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DALLAS COUNTY
1/17/2018 4:48 PM
FELICIA PITRE
DISTRICT CLERK
CAUSE NO. DC-16-10461
WELLS FARGO BANK, NA, IN THE DISTRICT COURT OF
Plaintiff,
Vv. DALLAS COUNTY, TEXAS
KID’S DEPOT, INC.,
HOSSEIN S. NAMDARKHAN a/k/a
SHAWN NAMDAR, and
MARJANEH NAMDARKHAN a/k/a
MARSE NAMDAR,
Defendants. 160"! JUDICIAL DISTRICT
SUPPLEMENT TO REPLY TO PLAINTIFF WELLS FARGO, N.A.’S
RESPONSE TO DEFENDANT HOSSEIN S. NAMDARKHAN’S
SECOND MOTION TO COMPEL [SIC]
TO THE HONORABLE JUDGE OF SAID COURT:
COMES NOW, Defendants file this Supplement to Reply to Plaintiff Wells Fargo,
N.A.’s Response to Defendant Hossein S. Namdarkhan’s Second Motion to Compel [Sic].
I
SUPPLEMENT TO EXHIBIT C
Attached hereto as Exhibit C-1 are the Exhibits to Exhibit C which were inadvertently
omitted.
IL.
PRAYER
WHEREFORE, PREMISES CONSIDERED, Defendants request that the Court order
Plaintiff to make full and complete answers to Defendants’ First Requests for Disclosure to
Plaintiff and Defendants’ First Request for Production, and that the Court award Defendants
reasonable and necessary attorney’s fees and such other and further relief to which Defendants
may be shown justly entitled.
SUPPLEMENT TO REPLY TO PLAINTIFF WELLS FARGO, N.A.’S RESPONSE TO DEFENDANT HOSSEIN S. NAMDARKHAN’S
SECOND MOTION TO COMPEL [SIC] Pace 1
Respectfully submitted,
THE FEIN LAw Firm, P.C.
By
Zen A
Eric D. Fein
State Bar No. 06879020
Vickie S. Brandt
State Bar No. 24031878
15455 N. Dallas Parkway, Suite 1225
Addison, Texas 75001
214-522-9596 Telephone
214-522-9599 Facsimile
ATTORNEYS FOR DEFENDANTS
CERTIFICATE OF SERVICE
The undersigned hereby certifies that a true and correct copy of the above and foregoing
document was forwarded via E-File, E-Mail, Certified Mail, Return Receipt Requested, First
Class Mail, Facsimile, and/or Hand Delivery to the attorney for Defendants on this the 17" day
of January 2018.
Via E-File and Email
Mark Rechner
Thomas M. Sellers
Vincent Serafino Geary Waddell Jenevein, P.C.
1601 Elma Street, Suite 4100
Dallas, TX 75201
mrechner@vinlaw.com; tsellers@vinlaw.com
Attorneys for Plaintiff
Zee
Eric D. Fein
SUPPLEMENT TO REPLY TO PLAINTIFF WELLS FARGO, N.A.’S RESPONSE TO DEFENDANT HOSSEIN S. NAMDARKHAN’S
SECOND MOTION TO CoMPEL [SIC] PAGE 2
EXHIBIT C-1
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 1of 11
Exhibit A
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 2 of 11
EXHIBIT A
CREDIT IMPACT DAMAGES METHODOLOGY
Terms defined in the Amended Stipulation and Agreement shall have the same meaning
in this Exhibit A. For ease of understanding, a flow-chart summarizing the below-described
methodology is attached as Exhibit A-2. This methodology is subject to change if any Consumer
Reporting Agency is unable or unwilling to provide the services necessary to implement this
process, and is not ordered to do so by the Court.
I Impact of unauthorized hard pull and tradeline
a. Step 1 — Identification of Unauthorized Credit Analysis Account(s)
i The Authorized Claimant must have asserted a claim for Credit Impact
Damages on the Claim Form and identified either (a) the approximate
calendar year(s) of the opening of the claimed Unauthorized Credit
Analysis Account(s) or (b) the approximate calendar year(s) that the
Authorized Claimant opened a valid credit tradeline during the Class
Period that he/she believes was impacted by the claimed Unauthorized
Credit Analysis Account(s).
ii Utilizing the name and identification number (Social Security number or
other specified identification number) provided by the Authorized
Claimant, Wells Fargo will search for small business checking or savings
accounts and consumer or small business unsecured credit cards and
unsecured lines of credit opened for that Person during the Class Period
that were not used! or activated. If an account cannot be found, Wells
Fargo will search for an Unauthorized Application that did not result in
an opened account. Identified accounts or applications that did not result
in an opened account will move to Step 2.
iii. If (a) Wells Fargo does not locate at least one small business checking or
savings accounts or consumer or small business unsecured credit cards or
unsecured lines of credit opened for that Person for each year identified
by that Person during the Class Period that were not used or activated,
and (b) the claim form submitted by the Authorized Claimant indicates
that the Unauthorized Credit Analysis Account or the valid credit
tradeline the Claimant contends was impacted was opened prior to, or
within one year after, the earliest date for which Wells Fargo has
sufficient accessible records to identify unused, unactivated accounts of
1 For this purpose, “not used” means there were no customer-initiated transactions in the account.
A fee charged by Wells Fargo is not a customer-initiated transaction. For purposes of this
analysis, a charge that is an overdraft protection payment from the Unauthorized Credit Analysis
Account to another Wells Fargo account will not be treated as a customer-initiated transaction.
1
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 3 of 11
these types, then the Consumer Reporting Agencies will be asked to
identify Wells Fargo unsecured credit cards or Wells Fargo unsecured
lines of credit opened, or Unauthorized Application(s) for those accounts
that did not result in an opened account during certain time frames, as
follows:
1. Ifthe Authorized Claimant indicates the approximate year in
which the Unauthorized Credit Analysis Account was opened, the
Consumer Reporting Agencies will be asked to identify accounts
opened in the calendar year indicated on the Claim Form, as well
as the calendar year immediately prior and the calendar year
immediately following (i.¢., in a three-year window centered on
the year indicated on the Claim Form) that did not show a reported
balance in any month, or Unauthorized Application(s) for those
accounts that did not result in an opened account. Identified
accounts or Unauthorized Application(s) will move to Step 2.
If the Authorized Claimant indicates the approximate year in
which a valid tradeline was opened that the Authorized Claimant
believes was impacted by the Unauthorized Credit Analysis
Account, the Consumer Reporting Agencies will be asked to
identify the valid tradeline in the calendar year indicated on the
Claim Form, as well as the calendar year immediately prior and the
calendar year immediately following (i.e., in a three-year window
centered on the year indicated on the Claim Form). If the valid
tradeline is located, the Consumer Reporting Agencies will
identify any Wells Fargo unsecured credit cards or Wells Fargo
unsecured lines of credit that were (a) opened in the twelve-month
period prior to the opening of the valid tradeline and (b) did not
show a reported balance in any month, or Unauthorized
Application(s) for those accounts that did not result in an opened
account. Identified accounts or Unauthorized Application(s) will
move to Step 2.
b. Step 2 — Identify subsequent tradelines
i For each Unauthorized Credit Analysis Account identified in Step 1, the
Consumer Reporting Agencies will identify all tradelines opened by the
Authorized Claimant in the shortest of:
1. the 12 months following the opening of any Credit Analysis
Account or application that did not result in an opened account;
the period from the credit inquiry until the credit inquiry and
tradeline (or just the credit inquiry if a tradeline was never opened
as a result of the inquiry) associated with Credit Analysis Account
were suppressed by the Consumer Reporting Agency; or
2
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 4 of 11
3. the period from the credit inquiry until the date of the first
Delinquency or Derogatory Report associated with that Credit
Analysis Account.
ii. Ifno new tradeline is identified during the specified period, there are no
Credit Impact Damages associated with the credit inquiry and tradeline
for that Credit Analysis Account and the analysis of that account
terminates unless there was a Delinquency or Derogatory Report for the
account, in which case the methodology for Delinquency and Derogatory
Reports on Unauthorized Credit Analysis Accounts outlined below will
be applied.
c. Step 3- Measure “but for” credit score
The Consumer Reporting Agency from which Wells Fargo obtained the
credit report for the account will compute a FICO 08 score using an
archived credit bureau report 3 months after the opening of the
unauthorized account exactly as it would ordinarily compute the
score. The Consumer Reporting Agency will report this “actual score” to
the Credit Impact Damages Experts.
il The same Consumer Reporting Agency will also compute a “but for”
FICO 08 credit score on the same archived credit bureau report in 1.c.i.,
above, but under the assumption that the Wells Fargo hard credit inquiry
and the Wells Fargo unauthorized credit account did not occur. This will
require that the Consumer Reporting Agency remove the inquiry and the
unauthorized account (including any Delinquency and Derogatory Report
for that account) from the credit report prior to running the FICO 08
score calculation. The Consumer Reporting Agency will report the
resulting “but for” credit score to the Credit Impact Damages Experts.
iii. If the Consumer Reporting Agencies is unable to calculate either the
actual credit score or the “but for” credit score (or both) associated with
an Unauthorized Credit Analysis Account, it will be assumed that the
difference between the actual and “but for” credit score associated with
that account is equal to the median difference between actual and “but
for” credit scores for Unauthorized Credit Analysis Accounts without
Delinquency and Derogatory Reports opened during the same calendar
year.
lv. If the “but for” credit score associated with a Credit Analysis Account is
the same or higher than the actual credit score, there are no Credit Impact
Damages associated with that Credit Analysis Account and the analysis
of that account terminates unless there was a Delinquency or Derogatory
Report for the account, in which case the methodology for Delinquency
and Derogatory Reports on Unauthorized Credit Analysis Accounts
outlined below will be applied.
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 5 of 11
d. Step 4— Communicate information to Credit Impact Damages Experts
a The Consumer Reporting Agencies will communicate to the Credit
Impact Damages Experts:
1 A unique, anonymous, identifier for each customer or the account
number for each identified Unauthorized Credit Analysis Account
An initial FICO 8 score at the time of the initial hard pull credit
inquiry or the date of the opening of the Unauthorized Credit
Analysis Account, if the date of the initial hard pull credit inquiry
is unknown;
An actual FICO 8 score three months after the date determined in
1.di3.;
A “but for” FICO 8 score three months after the initial hard pull
credit inquiry; and
Identification of the type of each tradeline identified in Step 2,
above, as well as the date it was opened, and the amount of the
tradeline.
e. Step 5 — Measure Credit Impact Damages
i As more fully described in Exhibit A-1, Credit Impact Damages will be
calculated by the Credit Impact Damages Experts by estimating the
amount of additional borrowing costs that an Authorized Claimant would
have incurred as a result of Credit Analysis Accounts.
f. Step 6 — Identification of Credit Impact Damages for Each Claimant
i If it becomes necessary to do so as a result of the Consumer Reporting
Agencies unwillingness to provide information in a non-anonymized
manner, and in the absence of a Court Order directing them to do so, the
Credit Impact Damages Experts will provide to the Consumer Reporting
Agencies the amount of Credit Impact Damages for each unique,
anonymous, identifier. These damage amounts will be rounded to the
nearest $5 increment. If there are any rounded damage amounts that are
not common to at least 5 separate identifiers, the Credit Impact Damages
Experts will increase the damage amounts to the extent necessary to
ensure that all reported damage amounts are assigned to at least five
separate identifiers.
ii, The Consumer Reporting Agencies will use the information provided by
the Credit Impact Damages Experts to determine the amount of Credit
Impact Damages assigned to each Claimant and will provide that
information to the Credit Impact Damages Experts.
4
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 6 of 11
2 Impact of Delinquency and Derogatory Reports (“DDR”)
a. DDR Impact for Unauthorized Credit Analysis Accounts
i Step 1 - Identification of Unauthorized Credit Analysis Accounts
1. Unauthorized Credit Analysis Accounts will be identified using the
method outlined in Section 1.a., above.
ii. Step 2 — Identification of DDR
1 For each Unauthorized Credit Analysis Account identified
pursuant to Section 1.a, above and for which Wells Fargo has an
account number, Wells Fargo will look for DDR reporting and
determine:
a. Whether any delinquency or derogatory report was made
regarding the Unauthorized Credit Analysis Account and, if
so:
i The date of first delinquency; and
ii. The date and type of the most serious DDR.
iii. Step 3 — Identify impacted tradelines
1 The Consumer Reporting Agencies will identify the type and
amount of each tradeline opened by the Authorized Claimant in the
shorter of the following time periods:
a. 7 years following date of first delinquency; or
b From the date of first delinquency until the date the
tradeline was suppressed by the Consumer Reporting
Agency.
If no new tradeline is identified during the specified period, there
are no Credit Impact Damages associated with the DDR for that
Credit Analysis Account and the analysis of that account
terminates.
iv. Step 4 — Measure “but for” credit scores
1 The Consumer Reporting Agency will compute a FICO 08 score
using an archived credit bureau report 1 month prior to the opening
of any tradeline opened after the date of first delinquency on the
exactly as it would ordinarily compute the score. The Consumer
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 7 of 11
Reporting Agency will report this “actual score” to the Credit
Impact Damages Experts.
2. The Consumer Reporting Agency will also compute a “but for”
FICO 08 credit score on the same archived credit bureau report(s)
in 2.a.iv.1., above, but under the assumption that the Wells Fargo
unauthorized credit account did not occur. This will require that
the Consumer Reporting Agency remove the unauthorized account
(including any Delinquency and Derogatory Report for that
account) from the credit report prior to running the FICO 08 score
calculation. The Consumer Reporting Agency will report the
resulting “but for” credit score to the Credit Damages Experts.
3. In the event that running multiple “but for” analyses proves
administratively infeasible, a single “but for” score selected to
adequately compensate the Authorized Claimant may be used with
respect to all subsequent tradelines that may have been impacted.
4. Ifthe Consumer Reporting Agency is unable to calculate either the
actual credit score or the “but for” credit score (or both) associated
with an Unauthorized Credit Analysis Account, it will be assumed
that the difference between the actual and “but for” credit score
associated with that account is equal to the median difference
between actual and “but for” credit scores for Unauthorized Credit
Analysis Accounts with Delinquency or Derogatory Reports
opened during the same calendar year.
5. Ifall “but for” credit scores associated with DDR for a Credit
Analysis Account are the same or higher than the corresponding
actual credit scores, there are no Credit Impact Damages associated
with DDR on that Credit Analysis Account and the analysis of that
account terminates
v. Step 5- Communicate information to Credit Impact Damages Experts
1 In addition to the information identified in Section 1.d., above, the
Consumer Reporting Agency will communicate to the Credit
Impact Damages Experts the following information concerning
each Unauthorized Credit Analysis Account with DDR:
a. Identification of the type of each tradeline identified in
Section 2.a.iii., above, as well as the date it was opened,
and the amount of the tradeline;
b. Each actual FICO 8 score calculated in connection with the
Unauthorized Credit Analysis Account with DDR; and
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 8 of 11
c. Each “but for” FICO 8 score calculated in connection with
the Unauthorized Credit Analysis Account with DDR.
vi. Step 6 — Calculate Credit Impact Damages
1 As more fully described in Exhibit A-1, Credit Impact Damages
will be calculated by the Credit Impact Damages Experts by
estimating the amount of additional borrowing costs that an
Authorized Claimant would have incurred as a result of Credit
Analysis Accounts.
vii. Step 7 — Identification of Credit Impact Damages for Each Claimant
1 If it becomes necessary to do so as a result of the Consumer
Reporting Agencies unwillingness to provide information in a non-
anonymized manner, and in the absence of a Court Order directing
them to do so, the Credit Impact Damages Experts will provide to
the Consumer Reporting Agencies the amount of the Credit Impact
Damages for each unique, anonymous, identifier. These damage
amounts will be rounded to the nearest $5 increment. If there are
any rounded damage amounts that are not common to at least 5
separate identifiers, the Credit Impact Damages Experts will
increase the damage amounts to the extent necessary to ensure that
all reported damage amounts are assigned to at least five separate
identifiers.
2. The Consumer Reporting Agencies will use the information
provided by the Credit Impact Damages Experts to determine the
amount of Credit Impact Damages assigned to each Claimant and
will provide that information to the Credit Impact Damages
Experts.
b. DDR for Authorized Credit Analysis Accounts
i Step 1 — Identification of Authorized Credit Analysis Account
1 For Consultant-Identified Persons
a. For each Authorized Claimant who submits a Claim Form
indicating that a checking or savings account identified in
the Consultant Analysis is unauthorized and asserts a claim
for Credit Impact Damages:
i Wells Fargo will determine if the checking or
savings account identified in the Consultant
Analysis had overdraft protection linked to a credit
card.
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 9 of 11
i If there is no overdraft protection (“ODP”)
link between the checking or savings
account and a credit card, there is not Credit
Impact Damage associated with that
checking or savings account and the analysis
as to that account is terminated.”
ii. Ifthere was an ODP link between the checking or
savings account identified in the Consultant
Analysis and a credit card, Wells Fargo will
determine whether there were any ODP transfers
from the card to the deposit account.
1 If there were no ODP transfers between the
credit card and the checking or savings
account identified by the Consultant
Analysis, there were not Credit Impact
Damages associated with that checking or
savings account and the analysis of that
account is terminated.
iii. If there were ODP transfers between the credit card
and the checking or savings account identified by
the Consultant Analysis, Wells Fargo will
determine whether a delinquency was reported on
the credit card within 120 days of the ODP transfer
and whether the delinquent balance was limited to
the amount of the ODP transfer and any ODP fee.
1 If there was no delinquency reported on the
credit card within 120 days or if the credit
card carried an additional balance at the time
of the delinquency that was not a result of
the ODP transfer or any associated ODP fee,
there was no Credit Impact Damage and the
analysis of the account is terminated.
Credit card accounts that remain move to
Step 2, below.
2. 2009-2017 unused accounts
? If the checking or savings account was a small business checking or savings account, there may
have been a hard pull credit inquiry associated with opening the account, in which case the
analysis for Unauthorized Credit Analysis Accounts outlined in Section 1, above, will be
performed without regard to whether the account had ODP or whether the ODP was ever
utilized.
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 10 of 11
a. For each claimant who claims both fee damages and credit
impact damages and for whom Wells Fargo locates a
consumer or small business checking or savings account
opened between January 1, 2009 and April 20, 2017 with
no customer-initiated activity:
i Wells Fargo will determine if that unused deposit
account had an ODP link to a credit card.
1 If there is no ODP link, there is no Credit
Impact Damage associated with that
checking or savings account and the analysis
of that account is terminated?
ii If the unused checking or savings account had an
ODP link to a credit card, Wells Fargo will
determine whether there were any ODP transfers
from the credit card to the deposit account.
1 If there were no ODP transfers, there is no
Credit Impact Damage associated with that
checking or savings account and the analysis
of that account is terminated.
ii. If there were ODP transfers from the credit card to
the unused checking or savings account Wells
Fargo will determine whether a delinquency was
reported on the credit card within 120 days of the
ODP transfer and whether the delinquent balance
was limited to the amount of the ODP transfer and
any ODP fee.
1 If there was no delinquency reported on the
credit card within 120 days or if the credit
card carried an additional balance at the time
of the delinquency that was not a result of
the ODP transfer or any associated ODP fee,
there was no Credit Impact Damage and the
analysis of the account is terminated.
3 If the checking or savings account was a small business checking or savings account, there may
have been a hard pull credit inquiry associated with opening the account, in which case the
analysis for Unauthorized Credit Analysis Accounts outlined in Section 1, above, will be
performed without regard to whether the account had ODP or whether the ODP was ever
utilized.
Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 11 of 11
2. Credit card accounts that remain move to
Step 2, below.
ii. Steps 2-7 — Utilize the process outlined above for Unauthorized Credit
Analysis Accounts, see Sections 2.a.ii-2.a.vii.
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Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 1of8
Exhibit A-1
Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 2 of 8
EXHIBIT A-1
CREDIT IMPACT DAMAGES
Terms defined in the Amended Stipulation and Agreement shall have the same meaning in this
Exhibit A-1.
A Overview/Information Considered
Credit Impact Damages are calculated by estimating the amount of additional borrowing costs
that a consumer would have incurred if an unauthorized event (or unauthorized events) caused
negative credit score impact (“Credit Injury”) and adjusting the estimated additional borrowing
costs to take into account the probability that the consumer actually did incur additional
borrowing costs as a result of Credit Injury. In order to calculate Credit Impact Damages, it is
necessary to consider for each consumer:
a) The amount of Credit Injury (described below), if any;
b) The probability that Credit Injury actually increased the consumer’s borrowing costs
by lowering the consumer’s credit rating to a less favorable credit pricing (borrowing
cost) level (“Inter-Tier Migration”);
c) The amount borrowed by the consumer (Credit Tradeline) that was exposed to Inter-
Tier Migration from Credit Injury;
d) The date(s) that the consumer acquired a Credit Tradeline or Credit Tradelines;
e) The types of Credit Tradelines acquired;
f) The estimated impact upon borrowing rates from Inter-Tier Migration based on type of
Credit Tradeline; and
g) The estimated time that consumers generally hold each type of Credit Tradeline.
B. Explanation of Information Considered
I Credit Injury
Credit Injury for non-delinquency/derogatory consumers is based upon the difference between
the consumer’s actual FICO 8 score three months after an unauthorized event and the FICO 8
Score that would have existed at the same time absent the unauthorized event(s) or “but-for
FICO 8 score.” If a consumer’s actual FICO 8 score is equal to or higher than the but-for FICO
8 score, Credit Injury has not occurred, and Credit Impact Damages are equal to zero. If the but-
for FICO 8 score is higher than the actual FICO 8 score, then Credit Injury has occurred. For the
purpose of this document, Credit Injury is equal to the reduction from but-for FICO 8 score to
actual FICO 8 score (if any) expressed as a decline in points. For example, if a consumer’s but-
for FICO 8 score is 712 and the actual FICO 8 score is 700, Credit Injury is 12 points.
Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 3 of 8
Credit Injury Example:
But-for FICO 8 score = 712
Actual FICO 8 score = 700
Credit Injury = 712-700 = 12 points.
IL. Probability of Credit Cost Injury
If, for a given consumer, Credit Injury has occurred, the next step is to estimate the probability
that the Credit Injury actually exposed the consumer to potentially higher borrowing costs
through Inter-Tier Migration. If negative Inter-Tier Migration has occurred, then the consumer
has been exposed to “Credit Cost Injury.” The probability of Credit Cost Injury will be
estimated for each consumer by comparing Credit Injury to an overall distribution of FICO 8
scores (or other reasonable FICO distribution if data availability necessitates) for the US
population as a whole. Using the example above, if Credit Injury for a given consumer is 12
points, and if the width of the credit tier (the range of credit scores that qualify for the same
borrowing cost or interest rate) is 100 points, and the distribution of credit scores within the tier
is uniform (FICO 8 scores evenly spread throughout the tier), then the probability that Credit
Injury exposed the consumer to Credit Cost Injury is 12%.
Probability of Credit Cost Injury Example:
Credit Injury = 12 points
Tier width = 50 points
Distribution of FICO 8 scores (or alternate scores) = uniform
Probability of Credit Cost Injury = 12/50 = 24%
The widths of credit tiers, the number of tiers, and the distribution of credit scores within tier will
be estimated separately for each type of credit line by examination of the relevant literature. The
values shown here are for illustration.
Ii. Amount Borrowed by Consumer (Credit Tradeline)
The amount borrowed by the consumer will be determined by review of the three major Credit
Reporting Agencies’ reports. The amount borrowed will take into account, as necessary, a
declining balance over the life of the loan. The resulting “Amount Borrowed” or “Tradeline
Amount” will be the average Credit Tradeline balance over the life of the consumer’s loan. For
the case of a line of credit or credit card, the Credit Reporting Agencies retum the credit limit,
rather than the actual amount borrowed. As a result, the average fraction of the credit limit
actually consumed as reported by the New York Federal Reserve Bank data or comparable data
will be used in place of the actual amount borrowed.
Amount Borrowed by Consumer — Credit Tradeline Example:
Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 4 of 8
Consumer borrows $28,000 for a vehicle purchase. Over a four-year period that the consumer
holds the loan, the average balance is $18,000. $18,000 will be the “Amount Borrowed” or
“Tradeline Amount.”
As a second example, a consumer opens a credit card account with a credit limit of $10,000.
According to the New York Federal Reserve, the average consumer credit card debit is
approximately 22% of the credit limit, so the “Amount Borrowed” will be assumed to be $2,200
for this consumer.
Iv. Date of Credit Tradeline Acquired
The date of Credit Tradeline acquired represents the reported date that the consumer acquired the
Credit Tradeline. For non-delinquency/derogatory consumers, Credit Tradelines considered for
Credit Impact Damages are those acquired within the 12 full calendar months following the date
of the event(s). For non-delinquency/derogatory consumers, Credit Tradelines acquired after the
12 full calendar months following the date of the event(s) will not be eligible for Credit Impact
Damages.
Date of Credit Tradeline Acquired Example:
Within the 12 full calendar months following the date of the event(s) = eligible;
Not within the 12 full calendar months following the date of the event(s) = not eligible.
Vv. T es of Credit Tradeline(s) Acquired
This information will be used to determine the average duration of Credit Tradelines, the change
in borrowing cost associated with Inter-Tier Migration, and the tier width.
VI. Estimated Impact on Borrowing Costs from Inter-Tier Migration
This variable estimates the amount of increase in interest rate from negative migration of one or
more credit tiers. For example, if Tier 1 auto loan customers paid an average interest rate of
3.25%, and Tier 2 auto loan customers paid an average interest rate of 5.25%, then the estimated
impact on borrowing costs from Inter-Tier Migration would be 2%. The costs of Inter-Tier
Migration shown here are for illustration only, and may be modified upon further research.
Estimated Impact on Borrowing Costs from Inter-Tier Migration Example:
Tier 1 auto loan average interest rate: 3.25%
Tier 2 auto loan average interest rate: 5.25%
Impact from Inter-Tier Migration of one tier = 2%
Vil. Estimated Time that Consumers Held Each Type of Credit Tradelin
This variable will be estimated based upon research and analysis of publicly available data and
documents, such as Federal Reserve Board releases. This variable estimates the average amount
Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 5 of 8
of time that consumers held various types of Credit Tradelines for the purpose of determining the
time period during which consumers may have been exposed to higher borrowing costs.
Estimated Time that Consumers Held Each Type of Credit Tradeline Example:
Credit Tradeline type: auto loan
Average amount of time that consumers held auto loans: 4 years
Estimated time that consumer held Credit Tradeline: 4 years.
Note: This value is assumed for the purpose of this example.
VIII. Credit Impact Damage
Consumer #123A experienced a hard credit pull and an unauthorized line of credit on February
7, 2012. The but-for FICO 8 score in May 2012 was 712. The actual FICO 8 score in May 2012
was 700. Credit Injury was 12 points. In January 2013, the consumer voluntarily took out a
Credit Tradeline in the form of an auto loan with an initial balance of $27,000. Since this date is
within 12 full calendar months of the event(s), the consumer is eligible for Credit Impact
Damages. Based on the 4-year assumed average life of auto loans, and a declining balance over
the life of the loan, the average loan balance during those four years would have been $18,000.
The 12-point Credit Injury resulted in a 12% probability that the consumer suffered negative
Inter-Tier Migration. If the Inter-Tier Migration indeed occurred, then the consumer’s interest
rate would have risen from 3.25% to 5.25% or 2 percentage points.
Credit Impact Damage Example:
$18,000 Average Loan Balance * 0.02 (2%) * 24% probability of Inter-Tier Migration * 4 years
= $345.60
D. Credit Impact Damages with Delinquency/Derogatory
I Overview/Information Considered
Credit Impact Damages with delinquency/derogatory are conceptually the same as Credit Impact
Damages without delinquency/derogatory. However, the potential severity of Credit Injury
when delinquency/derogatory indicators exist may change. The first change is that consumers
may be eligible for Credit Impact Damages for a period up to seven years following the event(s).
The second is that the longer time frame of the analysis and potentially different level of Credit
Injury leads to a slight modification of the timing of calculations. Each of the “Information
Considered” categories from above is present in the Credit Impact Damages with
delinquency/derogatory analysis, but the following elements of the analysis change.
Il. Credit Injury with Delinquency/Derogatory—Modification of Calculation:
Credit Injury for delinquency/derogatory consumers is based upon the difference between the
consumer’s actual FICO 8 score(s) prior to the consumer’s acquisition of each Credit Tradeline
and the FICO 8 scores that would have existed at the same times absent the unauthorized
event(s), which includes the suppression of the effects of the delinquency/derogatory indicators.
Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 6 of 8
or “but-for FICO 8 scores.” As in the Credit Injury without delinquency/derogatory analysis, if
any of the consumer’s actual FICO 8 scores is equal to or higher than its corresponding but-for
FICO 8 score, Credit Injury has not occurred in that instance, and Credit Impact Damages in that
instance are equal to zero. If the but-for FICO 8 score is higher than the actual FICO 8 score in
that instance, then Credit Injury has occurred. Since the time frame for the analysis of Credit
Injury with delinquency/derogatory is up to seven years, consumers may have some instances of
Credit Injury and some instances in which the acquisition of a Credit Tradeline is not subject to
Credit Injury. For the purpose of this example, Credit Injury is equal to the reduction from but-
for FICO 8 score to actual FICO 8 score (if any) expressed as a decline in points. For example, if
aconsumer’s but-for FICO 8 score prior to acquisition of the first Credit Tradeline is 742 and the
actual FICO 8 score is 700, Credit Injury is 42 points for the purpose of evaluating that Credit
Tradeline. If, four years later, the but-for FICO 8 score prior to the acquisition of the second
Credit Tradeline is 722 and the actual FICO score is 702, Credit Injury for the purpose of
evaluating the second Credit Tradeline is 20 points. If, at some point after the acquisition of the
second Credit Tradeline but within seven years of the event, the but-for FICO 8 score is 719 prior
to the acquisition of a Credit Tradeline, and the actual FICO 8 Score is 720, then the consumer
has no Credit Injury for the third Credit Tradeline. For reasons of efficient data collection and
higher potential Credit Injury in this analysis (which would be less sensitive to short-term timing
variation), actual and but-for FICO 8 scores are determined prior to the acquisition of each Credit
Tradeline.
Credit Injury Example:
But-for FICO 8 score for Credit Tradeline 1 = 762
Actual FICO 8 score = 700
Credit Injury for Credit Tradeline 1= 762-700 = 62 points.
FER RRR ECR RC OR ICCC OK
But-for FICO 8 score for Credit Tradeline 2 = 722
Actual FICO 8 score = 702
Credit Injury for Credit Tradeline 2= 722-702 = 20 points.
FESS ESSE SSS ISI RRA CRE RK
But-for FICO 8 Score for Credit Tradeline 3 = 719
Actual FICO 8 Score = 720
Credit Injury for Credit Tradeline 3= 719-720 = No Credit Injury
Il. Credit Impact Damage With Delinquency/Derogatory Example
Consumer #123A experienced a hard credit pull and an unauthorized line of credit on February
7, 2012. The unauthorized line of credit becomes delinquent and is reported to Credit Reporting
Agencies. In January 2013, the consumer voluntarily took out a Credit Tradeline in the form of
Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 7 of 8
an auto loan with an initial balance of $27,000. Prior to that Credit Tradeline, the consumer’s
but-for FICO 8 score is 762. The actual FICO 8 scores is 700. Credit Injury associated with this
Credit Tradeline (“Tradeline 1”) is 62 points. Since this date is within 7 years of the event(s), the
consumer is eligible for Credit Impact with Delinquency/Derogatory Damages. Based on the 4-
year assumed average life of auto loans, and a declining balance over the life of the loan, the
average loan balance during those four years would have been $18,000. If the width of a credit
tier is 50 points, the consumer is certain to suffer one Inter-Tier Migration, and will suffer two
Inter-Tier Migrations with estimated probability of (62-50)/50 = 0.24, assuming for illustration a
uniform distribution of FICO 8 credit scores within tier. If each Inter-Tier Migration results in a
2% increase in borrowing cost, then the consumer will suffer borrowing rate 2% higher with
probability .76 and 4% higher with probability 0.24. The numeric values given in the paragraph
are for illustration and may or may not reflect the values that will actually be used in the final
calculations.
If, after four more years, the consumer purchased and financed a second vehicle for $30,000 with
an expected average balance of $20,000 and an expected duration of the Credit Tradeline of four
years, the assumed Credit Injury of 20 points would make the second vehicle loan (“Tradeline
2”) eligible for Credit Impact Damage calculation. For Tradeline 2, the 20-point Credit injury is
assumed to result in a 40% probability that Inter-Tier Migration would have occurred, and as in
the pr
Preview
I DALLAS COUNTY 1/17/2018 4:48 PM FELICIA PITRE DISTRICT CLERK CAUSE NO. DC-16-10461 WELLS FARGO BANK, NA, IN THE DISTRICT COURT OF Plaintiff, Vv. DALLAS COUNTY, TEXAS KID’S DEPOT, INC., HOSSEIN S. NAMDARKHAN a/k/a SHAWN NAMDAR, and MARJANEH NAMDARKHAN a/k/a MARSE NAMDAR, Defendants. 160"! JUDICIAL DISTRICT SUPPLEMENT TO REPLY TO PLAINTIFF WELLS FARGO, N.A.’S RESPONSE TO DEFENDANT HOSSEIN S. NAMDARKHAN’S SECOND MOTION TO COMPEL [SIC] TO THE HONORABLE JUDGE OF SAID COURT: COMES NOW, Defendants file this Supplement to Reply to Plaintiff Wells Fargo, N.A.’s Response to Defendant Hossein S. Namdarkhan’s Second Motion to Compel [Sic]. I SUPPLEMENT TO EXHIBIT C Attached hereto as Exhibit C-1 are the Exhibits to Exhibit C which were inadvertently omitted. IL. PRAYER WHEREFORE, PREMISES CONSIDERED, Defendants request that the Court order Plaintiff to make full and complete answers to Defendants’ First Requests for Disclosure to Plaintiff and Defendants’ First Request for Production, and that the Court award Defendants reasonable and necessary attorney’s fees and such other and further relief to which Defendants may be shown justly entitled. SUPPLEMENT TO REPLY TO PLAINTIFF WELLS FARGO, N.A.’S RESPONSE TO DEFENDANT HOSSEIN S. NAMDARKHAN’S SECOND MOTION TO COMPEL [SIC] Pace 1 Respectfully submitted, THE FEIN LAw Firm, P.C. By Zen A Eric D. Fein State Bar No. 06879020 Vickie S. Brandt State Bar No. 24031878 15455 N. Dallas Parkway, Suite 1225 Addison, Texas 75001 214-522-9596 Telephone 214-522-9599 Facsimile ATTORNEYS FOR DEFENDANTS CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the above and foregoing document was forwarded via E-File, E-Mail, Certified Mail, Return Receipt Requested, First Class Mail, Facsimile, and/or Hand Delivery to the attorney for Defendants on this the 17" day of January 2018. Via E-File and Email Mark Rechner Thomas M. Sellers Vincent Serafino Geary Waddell Jenevein, P.C. 1601 Elma Street, Suite 4100 Dallas, TX 75201 mrechner@vinlaw.com; tsellers@vinlaw.com Attorneys for Plaintiff Zee Eric D. Fein SUPPLEMENT TO REPLY TO PLAINTIFF WELLS FARGO, N.A.’S RESPONSE TO DEFENDANT HOSSEIN S. NAMDARKHAN’S SECOND MOTION TO CoMPEL [SIC] PAGE 2 EXHIBIT C-1 Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 1of 11 Exhibit A Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 2 of 11 EXHIBIT A CREDIT IMPACT DAMAGES METHODOLOGY Terms defined in the Amended Stipulation and Agreement shall have the same meaning in this Exhibit A. For ease of understanding, a flow-chart summarizing the below-described methodology is attached as Exhibit A-2. This methodology is subject to change if any Consumer Reporting Agency is unable or unwilling to provide the services necessary to implement this process, and is not ordered to do so by the Court. I Impact of unauthorized hard pull and tradeline a. Step 1 — Identification of Unauthorized Credit Analysis Account(s) i The Authorized Claimant must have asserted a claim for Credit Impact Damages on the Claim Form and identified either (a) the approximate calendar year(s) of the opening of the claimed Unauthorized Credit Analysis Account(s) or (b) the approximate calendar year(s) that the Authorized Claimant opened a valid credit tradeline during the Class Period that he/she believes was impacted by the claimed Unauthorized Credit Analysis Account(s). ii Utilizing the name and identification number (Social Security number or other specified identification number) provided by the Authorized Claimant, Wells Fargo will search for small business checking or savings accounts and consumer or small business unsecured credit cards and unsecured lines of credit opened for that Person during the Class Period that were not used! or activated. If an account cannot be found, Wells Fargo will search for an Unauthorized Application that did not result in an opened account. Identified accounts or applications that did not result in an opened account will move to Step 2. iii. If (a) Wells Fargo does not locate at least one small business checking or savings accounts or consumer or small business unsecured credit cards or unsecured lines of credit opened for that Person for each year identified by that Person during the Class Period that were not used or activated, and (b) the claim form submitted by the Authorized Claimant indicates that the Unauthorized Credit Analysis Account or the valid credit tradeline the Claimant contends was impacted was opened prior to, or within one year after, the earliest date for which Wells Fargo has sufficient accessible records to identify unused, unactivated accounts of 1 For this purpose, “not used” means there were no customer-initiated transactions in the account. A fee charged by Wells Fargo is not a customer-initiated transaction. For purposes of this analysis, a charge that is an overdraft protection payment from the Unauthorized Credit Analysis Account to another Wells Fargo account will not be treated as a customer-initiated transaction. 1 Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 3 of 11 these types, then the Consumer Reporting Agencies will be asked to identify Wells Fargo unsecured credit cards or Wells Fargo unsecured lines of credit opened, or Unauthorized Application(s) for those accounts that did not result in an opened account during certain time frames, as follows: 1. Ifthe Authorized Claimant indicates the approximate year in which the Unauthorized Credit Analysis Account was opened, the Consumer Reporting Agencies will be asked to identify accounts opened in the calendar year indicated on the Claim Form, as well as the calendar year immediately prior and the calendar year immediately following (i.¢., in a three-year window centered on the year indicated on the Claim Form) that did not show a reported balance in any month, or Unauthorized Application(s) for those accounts that did not result in an opened account. Identified accounts or Unauthorized Application(s) will move to Step 2. If the Authorized Claimant indicates the approximate year in which a valid tradeline was opened that the Authorized Claimant believes was impacted by the Unauthorized Credit Analysis Account, the Consumer Reporting Agencies will be asked to identify the valid tradeline in the calendar year indicated on the Claim Form, as well as the calendar year immediately prior and the calendar year immediately following (i.e., in a three-year window centered on the year indicated on the Claim Form). If the valid tradeline is located, the Consumer Reporting Agencies will identify any Wells Fargo unsecured credit cards or Wells Fargo unsecured lines of credit that were (a) opened in the twelve-month period prior to the opening of the valid tradeline and (b) did not show a reported balance in any month, or Unauthorized Application(s) for those accounts that did not result in an opened account. Identified accounts or Unauthorized Application(s) will move to Step 2. b. Step 2 — Identify subsequent tradelines i For each Unauthorized Credit Analysis Account identified in Step 1, the Consumer Reporting Agencies will identify all tradelines opened by the Authorized Claimant in the shortest of: 1. the 12 months following the opening of any Credit Analysis Account or application that did not result in an opened account; the period from the credit inquiry until the credit inquiry and tradeline (or just the credit inquiry if a tradeline was never opened as a result of the inquiry) associated with Credit Analysis Account were suppressed by the Consumer Reporting Agency; or 2 Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 4 of 11 3. the period from the credit inquiry until the date of the first Delinquency or Derogatory Report associated with that Credit Analysis Account. ii. Ifno new tradeline is identified during the specified period, there are no Credit Impact Damages associated with the credit inquiry and tradeline for that Credit Analysis Account and the analysis of that account terminates unless there was a Delinquency or Derogatory Report for the account, in which case the methodology for Delinquency and Derogatory Reports on Unauthorized Credit Analysis Accounts outlined below will be applied. c. Step 3- Measure “but for” credit score The Consumer Reporting Agency from which Wells Fargo obtained the credit report for the account will compute a FICO 08 score using an archived credit bureau report 3 months after the opening of the unauthorized account exactly as it would ordinarily compute the score. The Consumer Reporting Agency will report this “actual score” to the Credit Impact Damages Experts. il The same Consumer Reporting Agency will also compute a “but for” FICO 08 credit score on the same archived credit bureau report in 1.c.i., above, but under the assumption that the Wells Fargo hard credit inquiry and the Wells Fargo unauthorized credit account did not occur. This will require that the Consumer Reporting Agency remove the inquiry and the unauthorized account (including any Delinquency and Derogatory Report for that account) from the credit report prior to running the FICO 08 score calculation. The Consumer Reporting Agency will report the resulting “but for” credit score to the Credit Impact Damages Experts. iii. If the Consumer Reporting Agencies is unable to calculate either the actual credit score or the “but for” credit score (or both) associated with an Unauthorized Credit Analysis Account, it will be assumed that the difference between the actual and “but for” credit score associated with that account is equal to the median difference between actual and “but for” credit scores for Unauthorized Credit Analysis Accounts without Delinquency and Derogatory Reports opened during the same calendar year. lv. If the “but for” credit score associated with a Credit Analysis Account is the same or higher than the actual credit score, there are no Credit Impact Damages associated with that Credit Analysis Account and the analysis of that account terminates unless there was a Delinquency or Derogatory Report for the account, in which case the methodology for Delinquency and Derogatory Reports on Unauthorized Credit Analysis Accounts outlined below will be applied. Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 5 of 11 d. Step 4— Communicate information to Credit Impact Damages Experts a The Consumer Reporting Agencies will communicate to the Credit Impact Damages Experts: 1 A unique, anonymous, identifier for each customer or the account number for each identified Unauthorized Credit Analysis Account An initial FICO 8 score at the time of the initial hard pull credit inquiry or the date of the opening of the Unauthorized Credit Analysis Account, if the date of the initial hard pull credit inquiry is unknown; An actual FICO 8 score three months after the date determined in 1.di3.; A “but for” FICO 8 score three months after the initial hard pull credit inquiry; and Identification of the type of each tradeline identified in Step 2, above, as well as the date it was opened, and the amount of the tradeline. e. Step 5 — Measure Credit Impact Damages i As more fully described in Exhibit A-1, Credit Impact Damages will be calculated by the Credit Impact Damages Experts by estimating the amount of additional borrowing costs that an Authorized Claimant would have incurred as a result of Credit Analysis Accounts. f. Step 6 — Identification of Credit Impact Damages for Each Claimant i If it becomes necessary to do so as a result of the Consumer Reporting Agencies unwillingness to provide information in a non-anonymized manner, and in the absence of a Court Order directing them to do so, the Credit Impact Damages Experts will provide to the Consumer Reporting Agencies the amount of Credit Impact Damages for each unique, anonymous, identifier. These damage amounts will be rounded to the nearest $5 increment. If there are any rounded damage amounts that are not common to at least 5 separate identifiers, the Credit Impact Damages Experts will increase the damage amounts to the extent necessary to ensure that all reported damage amounts are assigned to at least five separate identifiers. ii, The Consumer Reporting Agencies will use the information provided by the Credit Impact Damages Experts to determine the amount of Credit Impact Damages assigned to each Claimant and will provide that information to the Credit Impact Damages Experts. 4 Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 6 of 11 2 Impact of Delinquency and Derogatory Reports (“DDR”) a. DDR Impact for Unauthorized Credit Analysis Accounts i Step 1 - Identification of Unauthorized Credit Analysis Accounts 1. Unauthorized Credit Analysis Accounts will be identified using the method outlined in Section 1.a., above. ii. Step 2 — Identification of DDR 1 For each Unauthorized Credit Analysis Account identified pursuant to Section 1.a, above and for which Wells Fargo has an account number, Wells Fargo will look for DDR reporting and determine: a. Whether any delinquency or derogatory report was made regarding the Unauthorized Credit Analysis Account and, if so: i The date of first delinquency; and ii. The date and type of the most serious DDR. iii. Step 3 — Identify impacted tradelines 1 The Consumer Reporting Agencies will identify the type and amount of each tradeline opened by the Authorized Claimant in the shorter of the following time periods: a. 7 years following date of first delinquency; or b From the date of first delinquency until the date the tradeline was suppressed by the Consumer Reporting Agency. If no new tradeline is identified during the specified period, there are no Credit Impact Damages associated with the DDR for that Credit Analysis Account and the analysis of that account terminates. iv. Step 4 — Measure “but for” credit scores 1 The Consumer Reporting Agency will compute a FICO 08 score using an archived credit bureau report 1 month prior to the opening of any tradeline opened after the date of first delinquency on the exactly as it would ordinarily compute the score. The Consumer Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 7 of 11 Reporting Agency will report this “actual score” to the Credit Impact Damages Experts. 2. The Consumer Reporting Agency will also compute a “but for” FICO 08 credit score on the same archived credit bureau report(s) in 2.a.iv.1., above, but under the assumption that the Wells Fargo unauthorized credit account did not occur. This will require that the Consumer Reporting Agency remove the unauthorized account (including any Delinquency and Derogatory Report for that account) from the credit report prior to running the FICO 08 score calculation. The Consumer Reporting Agency will report the resulting “but for” credit score to the Credit Damages Experts. 3. In the event that running multiple “but for” analyses proves administratively infeasible, a single “but for” score selected to adequately compensate the Authorized Claimant may be used with respect to all subsequent tradelines that may have been impacted. 4. Ifthe Consumer Reporting Agency is unable to calculate either the actual credit score or the “but for” credit score (or both) associated with an Unauthorized Credit Analysis Account, it will be assumed that the difference between the actual and “but for” credit score associated with that account is equal to the median difference between actual and “but for” credit scores for Unauthorized Credit Analysis Accounts with Delinquency or Derogatory Reports opened during the same calendar year. 5. Ifall “but for” credit scores associated with DDR for a Credit Analysis Account are the same or higher than the corresponding actual credit scores, there are no Credit Impact Damages associated with DDR on that Credit Analysis Account and the analysis of that account terminates v. Step 5- Communicate information to Credit Impact Damages Experts 1 In addition to the information identified in Section 1.d., above, the Consumer Reporting Agency will communicate to the Credit Impact Damages Experts the following information concerning each Unauthorized Credit Analysis Account with DDR: a. Identification of the type of each tradeline identified in Section 2.a.iii., above, as well as the date it was opened, and the amount of the tradeline; b. Each actual FICO 8 score calculated in connection with the Unauthorized Credit Analysis Account with DDR; and Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 8 of 11 c. Each “but for” FICO 8 score calculated in connection with the Unauthorized Credit Analysis Account with DDR. vi. Step 6 — Calculate Credit Impact Damages 1 As more fully described in Exhibit A-1, Credit Impact Damages will be calculated by the Credit Impact Damages Experts by estimating the amount of additional borrowing costs that an Authorized Claimant would have incurred as a result of Credit Analysis Accounts. vii. Step 7 — Identification of Credit Impact Damages for Each Claimant 1 If it becomes necessary to do so as a result of the Consumer Reporting Agencies unwillingness to provide information in a non- anonymized manner, and in the absence of a Court Order directing them to do so, the Credit Impact Damages Experts will provide to the Consumer Reporting Agencies the amount of the Credit Impact Damages for each unique, anonymous, identifier. These damage amounts will be rounded to the nearest $5 increment. If there are any rounded damage amounts that are not common to at least 5 separate identifiers, the Credit Impact Damages Experts will increase the damage amounts to the extent necessary to ensure that all reported damage amounts are assigned to at least five separate identifiers. 2. The Consumer Reporting Agencies will use the information provided by the Credit Impact Damages Experts to determine the amount of Credit Impact Damages assigned to each Claimant and will provide that information to the Credit Impact Damages Experts. b. DDR for Authorized Credit Analysis Accounts i Step 1 — Identification of Authorized Credit Analysis Account 1 For Consultant-Identified Persons a. For each Authorized Claimant who submits a Claim Form indicating that a checking or savings account identified in the Consultant Analysis is unauthorized and asserts a claim for Credit Impact Damages: i Wells Fargo will determine if the checking or savings account identified in the Consultant Analysis had overdraft protection linked to a credit card. Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 9 of 11 i If there is no overdraft protection (“ODP”) link between the checking or savings account and a credit card, there is not Credit Impact Damage associated with that checking or savings account and the analysis as to that account is terminated.” ii. Ifthere was an ODP link between the checking or savings account identified in the Consultant Analysis and a credit card, Wells Fargo will determine whether there were any ODP transfers from the card to the deposit account. 1 If there were no ODP transfers between the credit card and the checking or savings account identified by the Consultant Analysis, there were not Credit Impact Damages associated with that checking or savings account and the analysis of that account is terminated. iii. If there were ODP transfers between the credit card and the checking or savings account identified by the Consultant Analysis, Wells Fargo will determine whether a delinquency was reported on the credit card within 120 days of the ODP transfer and whether the delinquent balance was limited to the amount of the ODP transfer and any ODP fee. 1 If there was no delinquency reported on the credit card within 120 days or if the credit card carried an additional balance at the time of the delinquency that was not a result of the ODP transfer or any associated ODP fee, there was no Credit Impact Damage and the analysis of the account is terminated. Credit card accounts that remain move to Step 2, below. 2. 2009-2017 unused accounts ? If the checking or savings account was a small business checking or savings account, there may have been a hard pull credit inquiry associated with opening the account, in which case the analysis for Unauthorized Credit Analysis Accounts outlined in Section 1, above, will be performed without regard to whether the account had ODP or whether the ODP was ever utilized. Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 10 of 11 a. For each claimant who claims both fee damages and credit impact damages and for whom Wells Fargo locates a consumer or small business checking or savings account opened between January 1, 2009 and April 20, 2017 with no customer-initiated activity: i Wells Fargo will determine if that unused deposit account had an ODP link to a credit card. 1 If there is no ODP link, there is no Credit Impact Damage associated with that checking or savings account and the analysis of that account is terminated? ii If the unused checking or savings account had an ODP link to a credit card, Wells Fargo will determine whether there were any ODP transfers from the credit card to the deposit account. 1 If there were no ODP transfers, there is no Credit Impact Damage associated with that checking or savings account and the analysis of that account is terminated. ii. If there were ODP transfers from the credit card to the unused checking or savings account Wells Fargo will determine whether a delinquency was reported on the credit card within 120 days of the ODP transfer and whether the delinquent balance was limited to the amount of the ODP transfer and any ODP fee. 1 If there was no delinquency reported on the credit card within 120 days or if the credit card carried an additional balance at the time of the delinquency that was not a result of the ODP transfer or any associated ODP fee, there was no Credit Impact Damage and the analysis of the account is terminated. 3 If the checking or savings account was a small business checking or savings account, there may have been a hard pull credit inquiry associated with opening the account, in which case the analysis for Unauthorized Credit Analysis Accounts outlined in Section 1, above, will be performed without regard to whether the account had ODP or whether the ODP was ever utilized. Case 3:15-cv-02159-VC Document 162-1 Filed 06/14/17 Page 11 of 11 2. Credit card accounts that remain move to Step 2, below. ii. Steps 2-7 — Utilize the process outlined above for Unauthorized Credit Analysis Accounts, see Sections 2.a.ii-2.a.vii. 10 Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 1of8 Exhibit A-1 Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 2 of 8 EXHIBIT A-1 CREDIT IMPACT DAMAGES Terms defined in the Amended Stipulation and Agreement shall have the same meaning in this Exhibit A-1. A Overview/Information Considered Credit Impact Damages are calculated by estimating the amount of additional borrowing costs that a consumer would have incurred if an unauthorized event (or unauthorized events) caused negative credit score impact (“Credit Injury”) and adjusting the estimated additional borrowing costs to take into account the probability that the consumer actually did incur additional borrowing costs as a result of Credit Injury. In order to calculate Credit Impact Damages, it is necessary to consider for each consumer: a) The amount of Credit Injury (described below), if any; b) The probability that Credit Injury actually increased the consumer’s borrowing costs by lowering the consumer’s credit rating to a less favorable credit pricing (borrowing cost) level (“Inter-Tier Migration”); c) The amount borrowed by the consumer (Credit Tradeline) that was exposed to Inter- Tier Migration from Credit Injury; d) The date(s) that the consumer acquired a Credit Tradeline or Credit Tradelines; e) The types of Credit Tradelines acquired; f) The estimated impact upon borrowing rates from Inter-Tier Migration based on type of Credit Tradeline; and g) The estimated time that consumers generally hold each type of Credit Tradeline. B. Explanation of Information Considered I Credit Injury Credit Injury for non-delinquency/derogatory consumers is based upon the difference between the consumer’s actual FICO 8 score three months after an unauthorized event and the FICO 8 Score that would have existed at the same time absent the unauthorized event(s) or “but-for FICO 8 score.” If a consumer’s actual FICO 8 score is equal to or higher than the but-for FICO 8 score, Credit Injury has not occurred, and Credit Impact Damages are equal to zero. If the but- for FICO 8 score is higher than the actual FICO 8 score, then Credit Injury has occurred. For the purpose of this document, Credit Injury is equal to the reduction from but-for FICO 8 score to actual FICO 8 score (if any) expressed as a decline in points. For example, if a consumer’s but- for FICO 8 score is 712 and the actual FICO 8 score is 700, Credit Injury is 12 points. Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 3 of 8 Credit Injury Example: But-for FICO 8 score = 712 Actual FICO 8 score = 700 Credit Injury = 712-700 = 12 points. IL. Probability of Credit Cost Injury If, for a given consumer, Credit Injury has occurred, the next step is to estimate the probability that the Credit Injury actually exposed the consumer to potentially higher borrowing costs through Inter-Tier Migration. If negative Inter-Tier Migration has occurred, then the consumer has been exposed to “Credit Cost Injury.” The probability of Credit Cost Injury will be estimated for each consumer by comparing Credit Injury to an overall distribution of FICO 8 scores (or other reasonable FICO distribution if data availability necessitates) for the US population as a whole. Using the example above, if Credit Injury for a given consumer is 12 points, and if the width of the credit tier (the range of credit scores that qualify for the same borrowing cost or interest rate) is 100 points, and the distribution of credit scores within the tier is uniform (FICO 8 scores evenly spread throughout the tier), then the probability that Credit Injury exposed the consumer to Credit Cost Injury is 12%. Probability of Credit Cost Injury Example: Credit Injury = 12 points Tier width = 50 points Distribution of FICO 8 scores (or alternate scores) = uniform Probability of Credit Cost Injury = 12/50 = 24% The widths of credit tiers, the number of tiers, and the distribution of credit scores within tier will be estimated separately for each type of credit line by examination of the relevant literature. The values shown here are for illustration. Ii. Amount Borrowed by Consumer (Credit Tradeline) The amount borrowed by the consumer will be determined by review of the three major Credit Reporting Agencies’ reports. The amount borrowed will take into account, as necessary, a declining balance over the life of the loan. The resulting “Amount Borrowed” or “Tradeline Amount” will be the average Credit Tradeline balance over the life of the consumer’s loan. For the case of a line of credit or credit card, the Credit Reporting Agencies retum the credit limit, rather than the actual amount borrowed. As a result, the average fraction of the credit limit actually consumed as reported by the New York Federal Reserve Bank data or comparable data will be used in place of the actual amount borrowed. Amount Borrowed by Consumer — Credit Tradeline Example: Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 4 of 8 Consumer borrows $28,000 for a vehicle purchase. Over a four-year period that the consumer holds the loan, the average balance is $18,000. $18,000 will be the “Amount Borrowed” or “Tradeline Amount.” As a second example, a consumer opens a credit card account with a credit limit of $10,000. According to the New York Federal Reserve, the average consumer credit card debit is approximately 22% of the credit limit, so the “Amount Borrowed” will be assumed to be $2,200 for this consumer. Iv. Date of Credit Tradeline Acquired The date of Credit Tradeline acquired represents the reported date that the consumer acquired the Credit Tradeline. For non-delinquency/derogatory consumers, Credit Tradelines considered for Credit Impact Damages are those acquired within the 12 full calendar months following the date of the event(s). For non-delinquency/derogatory consumers, Credit Tradelines acquired after the 12 full calendar months following the date of the event(s) will not be eligible for Credit Impact Damages. Date of Credit Tradeline Acquired Example: Within the 12 full calendar months following the date of the event(s) = eligible; Not within the 12 full calendar months following the date of the event(s) = not eligible. Vv. T es of Credit Tradeline(s) Acquired This information will be used to determine the average duration of Credit Tradelines, the change in borrowing cost associated with Inter-Tier Migration, and the tier width. VI. Estimated Impact on Borrowing Costs from Inter-Tier Migration This variable estimates the amount of increase in interest rate from negative migration of one or more credit tiers. For example, if Tier 1 auto loan customers paid an average interest rate of 3.25%, and Tier 2 auto loan customers paid an average interest rate of 5.25%, then the estimated impact on borrowing costs from Inter-Tier Migration would be 2%. The costs of Inter-Tier Migration shown here are for illustration only, and may be modified upon further research. Estimated Impact on Borrowing Costs from Inter-Tier Migration Example: Tier 1 auto loan average interest rate: 3.25% Tier 2 auto loan average interest rate: 5.25% Impact from Inter-Tier Migration of one tier = 2% Vil. Estimated Time that Consumers Held Each Type of Credit Tradelin This variable will be estimated based upon research and analysis of publicly available data and documents, such as Federal Reserve Board releases. This variable estimates the average amount Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 5 of 8 of time that consumers held various types of Credit Tradelines for the purpose of determining the time period during which consumers may have been exposed to higher borrowing costs. Estimated Time that Consumers Held Each Type of Credit Tradeline Example: Credit Tradeline type: auto loan Average amount of time that consumers held auto loans: 4 years Estimated time that consumer held Credit Tradeline: 4 years. Note: This value is assumed for the purpose of this example. VIII. Credit Impact Damage Consumer #123A experienced a hard credit pull and an unauthorized line of credit on February 7, 2012. The but-for FICO 8 score in May 2012 was 712. The actual FICO 8 score in May 2012 was 700. Credit Injury was 12 points. In January 2013, the consumer voluntarily took out a Credit Tradeline in the form of an auto loan with an initial balance of $27,000. Since this date is within 12 full calendar months of the event(s), the consumer is eligible for Credit Impact Damages. Based on the 4-year assumed average life of auto loans, and a declining balance over the life of the loan, the average loan balance during those four years would have been $18,000. The 12-point Credit Injury resulted in a 12% probability that the consumer suffered negative Inter-Tier Migration. If the Inter-Tier Migration indeed occurred, then the consumer’s interest rate would have risen from 3.25% to 5.25% or 2 percentage points. Credit Impact Damage Example: $18,000 Average Loan Balance * 0.02 (2%) * 24% probability of Inter-Tier Migration * 4 years = $345.60 D. Credit Impact Damages with Delinquency/Derogatory I Overview/Information Considered Credit Impact Damages with delinquency/derogatory are conceptually the same as Credit Impact Damages without delinquency/derogatory. However, the potential severity of Credit Injury when delinquency/derogatory indicators exist may change. The first change is that consumers may be eligible for Credit Impact Damages for a period up to seven years following the event(s). The second is that the longer time frame of the analysis and potentially different level of Credit Injury leads to a slight modification of the timing of calculations. Each of the “Information Considered” categories from above is present in the Credit Impact Damages with delinquency/derogatory analysis, but the following elements of the analysis change. Il. Credit Injury with Delinquency/Derogatory—Modification of Calculation: Credit Injury for delinquency/derogatory consumers is based upon the difference between the consumer’s actual FICO 8 score(s) prior to the consumer’s acquisition of each Credit Tradeline and the FICO 8 scores that would have existed at the same times absent the unauthorized event(s), which includes the suppression of the effects of the delinquency/derogatory indicators. Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 6 of 8 or “but-for FICO 8 scores.” As in the Credit Injury without delinquency/derogatory analysis, if any of the consumer’s actual FICO 8 scores is equal to or higher than its corresponding but-for FICO 8 score, Credit Injury has not occurred in that instance, and Credit Impact Damages in that instance are equal to zero. If the but-for FICO 8 score is higher than the actual FICO 8 score in that instance, then Credit Injury has occurred. Since the time frame for the analysis of Credit Injury with delinquency/derogatory is up to seven years, consumers may have some instances of Credit Injury and some instances in which the acquisition of a Credit Tradeline is not subject to Credit Injury. For the purpose of this example, Credit Injury is equal to the reduction from but- for FICO 8 score to actual FICO 8 score (if any) expressed as a decline in points. For example, if aconsumer’s but-for FICO 8 score prior to acquisition of the first Credit Tradeline is 742 and the actual FICO 8 score is 700, Credit Injury is 42 points for the purpose of evaluating that Credit Tradeline. If, four years later, the but-for FICO 8 score prior to the acquisition of the second Credit Tradeline is 722 and the actual FICO score is 702, Credit Injury for the purpose of evaluating the second Credit Tradeline is 20 points. If, at some point after the acquisition of the second Credit Tradeline but within seven years of the event, the but-for FICO 8 score is 719 prior to the acquisition of a Credit Tradeline, and the actual FICO 8 Score is 720, then the consumer has no Credit Injury for the third Credit Tradeline. For reasons of efficient data collection and higher potential Credit Injury in this analysis (which would be less sensitive to short-term timing variation), actual and but-for FICO 8 scores are determined prior to the acquisition of each Credit Tradeline. Credit Injury Example: But-for FICO 8 score for Credit Tradeline 1 = 762 Actual FICO 8 score = 700 Credit Injury for Credit Tradeline 1= 762-700 = 62 points. FER RRR ECR RC OR ICCC OK But-for FICO 8 score for Credit Tradeline 2 = 722 Actual FICO 8 score = 702 Credit Injury for Credit Tradeline 2= 722-702 = 20 points. FESS ESSE SSS ISI RRA CRE RK But-for FICO 8 Score for Credit Tradeline 3 = 719 Actual FICO 8 Score = 720 Credit Injury for Credit Tradeline 3= 719-720 = No Credit Injury Il. Credit Impact Damage With Delinquency/Derogatory Example Consumer #123A experienced a hard credit pull and an unauthorized line of credit on February 7, 2012. The unauthorized line of credit becomes delinquent and is reported to Credit Reporting Agencies. In January 2013, the consumer voluntarily took out a Credit Tradeline in the form of Case 3:15-cv-02159-VC Document 162-2 Filed 06/14/17 Page 7 of 8 an auto loan with an initial balance of $27,000. Prior to that Credit Tradeline, the consumer’s but-for FICO 8 score is 762. The actual FICO 8 scores is 700. Credit Injury associated with this Credit Tradeline (“Tradeline 1”) is 62 points. Since this date is within 7 years of the event(s), the consumer is eligible for Credit Impact with Delinquency/Derogatory Damages. Based on the 4- year assumed average life of auto loans, and a declining balance over the life of the loan, the average loan balance during those four years would have been $18,000. If the width of a credit tier is 50 points, the consumer is certain to suffer one Inter-Tier Migration, and will suffer two Inter-Tier Migrations with estimated probability of (62-50)/50 = 0.24, assuming for illustration a uniform distribution of FICO 8 credit scores within tier. If each Inter-Tier Migration results in a 2% increase in borrowing cost, then the consumer will suffer borrowing rate 2% higher with probability .76 and 4% higher with probability 0.24. The numeric values given in the paragraph are for illustration and may or may not reflect the values that will actually be used in the final calculations. If, after four more years, the consumer purchased and financed a second vehicle for $30,000 with an expected average balance of $20,000 and an expected duration of the Credit Tradeline of four years, the assumed Credit Injury of 20 points would make the second vehicle loan (“Tradeline 2”) eligible for Credit Impact Damage calculation. For Tradeline 2, the 20-point Credit injury is assumed to result in a 40% probability that Inter-Tier Migration would have occurred, and as in the pr