Suits Cite Credit Damage

By Lawrence Hurley

As the volume of litigation over subprime mortgage lending continues to explode, a small but increasing number of attorneys - egged on by one vocal expert, Georg Finder - are claiming damages based on harm done to their clients' credit ratings.

If a plaintiff can prove that a poor credit score - the result of a predatory lender's actions - has led directly to financial loss, it may be possible to win damages from the lender.

"If the underlying loan obligation was predatory because the documentation of the loan was false or misleading, then yes, there could be a credit-damages case," says Robert Brennan, of Brennan, Wiener and Associates in La Crescenta.

Steven R. Young, an Irvine-based civil justice attorney, has won one predatory-lending case with credit damages at trial (an appeal is pending) and has another in the works. Even though credit damage is widespread today, he says, "Few [lawyers] recognize it when they see it." The reason?

"They don't teach it at law school."

True, but there are seminars to attend: One is offered by Finder, the outspoken Orange County advocate of credit-damage claims who encourages lawyers to include them in lawsuits against predatory lenders.

It's "appropriate in a growing number of cases," he says - specifically, where there's evidence of enough damage to make the work worthwhile. Clients with $500 limits on their credit cards, for example, are not good candidates for such claims. "It's not cost-effective," Finder notes.

Credit-damage claims also may be difficult to bring in class actions, the main vehicle for much of the predatory-lending litigation in California and elsewhere. Attempting to apply the claims to an entire class can get overly complicated.

However, someone who had to borrow for a major purchase at a higher interest rate because her credit rating was poor could have a case. If real estate is involved, for example, damages can run into tens or hundreds of thousands of dollars. In one case where Finder testified, the award was $930,000. "We are talking serious amounts of money," he says.

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