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I was denied credit because of mistaken identity

Sergio Ramirez was denied a car loan because TransUnion had mistakenly flagged him as a potential terrorist


The CFPB has advised that consumer reporting bureaus should not match consumer records using only matching names, a practice that goes against the Fair Credit Reporting Act.

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If you have a fairly common name, you may have been mistaken for somebody else at some point in life. Sometimes, such mix-ups are harmless and have no fallouts. In the world of credit reporting, however, being mistaken for someone with bad credit could cost you a loan, housing or even a job.

TransUnion report flagged Ramirez as potential terrorist

In a lawsuit against TransUnion, it was revealed that a consumer named Sergio Ramirez had been denied credit as a result of the credit reporting bureau wrongly identifying him as a “potential terrorist.”

This happened as Ramirez and his wife visited a Nissan dealership in February 2011 to buy a car. When the dealership ran a credit check on Ramirez, a Nissan salesperson informed him that his name was on a terrorist list. His wife ended up buying a car in her name.

The terrorist alert came about as a result of a service that TransUnion started providing in 2002 that matched consumer names with those of individuals named on a list maintained by the Treasury Department’s Office of Foreign Assets Control (or OFAC list). This OFAC list contains names of terrorists, drug dealers and other serious criminals that “threaten” America’s national security. TransUnion provided an OFAC alert to help businesses avoid transacting with individuals on this list.

To place an individual on this list, TransUnion merely used software to check whether a name appeared on the OFAC list. If it did, the credit reporting bureau would place an alert on the consumer’s credit report flagging them as a “potential match” to a name on the OFAC list. TransUnion did not use any input other than a simple first and last name match in arriving at this conclusion. This led to many cases of people being flagged by TransUnion who were not actually the individuals on the Treasury Department’s alert list.

Case against TransUnion

In 2012, Ramirez filed a lawsuit against TransUnion alleging that the credit reporting bureau had infringed on his Fair Credit Reporting Act rights. He also included a group of 8,185 people, that he said also had their FCRA rights similarly violated by TransUnion (by mistakenly placing them on an OFAC-alert list), in this lawsuit.

A lower court jury had awarded the plaintiffs about $1,000 each for FCRA violations (about $8 million in total) and more than $6,000 in punitive damages (about $52 million in all), for a total payout of $60 million. However, the punitive damages were reduced to about $32 million on appeal.

The Supreme Court held earlier this year that Ramirez had suffered a concrete injury as a result of TransUnion’s faulty reporting since he actually suffered a negative consequence of being denied credit. The court also agreed he had cause for suing TransUnion for not using reasonable procedures to ensure the accuracy of his credit report. However, it overturned the lower court’s decision and did not extend this finding to all those who were part of the class action lawsuit but did not suffer any concrete harm.

When Ramirez asked TransUnion for a copy of his credit report, as a result of being denied credit by the car dealership, the credit reporting bureau did not indicate in the report it sent that he was flagged as a potential terrorist. It indicated that only in a second report it sent Ramirez, which also did not inform him of his FCRA rights as legally required.

Fair Credit Reporting Act rights

The FCRA calls for credit reporting bureaus to “follow reasonable procedures to assure maximum possible accuracy” in providing consumer reports. It also requires these agencies to disclose all information in the consumer’s file to the consumer when they ask for it. Also, credit reporting bureaus should provide consumers a summary of their rights, as prepared by the Consumer Financial Protection Bureau, when they make disclosures to consumers.

The CFPB has come out with an advisory opinion, which could prevent fallouts such as what happened to Ramirez, warning credit reporting bureaus, and others that make consumer reports, against “shoddy name-matching procedures.” The agency has stated that “the practice of matching consumer records solely through the matching of names is illegal under the Fair Credit Reporting Act.”

According to the CFPB, the danger of mistaken identity through incorrect matching of names is more prominent for Hispanic, Black and Asian communities since they have less diversity in surnames than white people.

Bottom line

If you have been denied credit as a result of mistaken identity you have rights under the FCRA (as well as the Equal Credit Opportunity Act) and can sue for damages – actual as well as punitive. You could also be awarded attorney’s fees. The CFPB provides further support and you could also put in a complaint with that agency.

Contact me at pthangavelu@redventures.com with your credit card-related questions.

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