Lawyers routinely hear complaints from clients who have had their credit cards canceled, are charged higher loan fees, are facing foreclosure or are filing for bankruptcy because the personal injury they experienced resulted in loss of income and thus damaged credit scores. Yet, most lawyers rarely include credit reputation damage in their damage demand, even when the evidence is readily available.
This view is slowly changing. Individual credit reports and scores are being made more readily available where previously they were shrouded in relative secrecy. Defense attorneys had used the “speculative” argument against credit damages, but as more courts allow awards for other difficult to calculate injures (i.e., emotional distress, loss of consortium), credit reputation damage is becoming more acceptable. The current economic downturn that has affected millions of Americans has also brought credit and all its nuances to the forefront.
A serious car accident (and the medical bills), fraud, construction defect, wrongful termination, insurance rescission – there are many ways clients can experience loss by the actions of a third party. However successful an attorney is in replenishing a client’s bank account through settlement or trial, the efforts will not resolve an invisible injury: damage to credit reputation.
Loss of credit reputation due to a third party is considered a form of “special injury.” Attorneys can use quantifiable measurements to show compensable damage for loss of credit reputation and receive compensation for their client for this damage.

Credit damage occurs when negative information appears on a credit report or other credit file that causes an individual or business to lose access to credit that was available prior to the damage. Credit reputation damage involves increased out-of-pocket costs, loss of credit capacity and loss of credit expectancy because of third-party actions that cause negative information to appear on a client’s credit report. When personal injuries or other wrongful acts force people to default on their credit obligations, they suffer financial harm.

Credit reputation damage, as a measurable form of special injury, began receiving court recognition in the mid-1990s, Bell v. May Dep’t Stores Co., 6 S.W.3d 871, 876 (Mo.1999); Nazeri v. Missouri Valley College, 860 S.W.2d 303, 316 (Mo.1993) and Bauer v Red Eagle Realty, although courts first recognized this form of damage in 1912, Simonoff v. Jas H. Goodman & Co. Bank, 18 Cal.App.5 (1912).

Introducing a Credit Damage Demand in a Lawsuit

Proper investigation to determine the possibility of a claim for credit damages requires exploration of credit damage factors during the intake interview or in responses to interrogatories. Ask about loans, credit cards or business guarantees. Has the client been contacted by bill collectors, facing bankruptcy, foreclosure or repossessions? If it appears that the credit damage is not self-inflicted but is the result of third-party misconduct, advise the client to save all monthly statements, collection demands, rate adjustment letters–any items that could prove damage.

Attorneys must explain to their clients why they are asking about such sensitive, seemingly personal, information. For many, credit problems are embarrassing. Attorneys must make clients comfortable enough so they provide the information needed to determine if credit damage has occurred.

Ask your client to request a “subscriber credit report”–usually available from a mortgage lender. These offer the most thorough snapshot of an individual’s creditworthiness. The consumer versions available online do not offer the depth of information and are not accepted by creditors when making credit decisions. Prior to making a damage demand to the defense, request another report, especially if more than 30 days have passed since the last credit check. Much can change. Attorneys will want the latest report when determining damages.

These credit documents are essential in establishing the client’s pre- and post-injury credit worthiness.

Establishing Monetary Value

Common forms of credit reputation damage are identified as an increase in credit interest rates, loss of existing credit accounts, denial of credit that would have lowered the cost of an existing loan (i.e., refinancing a mortgage) or higher interest charges for future purchases. As a result of those increased costs, debt service becomes more expensive. When debt service becomes more expensive, loss of credit capacity suffers as the injured person loses the ability to continue to use credit in the way before the damage to credit occurred.

The damage is identified as the difference between pre-injury and post injury costs. Say an injured party had a credit card limit of $100,000. After the injury occurred, the credit limit is lowered to $20,000. The credit capacity of the injured party was decreased by $80,000.

The ability to borrow against the value of real property is also affected by credit reputation damage. Prior to injury, for example, an injured party could borrow up to 90 percent of the value of the property. After the injury occurred, the amount available was reduced to 70 percent of the value. The amount of money that could be borrowed was reduced. Additionally, when credit is damaged, the interest rate increases as well, so not only was the amount of credit available reduced, but also the cost of borrowing that amount increased, making it more expensive to borrow against the value of the real property. Credit capacity was decreased by the 20 percent plus the property owner experienced increased borrowing costs.

Prior to injury, a person with excellent credit can often purchase a new car with little or no down payment. After an injury and damage to credit, that same person might have to make a down payment of 15 percent or more of the value of the car and be subject to a higher interest rate on the balance due. Thus, the amount of credit available decreases and the cost to manage the debt increases.

In the unlikely event that new credit can be obtained after credit damage occurs, the amount will certainly be less than would have been the case before credit was damaged with higher interest rates and monthly payments.

Types of Cases

Just about any type of serious personal injury case may have credit reputation consequences, especially where there is health insurance rescission or balance billing. Victims of credit reputation damage also include real estate buyers and sellers, divorcing couples, borrowers, homeowners with breach of contract, construction defects or bad faith claims, workers suing for wrongful dismissal, legal or medical malpractice and fraud victims.

Insurers are a target of credit damage claims when the carriers fail to pay medical bills as stipulated in insurance policies and these past due bills harm the policyholder’s credit rating. In an insurance breach of contract case Thomas v Workmans Insurance (Los Angeles County Superior Court, 2002), the plaintiff sought relief from a $270,000 judgment entered against him due to an insurance company’s failure to perform. On appeal, the judgment was reassigned to the insurance company. The court found in favor of the plaintiff for $70,000 including credit damage.

In a construction defect case, Alana Brown, et al., v Prometheus Real Estate Group, Inc., et al. (No. 34-2008-00000237, Calif. Super., Sacramento Co., 2009), 39 of 40 condominium owners found mold or water damage in their homes due to faulty construction and had to vacate their property. The condominium owners sued the builder. Four owners claimed, in part, that the construction defects and the required relocation expenses impaired their credit. The arbitrator agreed, awarding three of the four owners $25,000 each for credit loss damage. The fourth claimant did not have to vacate and was otherwise compensated.

Expect the defense to continue to use the “subjective” argument against credit damage measurement. The key to a successful argument for credit reputation damage and to maximize damage value is to present a thorough analysis of the before and after credit picture of the injured party followed by an expert opinion providing a rationale for the monetary costs of the damage. With more courts accepting credit reputation damage as a special injury, this “invisible” damage can become a sizable portion of an injured party’s damage award.

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Georg Finder, an Orange County Independent Credit Evaluator (ICE), is an expert on credit reporting violations and credit damage measurement. He has more than 15 years of experience evaluating credit reports and appearing as an expert witness for both plaintiff and defense.  Finder has authored numerous books including his upcoming, Credit Reputation Damage Compensation Success (2011). He is a MCLE provider on credit report issues and credit reputation damage compensation.

Georg Finder: creditdamageexpert@gmail.com
Credit Damage and Divorce - Stop Credit Damage

Creditworthiness is determined by a creditor’s underwriting department which determines the probability that the credit applicant will meet debt obligations in a timely fashion. Someone who is deemed likely to satisfy debt obligations is creditworthy while someone who is more likely to default is a greater credit risk and not creditworthy.

Thus someone who is considered creditworthy prior to injury to credit by the wrongful act of another and not creditworthy after occurrence of the injury has suffered credit damage. Such damage will result in either diminished credit capacity, diminished credit expectancy, or both. Credit capacity concerns the decrease of available credit and the inability to use credit at the same interest rate, thus at a greater cost.Credit expectancy is concerned with the performance based expectation of obtaining credit to maintain an attained lifestyle or to accomplish the life style to which one aspires. In other words, credit expectancy can be seen as a window of opportunity to advance goals. When credit is injured, that window of opportunity is slammed shut.

Expectancy is typical in human life. A college student expects to obtain future employment when a degree is attained. A medical student expects to become a doctor. Or a law student expects to be a lawyer. Similarly a person with a history of creditworthiness expects to be able to use credit in new and additional ways with increased credit availability and at a lower cost. This is credit expectancy.

When a pattern of credit use is interfered with that person’s expectation of continued credit or greater credit might be damaged. One illustration is the real estate investor who has a history of purchasing six properties per year for improvement and resale at a profit. Credit problems occur and the investor finds it impossible to obtain new credit to finance the purchases of property. The reasonable and foreseeable expectation of obtaining credit to finance a future enterprise has been dashed and the investor has been damaged accordingly. The window of opportunity has been broken. When the loss of credit occurs as the result of the wrongful act of another, credit damage has occurred in the form of loss of credit expectancy.

Other reasonable expectations which a person with a developing history of creditworthiness might envisage is the purchase of a first or new home, a new car, or credit cards with higher limits and lower interest rates. When creditworthiness is diminished and the window of opportunity is closed, those expectancies will be dashed and unattainable. That is the crux of damages for loss of credit expectancy.

It is likely that when credit damage for loss of expectancy is alleged the objection will be made that credit expectancy, something to occur in the future, is speculative. That issue can be met and overcome in the same manner that a similar objection to damages for diminished earning capacity is met with the testimony of the injured party and testimony of a qualified expert. The person whose credit has been damaged can testify about plans to utilize credit. Expert testimony concerning statistical evidence showing how credit is used by people similarly situated to the injured person is admissible.

To successfully recover credit damages for the loss of credit expectancy requires the services of a qualified expert to address the economic loss for damage to expectancy. Georg Finder is such an expert who has qualified as an expert witness in State and Federal courts.

Simple tool designed for persons or businesses who believe their credit score may have been damaged at no fault of their own.

FULLERTON, Calif. (NOV. 7, 2010) – Georg Finder, the leading expert in assessing loss of credit reputation for a person or business, today announces an online evaluation tool to quickly establish a credit damage level for a person or entity. The tool is designed for persons or businesses who believe they may have been injured at no fault of their own.

“The Credit Damage Score is the first tool available to help answer two nagging questions becoming more prevalent as credit scores impact more aspects of our lives. Was I injured? And, Do I have a case?” Finder said. “This tool can indicate a probability that compensation is deserved.”

The tool, available at www.creditdamagescore.com, presents visitors with a simple set of questions in areas such as lost wages or commissions, credit cards, collection accounts, mortgage and insurance.

“Thanks to marketing campaigns, everyone knows the term ‘credit score’; however it is misleading because a person’s credit score can be marred by actions out of their control,” Georg Finder said. “It makes sense then that there also is a Credit Damage Score, a number to understand just how badly your credit reputation may have been injured by the actions of another party.

“With the proper documentation, you may be entitled to compensation,” Finder said. “The Credit Damage Score helps an attorney recognize the probability of getting paid for actual loss of credit reputation.”

Credit damage is commonly overlooked in personal injury damage demands, or situations where a person’s credit reputation may be compromised or damaged through no fault of their own. For there to be payment for damages, the responsible party must be identified, and the damages measured and/or monetized.

At the start of www.creditdamagescore.com, the visitor is presented a table explaining scoring. A credit damage score of zero to five is marginal; 6 to 10, very likely or soon will be significant credit damage; 11 to 15, definite actual damage to measure; and for scores of 16 and above, the site recommends retaining a credit damage expert to include credit damage in a legal damage demand.

A lawyer will use the expert witness to present a credit damage measurement report to show how, and how much, the credit was damaged so a judge, a jury or an attorney can recognize the damage.

“Just as a doctor might provide an expert explanation of a medical situation, a credit damage expert can provide an expert credit damage assessment valuable in court situations,” Finder said.

“I sometimes refer to credit damage as the invisible injury in cases such as divorce; personal injury with at least two months’ loss of income; fraud (including, but not limited to, identity theft); breach of contract (including loss of health insurance); malpractice; credit report file merge; credit report errors; bill collector abuse; wrongful job loss; or bad faith insurance,” he said.

The credit record does not have to be perfect before the injury. The assessment must show a client’s credit reputation has enough sufficient documented change of credit status inflicted by a third party to cause increased out-of-pocket costs; loss of credit capacity; or loss of credit expectancy.

Damages for loss of credit reputation have been awarded dating back to 1995. See Mr. Finder’s Judicial List

Georg Finder
2501 East Chapman Ave., Suite 100
Fullerton, CA 92831
(714) 441-0900
creditdamageexpert@gmail.com
www.creditdamageexpert.com
www.stopcreditdamage.com

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Article reprint from: ORANGE COUNTY LAWYER MAGAZINE
Fullerton, CA – July 26, 2002

Damages to credit-worthiness due to a third party are now a measurable and compensable form of “special” injury. This financial damage can be quantified with the Credit Damage Measurement (CDM) Report developed by Georg Finder, an expert witness on credit damage and Certified Credit Evaluator. “All of us have had clients who said their credit is ruined,” says attorney Thomas George Key who has used this service, “With an expert who has a method of liquidating the damages, it is no longer speculative.”

Damages to credit-worthiness alone can often reach six figures on what may otherwise be a small claim. Credit damage has proven collectable in several cases even where credit was the only damage. One client received a $30,000.00 award due to real estate fraud. A real estate investor received $113,000.00 due to mortgage company errors. Overlooking credit damage can be serious negligence and missed opportunity for lawyers, who in a few minutes can understand the theory and its’ practical application.

According to attorney Key, “Credit damages have been mentioned in appellate cases and awards given over speculative objections. Loss of credit-worthiness can be quantified to a number. As attorneys, we have an obligation to present these damages.”
Victims of credit damage include divorcing couples, borrowers with creditor payment processing errors, breach of contract – especially with construction defects or bad faith situations, wrongful dismissal, personal injury/medical malpractice, and other causes of civil action.

“All staff involved in litigation or case management should be able to recognize signs of credit damage,” says Finder, author of CLE seminars on credit damage.

VERDICTS & SETTLEMENTS, LA/SF Daily Journal (7/26/02) Fraud case. $40,000 settlement increased to $170,000 using Georg Finder as technical expert for credit damage. (Case #ECO31647, LA Superior Court, Burbank. Date: 6/19/02

About the Author: Georg Finder, of Fullerton, California, wrote and co-presents the first State Bar accepted MCLE seminars on credit reports and credit damage. He can be reached at (714) 441-0900 or at Web site: www.creditdamageexpert.com where a case qualifying checklist may be obtained.