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Monday, 11 September 2006
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A Father's Difficulty

Article pulled from http://identityrehab.com

This extensive case of identity fraud is a specific example of how identity theft can affect anyone, and once it does, how extensive the damage and recovery can be.

In January 2000, Matthew S. Kirkpatrick, a Portland finish carpenter and father of two young children, was surprised to learn that he had been denied a mortgage loan. He understood the importance of good credit and maintained a FICO score around 750. But it turned out that someone in Coeur d’Alene, Idaho, had stolen his name and SSN to take out credit in his name, thereby polluting his credit report with late payments and collection accounts. Kirkpatrick began the arduous task of notifying those who had been defrauded that he was not responsible. He specifically recalled Equifax advising him to have the defrauded creditors notify Equifax directly. In fact, by the fall of 2000, two of creditors had done so. Kirkpatrick thought the problem had been resolved and that his FICO score would be restored to 750. He also put a “fraud alert” on his credit report.

Soon thereafter, Kirkpatrick’s wife, Lisa, became pregnant with their third child. He quickly made plans to construct a new bedroom, and would do most of the work himself. Wishing to get started right away, he borrowed money from Lisa’s retirement account – knowing there would be no penalty as long as the money was repaid by April 15, 2001, still several months away.

In February 2001, however, Kirkpatrick discovered that his credit report was polluted with more than a dozen collection accounts stemming from the ongoing activities of the Coeur D’Alene fraudster, including accounts involving creditors who already had informed Equifax that he was not responsible. His FICO score had plummeted to 580, well below sub-prime. Even though the local  branch was familiar with him, it rejected his home improvement loan application, as the underwriters would never permit credit to be granted to someone with such an abysmal credit history.

Once he overcame his shock, Kirkpatrick set out to compile a dispute package that would clear up the mess quickly. The package he sent to Equifax in late February 2001 included:

  • Coeur d’Alene and Portland police reports confirming that Kirkpatrick was not responsible for the fraud
  • Letters from two defrauded creditors confirming that he was not at fault
  • A copy of his Social Security card w/ signature
  • A copy of his driver’s license with his photo and current home address in Portland
  • A cover letter explaining that he was a victim of identity theft.

But there was no response. Bank of America told him that his loan had been rejected again, as there had been no changes in his Equifax report. Kirkpatrick called Equifax, but the operator (“Lori”) said they didn’t have his dispute package. The operator grew impatient with him, essentially telling him to either do an oral dispute with her, or hang up.

Kirkpatrick wondered how Equifax could investigate properly without his supporting documentation, but finally relented, disputing 19 fraudulent accounts on his report. He also re-sent the entire dispute package on March 22, 2001.

The same day, Kirkpatrick received a letter from Equifax (dated March 13), advising him that his dispute package “had been shredded,” without explaining why.

Kirkpatrick really started to worry. The deadline for returning the borrowed money to his retirement account was fast approaching, and there was no resolution in sight. He called again, this time talking with “Lynn Hamilton.”

1 On March 24, he sent a third dispute package. He called again on April 6, but “Sue” told him the package was nowhere to be found. On April 11, “Julie” and “Patty” reiterated that they could not find the package. Four days later, the bank assessed a penalty against the Kirkpatricks for not repaying the retirement account by the deadline.

Kirkpatrick kept trying. He talked to “Sue” again on April 20. Again, no package. But he followed her advice, sending a fourth package with the U.S. Postal Service’s “return receipt requested.” On April 30, the Postal Service delivered the signed card proving that Equifax had received his fourth package.

But incredibly when he called on May 7, “Marlene” amazingly insisted there was no dispute package. A week later, he spoke with “Dale,” and supervisor “Aaron.” Aaron essentially told him that if he wanted his credit report corrected, he needed to do it himself by contacting all of the defrauded creditors. This wasn’t the first Equifax operator to be rude to him; it wouldn’t be the last.

Coincidentally, he received Equifax’s response to his March 20 phone dispute. Equifax and the defrauded creditors had “verified” that he was responsible for many of the fraudulent accounts. Accordingly, they would remain on his credit report. Kirkpatrick felt defeated. 

Meanwhile, the new addition to Kirkpatrick’s house remained unfinished, since he could not get the necessary financing. The unfinished work posed potential safety problems for his young children, as well as fire hazards. The white construction paper known as Tyvek, which typically envelopes unfinished homes, was exposed for so long that it began to come loose. When the late autumn winds blew at night, the Tyvek paper would flap eerily against the walls. When the new baby came, the Kirkpatricks were forced to crowd into a space even smaller than what they had before the remodeling began. The stress compounded as time went by.

Hoping to complete the construction, Kirkpatrick in early 2002 tried to find a lender that used a CRA other than Equifax, as Trans Union and Experian had managed to remove the fraudulent accounts by then. He tried again with Bank of America, but 11 fraudulent accounts – all related to Coeur d’Alene – remained. In addition, information on other unknown consumers was creeping into his credit report.

It was then that Kirkpatrick re-read the “Statement of Consumer Rights Under the FCRA” attached to each of his credit reports. There it was, in black and white: It was Equifax’s responsibility to investigate and correct disputed information, not his. He contacted his uncle, an attorney in Washington State, who said he’d try to find a lawyer who knew something about the FCRA.

Kirkpatrick tried applying for credit, but banks and credit unions kept rejecting him, usually citing the Equifax report. Visibly changed and increasingly morose, Kirkpatrick reluctantly accepted a small personal loan from an insistent family friend.

He tried disputing again in April of 2002, but six weeks later, Equifax advised him that it had again “verified” fraudulent accounts – meaning that they would remain on his credit report. Moreover, new fraudulent accounts from collection agencies, phone companies and department stores had appeared on his account.

After yet another round of disputes failed to clear up his credit report, Kirkpatrick in June 2002 filed suit under the Fair Credit Reporting Act in federal court in Portland. Nonetheless, Equifax still did not correct the errors. 2
           

In January 2005, Kirkpatrick finally got his day in court. He described years of frustration, as Equifax simply would not respond in any meaningful way to his numerous disputes. Due to time zone differences and his work schedule, Kirkpatrick usually tried to phone Equifax dispute operators at 6 a.m. Because of the difficulty in getting through, this became a stress-inducing, pre-dawn ritual.

I would have shortness of breath, like it was hard to breathe. That was just the dread that I had of having to call.”

At trial, Equifax admitted it had failed Kirkpatrick. Alicia Fluellen, head of Equifax’s dispute-handling department, 3 said she couldn’t explain the breakdowns.

It appears to me to be the Murphy's law of all dispute handling. I have truly never seen that. Every last opportunity that we had to get it right, we just – it was missed or wasn't taken.”

In her pre-trial deposition, Fluellen denied that Equifax had violated even one provision of the FCRA. 4 But at trial, five years after his ordeal began, Kirkpatrick finally got an apology when the soft-spoken Fluellen, facing him from the witness stand, said, “I am completely and utterly embarrassed by the errors, very disappointed that we made so many errors on one particular consumer's credit file. This is my very first time coming into contact with Mr. Kirkpatrick.  I really do believe he deserves an apology and I really would like to say that I am very, very sorry in the way we handled your disputes.  I truly am.”

Equifax had reason to show remorse. Under the FCRA, the jury could assess monetary damages to compensate Kirkpatrick for the harm he suffered. Moreover, the jury could hit Equifax with punitive damages to deter it from doing to others what it did to Kirkpatrick. Given the long list of seemingly inexcusable mistakes, Equifax’s position was akin to that of actor John Cleese in the movie “A Fish Called Wanda,” when he was being dangled upside down from a window by actor Kevin Kline, with Kline demanding an apology.5

While Fluellen apologized for the mistakes, she did not apologize for Equifax’s system. She insisted that Equifax had good procedures in place, but that its employees failed to follow them.

One of these was the “verified victim policy” – meaning, Fluellen explained, that “if one credit grantor verified that the consumer was a victim of fraud, then regardless of what all the other credit grantors say, (Equifax) will remove all disputed accounts from the credit file.”

Another “recurring human error” was the operators’ failure to remove addresses that Kirkpatrick had disputed as fraudulent. Fluellen could not explain why the “maintenance reviewers,” who oversee the operators, never caught any of these failures.

To avoid a repeat of the Kirkpatrick debacle, Fluellen testified that Equifax increased its “refresher training” for all agents. It also implemented some new “prompts,” so that “if a consumer disputes an account as fraud, the system will ask the agent a series of (reminder) questions … so we're not depending on the agent to remember a great deal of information (about policies and procedures),” she said.

In 2001, Fluellen said, Equifax received anywhere from 10,000-30,000 letters a day – mainly consumer disputes and consumer requests for their own credit reports, but also some credit grantor responses. Most consumer disputes, including those with attachments, were outsourced to lower-paid operators in Jamaica. The exceptions were consumer disputes accompanied by police reports or fraud affidavits; those stayed with Equifax employees in Atlanta, she said.

Fluellen, along with the rest of Equifax’s defense, apparently convinced the jury that Kirkpatrick’s experience was relatively rare, and that Equifax did not need to be punished. The jury awarded Kirkpatrick $210,000 in actual damages to compensate him for the years of misery. But it declined to award punitive damages.6 

This meant that Equifax likely would not make any substantive changes in its system for investigating consumer disputes. This system involves an automated exchange of messages between it and the credit grantor, and is designed to reduce costs by minimizing the amount of time employees spend on consumer disputes.

Fluellen testified that it wasn’t a problem for its experienced operators to process 100 dispute messages, known as Consumer Dispute Verifications (CDVs), in one hour. “It's not very difficult,” she said.  “You're looking at the response from the credit grantor and you're matching up ID (i.e., name, address and SSN), and the more you do it, the faster you become. You're certainly not expected to process 100 CDVs an hour day one. You grow to that.

The problem is that with a complex dispute, like identity theft or a “mixed file,” the comparison of identifiers is unlikely to determine the accuracy of the disputed information or the validity of the consumer’s dispute. After all, in these kinds of cases, it is the mixing of identifying data that causes the inaccuracy in the consumer’s credit report.

When all the attorney’s fees are tallied, Equifax’s bill for the Kirkpatrick case could well reach $1 million. But one wonders what kind of impact that will make on a billion-dollar company like Equifax. Will it view the Kirkpatrick case as just a cost of doing business?

For consumers, the implications could be more severe. The probability that Equifax will continue depending on its automated “CDV-exchange” as its principal means of handling disputes portends more Kirkpatrick-like experiences for unlucky victims of identity theft, mixed files, or other kinds of inaccuracy.

These case studies are excerpts from Credit Scores & Credit Reports, How the System Really Works, What You Can Do By Evan Hendricks. Evan is author of numerous books, including Your Right To Privacy (1990 - Southern Illinois University Press) and Credit Scores & Credit Reports, How the System Really Works, What You Can Do (2005 - Privacy Times).

1 It was possible that some of the names given to Kirkpatrick were aliases.

2 Kirkpatrick was represented by Michael Baxter and Robert Sola of Portland. Equifax’s lead counsel was Mara McRae, of Atlanta’s Kilpatrick & Stockton. The author was an expert for plaintiff.

3 Fluellen’s title was director of consumer customer care.

4 That portion of the deposition was read at trial.

5 Cleese’s classic apology: “All  right, all  right, I apologize. I'm really, really sorry. I apologize unreservedly. I offer a complete and utter retraction. The imputation was totally without basis in fact and was in no way fair comment and was motivated purely by malice, and I deeply regret any distress that my comments may have caused you or your family, and I hereby undertake not to repeat any such slander at any time in the future.

6 If Kirkpatrick’s attorneys are awarded fees, which is allowed by the FCRA, then Equifax might have to pay another couple hundred thousand dollars.

 

  
   

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