    
Christine Baker
Board Administrator
Username: Admin
Post Number: 698
Registered: 08-2002
| | Posted on Tuesday, March 18, 2003 - 09:11 pm: | 
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FACTUAL ALLEGATIONS
32. In 1996, plaintiff filed for bankruptcy, in part because she could no longer obtain mortgage approvals for her mostly minority and/or low income first-time buyer clients due to minimum credit score requirements by FNMA and FHLMC. Additionally, her creditors kept raising the interest rates due to business related credit inquiries and possibly incorrectly calculated balance/limit ratios and other bugs in credit scoring software.
33. As an experienced real estate and mortgage broker, plaintiff was very aware of the importance of positive accounts and the devastating impact of any new derogatory entries on her credit reports after the bankruptcy. She also knew that the reporting of a collection after the bankruptcy would destroy her credit rating and prevent her from refinancing her home near San Francisco. After her bankruptcy was discharged, plaintiff disputed numerous incorrectly reported accounts with all CRAs.
34. During 1999 and most of 2000, plaintiff traveled full-time and she then established her base in the Arizona desert. The US Postal Service does not deliver to plaintiff’s address. Plaintiff, like millions of residents of rural America, has a choice of using a rural mailbox miles from her house and subjecting herself to mail and identity theft, or having important mail sent to a private or post office box. Due to the postal service inability to forward mail when plaintiff travels, plaintiff has most mail sent to a private mailbox. Plaintiff pays her bills online and conducts her business via e-mail and fax. Plaintiff often does not receive mailings sent via postal service for weeks and sometimes months.
FAIR ISAAC, THOMAS G. GRUDNOWSKI, THOMAS J. QUINN, BARRY PAPERNO AND FTC
35. Plaintiff repeats, realleges and incorporates by reference the foregoing paragraphs.
36. FAIR ISAAC is the developer of FICO credit scores, used in over 75% of all credit approvals or declines. FAIR ISAAC is also extensively marketing the sale of their credit scores to consumers. According to FAIR ISAAC, over two million people have purchased their products since March of 2001. The cost of one credit report with a score is currently $12.95.
37. At their web site myfico.com, FAIR ISAAC displayed on 2/6/03 how mortgage rates relate directly to their credit scores:
720-850 5.773%
700-719 5.898%
675-699 6.435%
620-674 7.585%
560-619 8.267%
500-559 8.689%
38. Upon information and belief, FNMA and FHLMC mortgages, as well as almost all other low rate mortgage programs with the exception of FHA and VA require minimum FAIR ISAAC credit scores for approval.
39. Upon information and belief, most auto loans and credit cards are rated according to FAIR ISAAC credit scores.
40. Plaintiff has been requesting information about the data utilized in FAIR ISAAC credit scores since at least 1995.
41. Since 1997, plaintiff has been publishing the “FICO Credit Scoring is Fraud!” web page at http://www.bayhouse.com/FICOisFRAUD.shtml. The scanned credit reports document how FAIR ISAAC credit scores can change up to 24 points within just a few days and with no changes on the credit reports.
42. Upon information and belief, THOMAS G. GRUDNOWSKI, THOMAS J. QUINN, and BARRY PAPERNO were aware of this publication, and they never objected.
43. In November 1998, plaintiff had extensive communications with BARRY PAPERNO regarding her published recommendations for improving FAIR ISAAC credit scores.
44. BARRY PAPERNO failed to advise plaintiff that insurance credit inquiries were ignored by their credit scoring software and he confirmed that payment of collections and charge-offs did not increase credit scores. Plaintiff discovered that this is often not true.
45. In April 2000, plaintiff e-mailed to BARRY PAPERNO the draft of the update to her published credit scoring recommendations. Excerpt:
“So all the auto and mortgage inquiries in the last 30 days are ignored, but the cell phone credit check + the department store inquiry + the insurance credit check give you 3 inquiries in the last 30 days.”
46. In the subsequent e-mail exchanges, BARRY PAPERNO again failed to point out that insurance inquiries are ignored by FAIR ISAAC credit scoring formulas.
47. Plaintiff and many of her readers subsequently did not shop for lower insurance rates.
48. Another excerpt from her e-mail to BARRY PAPERNO:
“I was also able to confirm that you will NOT improve your Scores by paying collections and charge offs. And it makes little difference whether you have one or more collections. And of course, a collection last month lowers your Score much more than a collection 5 years ago (provided the correct date is reported on the credit report by the collection agency.)”
BARRY PAPERNO failed to inform plaintiff that this is not correct.
49. Plaintiff also published bizarre credit reporting at her credit forum, such as CAPITAL ONE reporting a “current balance” higher than the “most owed” (or “high credit”, depending on the CRA) amount for reader Erik. Plaintiff discussed the scoring of this account with BARRY PAPERNO and he assured her that the “over limit” balance would be excluded from FAIR ISAAC’s scoring calculations. He failed to mention that the account balance and the amount reported as “most owed” are included in the FAIR ISAAC balance/limit ratio. If CAPITAL ONE was the only revolving account, Erik's balance/limit ratio was OVER 100% and his score was substantially lowered by the balance/limit ratio.
50. Upon information and belief, and as published at http://bayhouse.com/discus/messages/1231/1032.html, Erik submitted his complaint to the FTC on or about January 16, 2001. Excerpt:
“I'm deeply concerned that Capital One and some other credit card companies have a policy of not reporting credit limits. The CRAs should not be allowing this either. It is an illegal practice that is harming hundreds of thousands of consumers in the United States. I ask that you enforce the FCRA to stop this practice.”
51. Upon information and belief, the FTC responded:
“Re: FTC Ref. No. 1227099
Dear Erik:
This is in response to your complaint concerning your credit report. While the FTC does not collect or keep credit records on individual consumers, it is responsible for making sure that credit bureaus report accurate and up-to-date information. We have enclosed a brochure that addresses your concerns. Between the brochure and this letter we hope to be able to answer all of your questions.”
52. Upon information and belief, the FTC did nothing in response to this complaint except to send completely unrelated brochures to Erik.
53. Upon information and belief, the FTC ignored the second complaint, CAPITAL ONE stated that they DO report the credit limits, and EXPERIAN claimed that the missing credit limit is not a violation of the FCRA.
54. The FTC failure to take action contributed greatly to plaintiff’s subsequent damages.
55. On or about April 7, 2001, BARRY PAPERNO admitted to plaintiff that FAIR ISAAC was using the amount reported as “high credit” instead of a missing “credit limit” to calculate the balance/limit ratio.
56. On or about August 24, 2001, plaintiff sent a letter to THOMAS G. GRUDNOWSKI through Planetfeedback.com, inquiring about the scoring of student loans and the effect of balances higher than the original loan amount due to deferment and accrued interest.
57. Planetfeedback.com (hereafter “PFB”) is a web site allowing consumers to submit their complaints, questions or compliments about most major companies. PFB forwards the letter to the company’s CEO or to the person designated to handle consumer correspondence. Many companies make special efforts to resolve complaints submitted through PFB, because consumers can “share” their letters, allowing PFB to publish those letters and the subsequent results at their web site. PFB also allows consumers to send copies of their letters to elected officials and plaintiff had PFB copy her credit reporting and credit scoring complaints to Senators John McCain and Jon Kyl of Arizona.
58. On August 31, 2001, plaintiff sent two letters to FAIR ISAAC through PFB, inquiring about the use of personal data such as addresses and inquiring which date FAIR ISAAC used to age charge-offs. FAIR ISAAC ignored the letters.
59. On October 24, 2001, plaintiff filed her small claims complaint against FAIR ISAAC in Kingman, AZ, Justice Court. Plaintiff dismissed without prejudice on 12/10/01.
60. THOMAS J. QUINN, Director, Client Support, responded in his letter to plaintiff dated 11/19/01:
“When viewing a collection agency item, the models look at the date the collection account was opened.”
61. Upon information and belief, PROFESSIONAL RECOVERY reported the disputed PACIFIC BELL collection as opened in 4/99 on plaintiff’s TRANS UNION report and AMERICAN AGENCIES reported the collection as opened in 7/2000 to EXPERIAN. The actual date of original delinquency was 11/96 and the date reported to the CRAs was 11/97.
62. Upon information and belief, FAIR ISAAC credit scoring software calculated a score not at all representing plaintiff’s true credit risk, causing numerous declines and lost opportunities.
63. Upon information and belief, FAIR ISAAC credit scoring software lowers the credit scores for all consumers whose collections are reassigned or sold, utilizing the date a collection account is opened with a collector instead of the date of the original delinquency, required to be reported to the CRAs by all credit data furnishers as per FCRA § 1681c(c)1.
64. Upon information and belief, FAIR ISAAC credit scoring software lowered plaintiff’s credit scores when CRAs verified incorrect data due to a creditor’s response and subsequently a newer date was reported with the account.
65. Upon information and belief, FAIR ISAAC credit scoring software lowered plaintiff’s credit scores when:
a) Wholesale lenders ran her credit while she operated her mortgage brokerage.
b) Plaintiff ordered any services for her business requiring credit checks.
c) Plaintiff applied for cell phone service or a bank account.
d) Plaintiff applied for utilities and telephone service upon moving.
e) Plaintiff applied for any type of financing to get a rate quote.
66. Upon information and belief, FAIR ISAAC credit scoring software may have lowered plaintiff’s credit scores when collectors ran her credit, attempting to collect the disputed PACIFIC BELL collection.
67. Upon information and belief, FAIR ISAAC credit scoring software may have lowered plaintiff’s credit scores due to incidental credit inquiries when she rented a car, movie or anything else and when she paid for merchandise with a check.
68. Upon information and belief, one credit inquiry can lower the FAIR ISAAC scores up to 35 points and multiple inquiries within the last 12 months from the score date can lower the scores up to 115 points.
69. Upon information and belief, FAIR ISAAC credit scoring software lowered plaintiff’s credit scores when several creditors violated the 1996 discharge order and they continued to attempt to collect the discharged balances.
70. Upon information and belief, FAIR ISAAC credit scoring software lowered plaintiff’s credit scores for the accounts reported as “included in bankruptcy” in addition to the rating of the public record of the bankruptcy filing.
71. Upon information and belief, FAIR ISAAC credit scoring software rated accounts reported as “reaffirmed” after bankruptcy as currently delinquent, even when the account was never paid late.
72. Upon information and belief, plaintiff cannot apply for employment without risking lower FAIR ISAAC credit scores due to incidental credit checks.
73. Upon information and belief, plaintiff may now be subjected to credit score lowering inquiries prior to boarding an airplane.
74. Upon information and belief, FAIR ISAAC substituted the amount reported as “high credit” for the “credit limit” (willfully omitted by CAPITAL ONE and others) to calculate plaintiff’s balance/limit ratio, lowering her credit scores.
75. THOMAS J. QUINN wrote in his final letter to plaintiff, dated 12/28/2001, that the CRAs and not FAIR ISAAC score plaintiff’s credit reports and that he would not engage in any further communications with plaintiff.
76. Plaintiff subsequently requested that the CRAs not utilize FAIR ISAAC credit scoring software with her credit files, but they failed to comply with her requests.
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