Financial institutions and class action lawyers mix as well as Donald Trump and Carly Fiorina, so the latest news from Ballard Spahr about a new "coalition" of sharks in Sin City is bound to cause bankers everywhere to break out in a nasty rash.
Approximately 50 cases have been filed recently in Nevada state and federal courts against furnishers of information and credit reporting agencies (CRAs) for alleged Fair Credit Reporting Act (FCRA) violations. It appears that consumer rights attorneys have teamed up with consumer bankruptcy firms to monitor credit reports over the course of a debtor’s bankruptcy case and then sue creditors and CRAs after discharge if the debtor’s credit report inaccurately reports debts after the bankruptcy.
As the alert notes, individuals who alleged that they have been harmed by the inaccurate reporting of a debt that has been discharged in a bankruptcy proceeding have a private cause of action under the FCRA against a creditor that failed to report to the credit bureaus that the debt had been discharged. Of course, the class action attorneys make a nice pile of cash, which has absolutely nothing to do with the matter. It's all about getting "justice" for the debtor.
Banks and credit unions will need to take this trend into account, and ensure that their reporting policies and procedures are hyper-vigilant so that inaccurate reporting to the credit bureaus does not occur. While this has been the case for some time in theory, in practice some institutions appear to have been relying on the theory that if the error is inadvertent, they might get a pass if they correct it as soon as they become aware of it. The "flurry" of new lawsuits makes it clear that the sharks are circling, that reporting inaccuracies are "chum," and that the the plea of "no harm, no foul" will be drowned out by the screams emanating from the bank's dismemberment by a veritable "sharknado" of vicious hammerheads and, perhaps, a few oversize "great whites."