In Reilly v. Vivint Solar, 2021 U.S. Dist. LEXIS 14088, the District of New Jersey tackled a gray area under the FCRA: what does it mean for a user of consumer credit information to have a “reasonable belief” that its actions are permissible?

The core of this case is whether the defendant and its employee acted with a permissible purpose in obtaining a consumer’s credit.  There’s no dispute that the plaintiff authorized the defendant to conduct a credit inquiry in connection with a purchase.  But that authorization somehow turned into a separate authorization to conduct separate inquiries, possibly without the plaintiff’s separate consent for each inquiry.

In its defense, the defendant argued that it held a “reasonable belief” that it had a permissible use for obtaining the plaintiff’s consumer credit report.  The FCRA imposes liability if the user of a consumer credit report acts negligently or intentionally uses a report for an unpermitted purpose.  Some courts have employed a “reasonable belief” standard for lenders such as the defendant here, and found that lenders using consumer credit reports can escape liability if they reasonably believed that obtaining a consumer’s credit report was proper—even if the use would have otherwise violated the FCRA.

The Reilly court rejected that idea.  Instead, it found that the “reasonable belief” standard wasn’t a separate or standalone rule of law, but instead “an alternative way of describing the intent requirement inherent in the FCRA.”  Put another way, the court held that a “reasonable belief” is not a way of escaping liability under the FCRA for an impermissible use of a consumer credit report, but instead another way of referring to the criteria for establishing liability under the FCRA.  If the user of the information acted reasonably, then it did not act negligently or intentionally, and vice versa.

In practice, a court applying this standard would no longer look at a lender’s belief in a vacuum, and dismiss a FCRA claim solely because a lender’s belief was reasonable (even if it were wrong).  Instead, the court would look solely to whether the plaintiff had sufficiently alleged or provided enough evidence to show that the defendant could have acted negligently or intentionally in violating the FCRA.  If the plaintiff failed to meet that burden, the defendant would have acted reasonably.

If you’re a FCRA defendant, be careful about employing the “reasonable belief” standard in your defense.  It may not apply in your jurisdiction, and even if it does, there’s an evolving body of case law that’s changing the standard.