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5/15/2014

Yes, but watch out landlords, and Yes you can tenants.

 

How Can A Landlord Even Report Unpaid Rent on my Credit Report?

Credit reports are for the reporting of consumer, and in some cases, business debts personally guaranteed by consumers.

 

Under the California Fair Debt Collection Practices Act, California Civil Code 1788 et seq. “consumer debt” means money property or their equivalent due or owing or alleged to be due or owing from a natural person by reasons of a “consumer credit” transaction.  CC 1788.2(f)


A “consumer credit transaction” means a transaction between a natural person and another person in which property services or money is acquired on credit by that natural person from such other person primarily for personal, family, or household purposes.” CC 1788.2(e)


You may be wondering how can “rent” be considered a “consumer credit transaction” since renting property is not the same thing as extending someone “credit”?

 

The short answer is that the credit reporting bureaus are allowed to list “alternative credit data” which is considered “credit-like” in that you make monthly payments for goods or services in advance which is not the same as repaying a debt.  That’s how unpaid cable, gas, electric, and even rent makes its way onto your credit report even though it’s not really credit debt by definition.  See CC 1785.1 et. seq. (California Fair Credit Reporting Act).  Most “credit-like” companies hire collection agencies to separate themselves from the reporting.  Also, if a judgment is obtained against you in court for a “credit-like” debt then the reporting agencies can pick up on that without the debt ever being reported as well.

 

How is the Law Actually Applied?


The California legislature ATTEMPTED to fix this loop hole (at least in part) by prohibiting the dissemination of unlawful detainer information by consumer credit reporting agencies CC 1785.13(a)(3) and investigative consumer reporting agencies (CC 1786.18(a)(4)) unless the landlord was the prevailing party; however, these statues have been held to be an unconstitutional by the 4th district Appellate Court as violations of the credit reporting agencies First Amendment rights of free speech.  U.D. Registry Inc v State of Calif (1995) 34 CA 4th 107, 114; Ortiz v Lyon Mgmt. Group, Inc. (2007) 157 CA 4th 604, 612-19; Trujillo v First American Registry Inc. (2007) 157 CA4th 628, 640

 

It’s troubling that landlords don’t have to report a tenant’s on-time rental payment history as “alternative credit data,” or even have to wait for a final determination of rights in court before they can report you to collections and ding your credit.  This practice allegedly protects the landlords, collection agencies, and credit reporting bureaus’ “free speech” rights, but overlooks the FACTS that Tenant’s can win at trial and often have legitimate reasons for not paying all of the rent allegedly due (i.e. habitability defenses, reimbursement issues, breach of lease issues, Unlawful Detainer Court errors by landlord, etc…) without getting due process.   So what can a tenant or prospective-tenant with an unpaid rental obligation in collections do about it?

 

What can an Aggrieved Tenant Do About it?


First, if you are denied a rental based on an unpaid rental collection account (which is separate from an eviction judgment on your record which occurs only after losing an unlawful detainer trial or being defaulted) then the landlord must comply with CC 1785.20 which requires: (1) written notice of the adverse action, the name/address/phone number of consumer credit reporting agency which furnished the report, a statement that the decision to take adverse action was based on the consumer credit report info, and written notice of the right to obtain a free copy of the credit report and right to dispute the accuracy of the information.  CC 1785.20(a)(1)-(4).  Many landlords don’t follow the law in this regard with prospective tenants and the remedies are limited.

 

More importantly, it’s the former landlord, collection agency, and/or credit reporting bureau that is causing the harm – not the prospective landlord who is simply going off of the false information that's being reported to them.  Therefore, it may be important for aggrieved tenants to focus their energy and resources where it counts – against the former landlord and their collection agency.

 

With that in mind, NONE OF THE FOREGOING IS INTENDED AS LEGAL ADVICE, READ AT YOUR OWN RISK


Next, you can file a dispute with the credit reporting agency directly, but note that neither puts a roof over your head, nor is dealing with a credit reporting bureau at all pleasant, but you will almost certainly need to document this step before taking any legal action even though your dispute will almost certainly be denied.  There are specific protocols that you’ll need to follow with each credit reporting agency so do your homework online with each bureau first, be extra thorough, and be sure to send everything certified.  If you want to read more about the legality behind this part of the process See CC 1785.16, 15 USC 1681i; CC 1786.24; Schoendorf v U.D. Registry Inc. (2002) 97 CA 4th 227, 38-40, CC 1785.30, and CC 1785.31.

 

Assuming your dispute with the credit reporting bureaus goes nowhere, then you may have the right to sue the landlord and reporting agency for damages, attorney’s fees, and costs: “Landlords who improperly or inaccurately report unlawful detainer actions to a consumer credit reporting agency, as well as agencies who improperly or inaccurately report such information are subject to civil damages liability to aggrieve tenants or perspective tenants.”  CC 1785.31, 1786.50 That's why most smart landlord attorney's advise their client's not to report the debt but do get the judgment and let the debt report itself so you can't be sued on it.  That said, not all landlord attorney's are knowledgeable, not all clients listen, and many landlords have a chip on their shoulder & take tenant disputes rather personally.

 

Under the law, the aggrieved tenant is entitled to recover:

1)      Actual damages – including pain and suffering, court costs and attorney fees (minimum $2500 if violation done “knowingly and without permissible purpose: plus

2)      If “willful violation” then punitive damages of at least $100 but no more than $5,000 for each violation as the court deems just and proper and

3)      Any other relief which the court deems proper CC 1785.31(a)(1)(2)&(3) which includes injunctive relief CC 1785.31(b) (i.e. an order removing the improper listing)

 

Conclusion

In most cases, you’ll want to hire a lawyer that knows what they’re doing to sue the former landlord and collection agency that’s harming your credit.  Depending on your facts, our office can do these claims for little or no money down and in many cases on a contingency basis (619) 794 0460, This e-mail address is being protected from spambots. You need JavaScript enabled to view it .  If you are already in litigation then discuss filing a cross complaint with your attorney but make sure they know what they’re doing.  You can’t file cross complaints in UD actions and if the case converts into a limited civil action then your attorney may not be familiar with the application of the laws cited in this blog.

Alternatively, you can also go the small claims route but beware – this isn’t a simple cause of action – it’s a legal minefield out there and it’s important to be represented by an experienced attorney because you can’t afford to lose and owe the landlord even more money.  If you can settle it and get them to voluntarily take down the listing without an attorney then mazel tov, but proceed with caution – they probably won’t take you seriously unless represented anyway so give us a call for a free consult and see if we can help you repair your credit. (619) 794 0460, This e-mail address is being protected from spambots. You need JavaScript enabled to view it