Pintos Impact Limited but it May be a Threat

A decision handed down by a federal appeals court in late September is still causing confusion among collectors regarding their rights to access a consumer’s credit report during the collection process. ACA International held a second teleconference Thursday to address some of the confusion.

The case, dubbed ‘Pintos’ from its legal title Pintos v. Pacific Creditors Association (PCA), has become important for the collection community because it raises issues regarding the pulling of credit reports, and because it could cover select debt sectors including healthcare, said Valerie Hayes, ACA’s International Corporate Counsel.

In the case, Maria Pintos claimed that PCA did not have “permissible purpose” to access her credit report in her particular case. When she sued PCA and credit reporting agency Experian – the provider of the report – a district court in northern California ruled in favor of PCA and Experian. Pintos appealed the case to the 9th Circuit Court of Appeals which overturned the original ruling.

In its Sept. 21 ruling, the appellate court’s panel of judges found that debt collection, by itself, did not constitute permissible purpose for an agency to access a consumer’s credit report, reversing a long-held standard used by collectors. At particular issue was the establishment of a voluntary credit transaction under the Fair Credit Reporting Act on the part of a consumer.

In the ACA’s teleconference, two collection law experts answered questions on the case from listeners. John Bedard, of Norcross, Ga.-based Franzen and Salzano, and Tomio Narita, from San Francisco-based Simmonds and Narita, attempted to assuage fears that the decision might be more broadly applied.

Bedard said that in order for collectors to establish permissible purpose to access a credit report under the FCRA, three questions must be satisfied: Did the consumer directly participate in the transaction? Was there a deferred payment arrangement? And was the consumer voluntarily seeking credit?

“If ‘yes’ is the answer to all of the questions,” said Bedard, “then you have a ‘credit transaction’.”

The Pintos case involved a consumer’s car being towed after abandonment. Local police had a towing company remove the car from a public street and created an account for costs associated with the towing and impoundment. The company ultimately sold the car, but the proceeds did not cover the costs. So a deficiency balance was created which was forwarded to PCA. When PCA attempted to collect, the company pulled Pintos’ credit file.

Although the ruling probably was in-line with Bedard’s test, many in the industry worry that the case’s precedent will be applied to other debt types. Non-sufficient-funds check charges, overdraft fees, and even medical debt are up for scrutiny under the Pintos ruling, according to Bedard and Narita.

Both attorneys said that credit card debt was safe under the ruling. In response to a question posed by a teleconference participant, Narita said, “It’s safe to assume [credit card situations] do not apply.”

Hayes notes there’s a mistaken sense of relief among some collectors that Pintos appears to only apply to 9th Circuit cases. “Technically, Pintos has precedential value only in the Ninth Circuit. However, it may have broad-reaching implications for other jurisdictions as courts may use Pintos as the basis for interpreting the FCRA in the same manner,” said Hayes

And the 9th Circuit is huge, handling appeals for Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington as well as the territories of Guam and the Northern Mariana Islands.