District Court Holds Collection Agency Did Not Establish Permissible Purpose in FCRA Suit

In an FCRA action, where the consumer disputed that a collection agency had a permissible purpose to access his credit report, the District Court of New Hampshire has held that to establish permissible purpose, the collection agency must establish that it was seeking to collect an “account” as the term is narrowly defined in 15 U.S.C. §1693a(2).  In Bersaw v. Northland Group, Inc., C.A No. 14-cv-128-JL, a debt buyer assigned to Northland Group for collection two accounts owed by Bersaw.  In its collection efforts, Northland Group accessed the consumer credit report of Bersaw.  Bersaw filed suit alleging that Northland Group did not have a permissible purpose to access his credit report because he had not had any business dealings or accounts with Northland and had not applied for credit or employment with Bersaw.  Northland Group filed for summary judgment, arguing that the FCRA expressly permits an entity to obtain a credit report when collecting a debt from the consumer. 

In denying Northland’s motion for summary judgment, the court looked at the specific language of 15 U.S.C. §1681b(3)(A) which provides that a consumer reporting agency may furnish a credit report to a person who intends to use the information for a permissible purpose and specifically, in this case, “in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer.”  (emphasis supplied).  The court determined that it was not enough to be simply attempting to collect a debt from the consumer – the collection agency must be attempting to collect an account from the consumer, as the term is defined in 15 U.S.C. §1693a(2).  Under 15 U.S.C. §1693a(2), the term account is defined as being a “demand deposit, savings deposit, or other asset account (other than an occasional or incidental credit balance in an open end credit plan as defined in section 1602(i) of this title), as described in regulations of the Bureau, established primarily for personal, family, or household purposes.”  The court determined that Northland had not brought forth any evidence whatsoever “that sheds any light on the nature of the debts Northland was attempting to collect from Bersaw.  They may have been “demand deposit, savings deposit or other asset account[s]” and they may well have been incurred “primarily for personal, family, or household purposes. But, based upon the information presently before the court, it is equally possible that the debts in question were not such accounts, and were incurred for business (or some other) purposes.”  The court therefore denied Northland's motion for summary judgment.