeal, the objecting plaintiffs argued that the settlement creates a conflict of interests between class representatives and the class, making representation by class representatives and class counsel inadequate. The Ninth Circuit agreed after review. The Ninth has approved incentive awards for class representatives, but not when they are so large that they create conflicts of interests. Here, the language of the settlement conditions the $5,000 incentive awards on support for the settlement, the court said, despite settling plaintiffs' arguments to the contrary. This could bias the judgment of the class representatives, the court said, because they would receive nothing if they opposed it, even if they thought that was the best choice for the class as a whole. The conditioning of the awards is not at all typical, the court added. And because the settlement created this problem, the Ninth found that both the class representatives and the class counsel did not adequately represent the class. It remanded for a new settlement.

Vincent Howard and our Anaheim personal bankruptcy attorneys are sorry to see that this settlement will have to be re-negotiated--but we are pleased that the issue was raised in the first place. Wrong information on credit reports has serious consequences. Anyone who has ever been harassed by a debt collector knows that they often don't listen to explanations; their job is to get paid, sometimes using emotional manipulation and outright lies. The "actual damage" awards proposed in this case were not adequate to cover the likely costs of having incorrect debts reported. For example, the award for having credit denied was $150, which is likely a fraction of the actual cost difference between a good credit card rate and a bad one. That's why Vincent Howard and our Chino individual bankruptcy lawyers strongly advise victims of mistakes by debt collectors or credit reporting agencies to talk to us about a FCRA or FDCPA lawsuit.

If you're being harassed by a collection agency or have wrong information on your credit report that you can't shake off, you should call Howard Law, P.C., to discuss your legal options. You can reach us at 1-800-872-5925 or send us an email.

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