Hard inquiries on discharged debt, violation???

[mysticspirit25]

Is a creditor pulling a hard inquiry on a discharged debt a violation of the discharge? Or is it simply a violation of the FCRA? My friend who was discharged in 8/09 has 3 hards from BOA, 2 from CAP1 and 4 from Wells Fargo Mortgage, (all of which were dishcharged in CH7). He is considering reopening the case to file an adversarial to get them removed.

Thoughts?

He was pro se.

[HHM]

Waste of time...

At most (and I am being generous), there is a FCRA claim. But hard pulls are generally not going to rise to the level of a discharge violation unless there was some other evidence or facts that the hard pulls were part of an overall scheme to collect a discharged debt (i.e. WF rep called and said, we will remove the hard pulls if you pay us).

The problem, even under FCRA, is that 99% of the time, the hard pulls are legitimate. Most people never actually read the statute...there is a catch all provision for hard pulls...so long as the lender has a "legitimate business purpose" they can pull credit. That is a fairly broad category. Also, hard pulls so incrementally affect credit, that there are no damages.

Most likely, no violation of any kind, BK or FCRA. Tell your friend to get a life

[nekom]

How is a hard pull on a debtor whose debt has been discharged a `legitimate business purpose'? The debt is extinguished and you no longer have an account with them. What business do they have doing even a soft pull much less a hard? Companies with which you currently do business have every right to do soft pulls, daily if they wish. Many do fairly frequently to review their accounts, raise or lower credit lines, etc. These are soft pulls. Nobody should be doing a hard pull unless you have applied for new credit. Collections agencies frequently do, sometimes monthly in an attempt to harass you, which also serves no legitimate business purpose.

But good luck finding an attorney who is interested in FCRA violations. Not enough payola in it, I believe the statute penalty is $1000 and damages would be extremely hard to prove.

[HHM]

In this particular case, I would point out, one of the creditors is "Wells Fargo Mortgage". Assuming the debtor is still paying the mortgage, there is conceivably a legitimate business purpose. Also, to get technical, BK does not extinguish the debt. A BK discharge is simply a permanent injunction against collecting a debt. A BK doesn't void the contract or terminate the relationship between debtor and creditor in a broad sense.

Don't get me wrong, I agree with you, I am just pointing out that the practicality of doing anything about it is not worth it. In FCRA, the Permissible Purpose area is the most difficult to litigate and pursue.

[nekom]

If they are still paying the mortgage, any pulls from Wells Fargo SHOULD be softs. I've never in my life had a creditor do a hard inquiry other than the initial one when I applied for credit. I have seen plenty of subsequent softs on my paper reports, that's very common and they have every right to periodically review your credit. If one fought with the credit bureaus you might be able to get them recoded as softs, although inquiries are hard to dispute, TransUnion flat out sends a letters stating that they will not investigate inquiries. In a case like that it's not an issue of permissible purpose as much of an issue of how inquiries are SUPPOSED to be coded. That is spelled out in some credit reporting guidelines, but probably not codified in any law. I'm fairly certain the FCRA does not make that clear.

I would argue that any former credit included in bankruptcy and not a current creditor has no permissible purpose but I doubt I'd be able to get a court to buy that or an attorney to take the case, especially on contingency.

[HHM]

Given the amount of pulls at issue, I question whether they really are hard pulls. You are correct, these could most likely be soft pulls.

[mysticspirit25]

They definitely are hard pulls. I looked at his credit report. And while it may be a waste of time, I think it is illegal. I have had many mortgages myself, and I NEVER have had a lender do a hard after closing, rarely they did softs (but only on HELOC products), never on a conventional mortgage. I can't understand why WF wants to continue to do hards. Not only that, the insurance company who purchased his charged off and discharged 2nd did a hard as well upon acquiring the loan. They have no permissible purpose, they paid off Citi, acquired the loan and offered a settlement of 50% after pulling credit to extinguish the lien. He declined. I fail to see the PP.

[HHM]

On the insurance company (or guarantor), that is easy, the PP is collection on the security interest.

Here is the thing, you can be all talk and have all the hoopla you want about this. It is a grey area and for the "marginal", if any, harm done, not really worth the mental anguish. So, let me ask you this, would you be willing to spend $10,000 to fight it. If the answer is no, then it really isn't that important, is it.

[thereshope]

Maybe Wells thinks they don't have to follow rules. Wells Fargo Home Mortgage did a hard pull on all three bureaus 9 months after my ch 7 discharge, I gave up the property in BK. They had also done hard pulls while the loan was still current and before BK filing. I disputed the inquiries directly with them, but they responded that they are too big to figure out why they pulled my credit report, so I filed a complaint against them with the FTC and advised Wells.

[mysticspirit25]

Well I can give you an update, my buddy reopened his case and threatened the people who bought his discharged 2nd, they released the lien free and clear without payment. $80,000 that was owed to Citi was discharged and the insurer who thought they had permissible purpose as an insurer of a loan was dead wrong, he sent a strongly worded letter outlining how they no longer had the PP, and their legal dept agreed. It went from him paying $8000 to settle the lien to them agreeing to just release it on the promise he would not file an AP. Oh and the insurer had also been sending bills for 18 months all attempting to collect a debt and stating there was an "amount due". Not anymore. He is currently suing Wells in an AP and last I heard they were offering to remove the inquiries and do a principal reduction to market value on his first (and only) mortgage, and pay a few thousand dollars.

[df04527]

I have to agree with the posters - I have recent knowledge of inquiries after a bk is a liability for the creditor. I can assure you this is a not so muddy violation. I've seen crap one for instance do almost the same thing as decribed above to include deleting the inquiry, reducing the amount owed and/or deleting the tradeline all together if the consumer agrees he will not persue legal action. These companies are beginning to recognize they can be sued for this as the damages to the consumer are a lower credit score for the consumer which then relates to higher interest rates. I would have to go find the court cases that support this. If I remember tomorrow I will post the cases. Sorry for not having them handy.

[mysticspirit25]

In this particular case, I would point out, one of the creditors is "Wells Fargo Mortgage". Assuming the debtor is still paying the mortgage, there is conceivably a legitimate business purpose. Also, to get technical, BK does not extinguish the debt. A BK discharge is simply a permanent injunction against collecting a debt. A BK doesn't void the contract or terminate the relationship between debtor and creditor in a broad sense.

Don't get me wrong, I agree with you, I am just pointing out that the practicality of doing anything about it is not worth it. In FCRA, the Permissible Purpose area is the most difficult to litigate and pursue.

While I have usually agreed with your advice, this is one point where I disagree. A bankruptcy filing in and of itself breaches most if not all contracts, therefore nullifying them after the discharge (unless it's secured). Once a debt is discharged, it is not legally owed to that creditor, therefore there is never any permissible purpose ever for that creditor to ever inquire onto a credit report, see my response below, my buddy just had 80k wiped out and offered to pay 10% for a lien release until he saw the inquiry and then they released lien for nothing. Wells is doing a mod and paying thousands, so obviously companies with high paid lawyers see the discharge injunction as more than just that, they see it as they no longer have PP ,otherwise why would the be giving up thousands of dollars in concessions?