Maryland Bar Bulletin
Publications : Bar Bulletin

November, 2004

Identity Theft
~A primer on credit restoration~
By Marc Emden

{EDITOR’S NOTE: This article was intended for publication in the consumer law focus of the October 15, 2004, edition of the Bar Bulletin.]

We have all laughed at the recent series of Citibank commercials in which we see an image of a victim speaking in an imposter’s voice. The voice is that of an identity thief gloating over the ease with which he or she has just gained access to the victims’ credit card. These commercials do an excellent job of depicting how easy it is for any one of us to become a victim of identity theft.

In fact, identity fraud is the fastest-growing crime in the nation, affecting nearly 10 million people in the last year alone. The damage is devastating. Feeling desperate to get their credit restored, victims may spend months or years trying to fix the damage. In the process, they lose job opportunities or simply can not get credit all. So how do identity fraud victims get their credit restored after a store or financial institution refuses to delete the unauthorized charge?

The problem: After learning that a friend, uncle, ex-spouse or total stranger has made unauthorized charges using their names, identity fraud victims are traumatized and often need a helping hand to restore their credit and good name. Many victims report that the credit grantor or the credit reporting agency (CRA) simply refuses to remove the fraudulent charge. Reasons for their refusals include the passage of time without the victim lodging a dispute, the making of a partial payment on the account or an acknowledgement by the client that he knew the wrongdoer committing the fraud.

The process: An effective approach undertaken by counsel includes identifying the preliminary and formal dispute procedures established by the credit grantor. The next step is to seek the name and department information concerning the filing of a dispute for fraudulent charge. Counsel’s letter to the credit grantor must explain why the client is disputing the charge, request that the credit grantor investigate the charge and, most importantly, ask the grantor to provide counsel with proof that the client actually authorized the debt.

At the same time, write to all three credit reporting agencies, Equifax, Experian and Trans Union, requesting that they place a fraud alert on the client’s credit reporting file to alert potential creditors or other parties of possible tampering. Most importantly, counsel must request that the CRA investigate the errant charge. If the CRA cannot verify that the client authorized the disputed charge within 30 days of the request, the CRA must then delete the derogatory file.

Taking these steps to expedite the process is not mandatory, but it is necessary, as the burden of proof is never on the consumer to prove lack of authorization. Remember, as in any breach of contract case, the burden is on the plaintiff (in this case, the creditor or CRA) to prove by a preponderance of the evidence that the charge was authorized.

The law: The relevant Maryland and federal laws pertaining to victims of identity fraud are complicated. In their simplest form, there are two statutes that govern this area. The first, the Fair Credit Reporting Act (FCRA), was designed to protect consumers by requiring creditors, grantors and credit reporting agencies to correct and to stop reporting credit errors. The second, the Fair Debt Reporting Act (FDRA), was intended to keep bill collectors from hounding debtors and from reporting false or disputed debts. Maryland has its own versions of these same laws.

The FDRA requires a creditor to stop all collection efforts once a written dispute notice is received within the 30-day validation period. The FDRA also prohibits debt collectors from reporting any debt that the collector knows or should know is either false or disputed. Debt collectors are held to the much stricter standards under the FDRA than creditors under FCRA. As such, there are additional enforcement opportunities available to consumers under the FDRA.

Whether and Where to File: When the CRA or creditor refuses to delete the derogatory file, even after investigation and reinvestigation fail to substantiate the debt, the client’s only remaining recourse is to file suit under the FCRA or FDRA. The decision whether to file in state or federal court is a complicated one, and counsel should discuss the relative merits of each with the client before choosing the appropriate forum. If the Maryland state court is the forum of choice, it is best to bring an action using only the state version of the FCRA to prevent removal to federal court. Maryland also contains a longer statute of limitations than its federal counterpart.

Additional Law: Other statutes, including the Fair Credit Billing Act and the Deceptive Trade Practice Statute, may prove even more useful depending on the merits of the case.

Additional Causes of Action: Related causes of action include intentional infliction of emotional distress, misrepresentation, injurious falsehood and intentional interference with prospective contractual relations.

Damages: These can include cost of higher credit, mental distress and loss of employment, just to name a few.

With these points in mind, the lawyer prepared for battle can often persuade a creditor or CRA intent on collecting a debt to delete the identity fraud charges.

Marc Emden is an attorney in private practice in Rockville. He concentrates on consumer, criminal defense and personal injury law.



Publications : Bar Bulletin: November, 2004

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