Credit Reports Tag Consumers as Terrorists or Drug Dealers

Reports by Trans Union to creditors sometimes mistakenly tag law-abiding consumers as terrorists or drug dealers. The reports are not the normal credit reports consumers and lenders obtain on consumers. The reports are special reports Trans Union sells to lenders as method to screen consumers so the lenders are in compliance with the USA Patriot Act regulations.

Attorney Andrew Ogilvie of this firm and co-counsel at Francis & Mailman, a Philadelphia law firm, have filed a class action in the federal district court in San Francisco alleging that Trans Union’s practices are in violation of the Fair Credit Reporting Act with Sergio Ramirez as the class representative.

When Mr Ramirez applied for a car loan at a dealership in Dublin, CA, but the dealer rejected his application after the finance manager pulled a Trans Union credit report indicating he may be a drug trafficker. When Ramirez disputed the report, Trans Union told him there was nothing Ramirez or the credit bureau could do to fix the problem!

Trans Union added Sergio Ramirez to the list it sold to lenders because his name was similar to two suspected drug traffickers on the SDN list.

Many people are likely to have been mistakenly tagged as criminals because of loose criteria Trans Union uses to match people to a publicly available government blacklist, the Specially Designated Nationals (SDN) list, commonly known as the OFAC list, after its agency of origin — the Treasury Department’s Office of Foreign Assets Control.

Lenders are supposed to check the list each time they receive a new application for credit and face steep penalties of up to $10 million if they don’t.

The exact algorithm that Trans Union uses to match people to individuals on the list is unknown. It appears that if any two names match up with the consumer’s first and last name, it will be returned as a match. No other identifying information, such as Social Security number or birth date, is used.

As a result, many people are getting mistakenly flagged by the credit reporting agencies simply because they have common names. The OFAC list has a large number of Hispanic and Middle Eastern names that are shared by large numbers of people who are law abiding citizens.

If a consumer learns that an OFAC alert tied to your name is being reported to lenders, the consumer should write or call the credit bureau that is making the report and ask to be taken off the list. If a credit bureau refuses to remove the false alert, the consumer may wish to contact this law firm for further advice.

The courts ruled against Trans Union in an earlier case. Sandra Cortez was told she was on the OFAC list when she applied for a car loan. The car dealership threatened to call the FBI and made her wait for hours before she could take her car home. Cortez later contacted Trans Union several times trying to get the alert removed. However, Trans Union told her the alert didn’t exist on her credit report so she couldn’t dispute it.

During that same period, Cortez saw the alert still appeared on other lenders’ credit reports, including one pulled by a potential landlord a year after she visited the car dealership.

Ms Cortez retained attorneys and prevailed at trial receiving an award of substantial damages. Trans Union lost on appeal to the 3rd U.S. Circuit Court of Appeals. The appellate Court held that OFAC alerts are covered by the Fair Credit Reporting Act and that Trans Union violated the Fair Credit Reporting Act by keeping the OFAC alert secret from Cortez and not letting her dispute it. Cortez v. Trans Union, LLC (3d Cir. 2010) 617 F.3d 688.

Update and clarification: I prepared a draft of this post on November 23, 2012, but did not publish it on the Internet until after I had read a post on the same subject on the CreditCards.com site written by reporter Ms. Kelly Dilworth. After reading her post, I revised my draft borrowing some of her words and phrases. I then published my post on December 7, 2012. I should have given proper attribution to Ms. Dilworth and CreditCards.com and I apologize for not having done so.

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