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Screening Judgments - Credit Reports
This article is my opinion, and not legal advice. I am a judgment broker, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.
The first level of screening is to estimate the approximate financial condition of the judgment debtor using what the OJC told them, and from what they can find using public data record searches. Level one screening is done before the enforcer mails paperwork (the purchase agreement and the assignment of judgment document) to the OJC. If public data records show a sad story on the debtor, the good judgment enforcers will explain this to the original judgment creditor, and not even send their paperwork to the OJC, and there will be no level two screening.
Who has the right to pull a credit report on a judgment debtor? In my opinion, the OJC, their lawyer, or an assignee of record for the judgment does when they have their contract signed by the original judgment creditor; because they have permissible purpose (sometimes called probable cause). Although in the minority, certain books, web sites, lawyers, and non-lawyers have stated that one cannot pull a credit report until they actually own the judgment; and the only valid proof of that ownership is the stamp of the court, endorsing the change of ownership.
For a short period of time there was the Pinto credit decision, which cast a shadow on the legality of pulling debtor-related credit reports. That decision was overturned, and now again, many judgment enforcers that own judgments, pull a credit report on the judgment debtor before filing the assignment at the court. Interestingly, for some reason, many credit report companies will not allow private investigators to use their services.
After the OJC gets their signature notarized on their assignment of judgment, and returns it along with the signed purchase contract to the judgment enforcer; the enforcer then does a second level of screening, which sometimes includes pulling a credit report on the judgment debtor. If the second level of screening shows too much negative information, the good judgment enforcers mail the paperwork back to the original judgment creditor, and explains that they cannot help, because the debtor has too many problems.
Even if a credit report shows a loan on a house, or a property, often the "servicing" was sold by XYZ Bank to another bank. This happens all the time, occasionally several times and nothing gets recorded. The borrower is notified by mail to start making payments to the new bank and the new bank starts making reports to the credit reporting agencies.
The FCRA (Fair Credit Reporting Act) states that those having permissible purpose can pull credit reports. The PDF is at: www.ftc.gov/os/statutes/031224fcra.pdf. If you read it, notice that the statute does not mention "assignment of judgment". To obtain a credit report, one must have a "permissible purpose" as defined in section 604. There appears to be two subsections which may apply to debt collectors.
As I read it, the FCRA says that one may lawfully obtain a credit report if they "intend to use the information 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".
The important phrases are "in connection with" (which is broad) and "review or collection of an account". When an OJC sends their judgment to a judgment enforcer, there is a pending contract to collect the judgment debt (account). The enforcer reviews the account before making a decision.
One may obtain a credit report if they "intend to use the information, as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation".
When an enforcer is contemplating buying a judgment, on a future payment basis or for cash upfront, they are a "potential investor". Servicing the account is another way of saying collecting the debt. This was published 13 years ago, in the Gramm-Leach-Bliley Act.
The assignment of judgment is completed as soon as the notary stamp hits the page. The notarized assignment of judgment can be thought of as a deed. When a grant deed is acknowledged, the title to the property is transferred (whether recorded or not). As soon as you have the assignment of judgment in hand, you are the creditor, whether it is filed with the court or not. This is the same as if you buy a vehicle and later drive it to the DMV to record the title.
As soon as the enforcer gets the signed and notarized acknowledgment of assignment back, they can pull a credit report on the judgment debtor. Be sure to keep a copy of all those notarized assignments of judgment, even for the judgments you reject, in case you must one day prove your probable cause for running each credit report. Also, do not wait too long to decide whether or not to keep the judgment, because some OJCs keep shopping their judgment after they send you paperwork. As soon as you decide you want to attempt to recover the judgment, file that assignment at the court to seal the deal. An example of a place to sign up with to pull credit reports is Cal Coast Credit DBA Clear Choice Credit.
Many in the business use a UPS store address on all business-related filings. With the data services, they give them the physical address of their home, as required. If a data service comes out to look at your office for compliance reasons, you do not want them going to your UPS Store. Becoming a process server is cheap and easy to do, and gets you the best access levels on data services.
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