Search results for: FCRA

Earlier this month, the Consumer Financial Protection Bureau (the “CFPB”) announced that it had issued a request for information (“RFI”) seeking public comment on “companies that track and collect information on people’s personal lives. In issuing this new Request for Information, the CFPB wants to understand the full scope and breadth of data brokers and their business practices, their impact on the daily lives of consumers, and whether they are all playing by the same rules.”  The deadline for submitting comments in response to the RFI is June 13, 2023. Continue Reading CFPB Issues Request for Information to Determine Data Brokers’ Compliance with FCRA

Last month, the United States Court of Appeals for the Third Circuit decided a set of consolidated appeals in Fair Credit Reporting Act (“FCRA”) actions brought by consumers against a credit reporting agency.  The consumers all alleged that a notation in their credit reports was misleading and inaccurate under the FCRA, which requires credit reporting agencies to “assure maximum possible accuracy.”  The appeals presented a common question: what standard should courts use to determine if information in a credit report is misleading?  In adopting and applying a “reasonable reader” standard, the Third Circuit has provided FCRA defendants a holding that will be useful for early dismissal of consumer claims based on alleged misleading portions of credit reports.

In Bibbs, 43 F.4th 331, 2022 U.S. App. LEXIS 21819, 2022 WL 3149216 (3d Cir. Aug. 8, 2022), three consumers each failed to repay student loans from their respective lenders.  Sometime after the consumers’ loan payments were over 120 days past due, the lenders transferred each loan to another entity and closed the consumer’s account.  On each consumer’s credit report provided by the defendant credit reporting agency, the student loans were listed as closed with a $0 balance.  However, each report also contained a “Pay Status” notation on the student loan account stating “Account 120 Days Past Due.”

The consumers (through the same lawyer) brought claims against the credit reporting agency for violations of the FCRA for failing to maintain information to the maximum possibly accuracy and for failing to modify inaccurate information after being informed by the consumers.  In particular, the consumers argued that their credit reports were inaccurate because the pay status notation inaccurately reflected that the consumers still had payment obligations (and were delinquent) on the closed accounts.  The district courts all granted the credit reporting agency’s motions for judgment on the pleadings and held that the pay status notations—which reflect historical pay status—were not inaccurate or misleading to a reasonable creditor.  The consumers appealed.

The Third Circuit affirmed the judgments in favor of the credit reporting agency, but differed from the district court on the appropriate standard for determining whether a credit report is misleading.  Turning to the text of the FCRA, the Court observed that the statute permits persons other than creditors to request credit reports, “including, but not limited to, potential and actual employers, investors, and insurers.”  Reasoning that Congress could not have intended that only sophisticated creditors be able to understand credit reports, the Third Circuit rejected the “reasonable creditor” standard used by the district courts and advanced by the credit reporting agency.  Instead, the Court adopted a “reasonable reader” standard to determine whether a credit report is inaccurate and noted that “the reasonable reader standard runs the gamut to include sophisticated entities like banks and less sophisticated individuals such as local landlords.”

The Court went on to apply the reasonable reader standard to the consumers’ credit reports and determined that the pay status notations were not misleading or inaccurate.  Emphasizing that the information in a credit report cannot be viewed in isolation and must be read in conjunction with the entire report, the Court reasoned that the notations were not misleading because “multiple conspicuous statements reflect[] that the accounts are closed and [consumers] have no financial obligations to their previous creditors” and “a reasonable interpretation of the reports in their entirety is that the Pay Status of a closed account is historical information.”

While the Third Circuit’s adoption of a “reasonable reader” standard over a “reasonable creditor” standard may sound plaintiff-friendly, the Court’s application of the standard will likely prove useful for defendants in FCRA actions.  With the clarification that purported misleading information in a credit report cannot be read in isolation, credit reporting agencies in future cases will likely be able to point to other accurate information in a credit report that disambiguates isolated statements that draw the attention of plaintiffs’ attorneys.

You can be sure CPW will be monitoring litigation developments in this space and will keep you in the loop.

Thanks are owed to SPB summer associate Gabby Martin for her contributions to this article.

Last month, a Florida federal jury found in favor of a credit reporting agency (“CRA”) in a trial centering on whether the CRA took “reasonable” steps to assure the accuracy of a consumer’s credit report after a consumer dispute.  The result is a valuable glimpse into how juries view the burdens of the statutory obligations placed on reporting agencies by the Fair Credit Reporting Act (“FCRA”).

In Losch, No. 2:18-cv-00809-MRM (M.D. Fla.), the plaintiff was a consumer who discharged a debt in bankruptcy.  After the consumer’s bankruptcy, however, he received his own credit report from a CRA and saw that the discharged debt was inaccurately included as a delinquent debt.  The consumer then wrote a letter to the CRA disputing the inclusion of the discharged debt and requesting that the CRA correct the credit report.

After the CRA received the consumer’s letter, the CRA then forwarded it to the creditor of consumer’s discharged debt.  The creditor confirmed to the CRA that the consumer’s debt was outstanding.  The CRA then relayed the creditor’s response back to the consumer and took no additional steps to verify the accuracy of the credit report.

Notwithstanding the above, in 2018, the consumer brought FCRA claims against the CRA and the creditor (who settled with the consumer before trial) in Florida federal court.  After the Eleventh Circuit reversed a grant of summary judgment in favor of the CRA in April 2021 (995 F.3d 937), two main issues were left for the jury to decide: (1) whether the CRA used “reasonable procedures to assure maximum possible accuracy” of consumer’s credit report, 15 U.S.C. § 1681e(b), and (2) whether the CRA “conduct[ed] a reasonable reinvestigation” into the disputed information in the consumer’s credit file, 15 U.S.C. § 1681i(a).

At the June trial, as reported elsewhere, the two sides gave contrasting stories on the importance of the role of the creditor who furnished and confirmed the inaccurate data to the CRA.  The consumer argued that the FCRA did not allow the CRA to shift its reinvestigation duties to a third party, while the CRA emphasized that the statute only requires “reasonable” efforts.  The CRA also referred to the consumer’s testimony at his deposition, where he expressed that, at the time he sent his letter, he hoped that the CRA would have contacted the creditor.

On July 1, the jury returned its verdict in favor of the CRA.  The jury found that the consumer failed meet his burden to prove by a preponderance of the evidence that the CRA “fail[ed] to follow reasonable procedures to assure maximum possible accuracy” or that Experian “fail[ed] to conduct a reasonable reinvestigation after it received [consumer’s] dispute letter.”  The consumer has since filed a notice of appeal to the Eleventh Circuit.

The jury verdict in this case gives a glimpse into how juries view the reasonableness of credit reporting agencies’ efforts to confirm credit report accuracy.  Going forward, credit report agencies may be on safer footing whenever inaccurate information is confirmed by a data furnisher (at least when the underlying debt stems from a bankruptcy discharge).  You can be sure that CPW will be following developments in this appeal and will keep you in the loop.

This week, a federal court rejected an attempt in litigation under the Fair Credit Reporting Act (“FCRA”) to assert claims against not only against Credit Reporting Agencies (“CRAs”) but also the Chief Executive Officers (“CEOs”) of the CRAs (“CEO Defendants”),  concerning claims that they failed to respond to communications or remove an errant account from Plaintiff’s credit report.  Estrada, 2022 U.S. Dist. LEXIS 123000 (D. Az. July 12, 2022).  While this case is consistent with the rulings of other courts that have addressed this issue, it is still significant as allowing Plaintiff’s claims to proceed would have resulted in a radical expansion of the FCRA’s scope and private right of action.  Read on to learn more.

First, some statutory background.  The FCRA provides that:

It is the purpose of this subchapter to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this subchapter.

15 U.S.C. § 1681(b) (emphasis in original decision).  The FCRA includes a private right of action for individuals aggrieved by a violation, as well as statutory liquidated damages, making it a frequent target by plaintiffs in data privacy litigations.

The FCRA defines the term “consumer reporting agency” as: [A]ny person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports. 15 U.S.C. § 1681a(f). However, “person” as used in the FCRA is defined as “any partnership, corporation, trust, estate, cooperative, association, government, or government subdivision or agency, or other entity.” 15 U.S.C. § 1681a(b).

In this litigation, the section of the FCRA under which Plaintiff sought to impose liability on the CEO Defendants provided that “[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” 15 U.S.C. § 1681e(b).

It is well-established that, in litigations involving the FCRA and in other cases more broadly, “individual defendants cannot be held liable solely because they are chief executive officers for the corporate defendants.”  (quotation omitted).  Instead, a high showing is necessary to impose personal liability on corporate officers in only those rare instances where the corporate officer “was the guiding spirit behind the wrongful conduct … or the central figure in the challenged corporate activity.”

The Court ruled that this heightened standard was plainly not satisfied in this case.  First, the Court held that “the CEO Defendants are not CRAs for the purposes of the FCRA but are merely officers of the CRAs themselves.”  And second, the Court found that Plaintiff did “not allege that the CEOs took actions individually which led to the CRA violations” and merely conflate[d] the CEOs with the CRAs themselves.”  This was inadequate, particularly in the absence of any other allegations concerning the CEO Defendants, for the Court to find that Plaintiff sufficiently pled his FCRA claims.

For more, stay tuned.  CPW will be there to keep you in the loop.

 

In a recent decision from the Middle District of North Carolina, a federal district court found a plaintiff in a Fair Credit Reporting Act (“FCRA”) case to have Article III standing to bring his claims in federal court, relying on the Supreme Court’s ruling in Ramirez last year and so denied an employer defendant’s Motion to Dismiss.  The case involved allegations that the employer defendant violated the FCRA by failing to include a copy of the consumer’s background screening report in the “pre-adverse action letter” sent to him.  Read on to learn more.

One trend in FCRA litigation is a rising number of claims brought against employers in the background check context.  As shown by some recent cases, many prospective employers are not aware of potential FCRA litigation risk concerning background check disclosure issues because template disclosures and notices are frequently provided by third-parties.

In Derrick v. Full House Mktg., 2022 U.S. Dist. LEXIS 38999 (M.D.N.C. Mar. 4, 2022), Plaintiff Derrick Perez Scott applied for employment in March 2019 with Defendant, an employment agency.  Based on information in a consumer report provided by Resolve Partners, LLC (“Resolve”), a consumer reporting agency, Defendant determined that Plaintiff was ineligible for employment.  On March 15, 2019, Resolve (on Defendant’s behalf) sent Plaintiff the pre-adverse action letter that the FCRA requires employers to provide consumers before taking an adverse action based on information in a consumer report.  However, the pre-adverse action letter did not include a copy of the consumer report used by Defendant in determining that Plaintiff was not eligible for employment, in alleged violation of FCRA Section 1681b(b)(3).

Because Plaintiff did not receive a copy of his consumer report, he was unaware that the consumer report provided by Resolve and relied on by Defendant inaccurately stated that he had been found guilty of six felonies and misdemeanors (the convictions related to a Derrick Lee Scott).  Plaintiff only became aware of error five weeks later, after the position he had applied for had been filled.

Plaintiff then sued Defendant in federal court, alleging that Defendant violated the FCRA by failing to provide him a copy of his consumer report prior to taking an adverse action.  Plaintiff also in the Complaint alleged that he suffered actual harm as a result of the violation—the loss of an employment opportunity and damages in the form of wage loss and emotional distress.  Defendant in turn asserted a facial challenge to Plaintiff’s standing under Article III of the US Constitution, arguing that Plaintiff “has failed to articulate any injury” because an informational injury cannot confer Article III standing.

As a reminder, a party wishing to sue in federal court bears the burden of establishing Article III standing, which requires that a plaintiff demonstrate: (1) an injury in fact; (2) the injury was caused by defendant’s conduct; and (3) the injury can likely be redressed by a favorable judicial decision.  Five years after the Supreme Court’s significant holding in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, the Court reconsidered the question of what constitutes an “injury in fact” under Article III in Ramirez.  In doing so, the Court held that “[o]nly plaintiffs concretely harmed by a defendant’s statutory violation have Article III standing to seek damages against that private defendant in federal court.”  (emphasis added).  The Court reaffirmed that “Article III standing requires a concrete injury even in the context of a statutory violation” and it was not the case that “a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.”  As the Court explained, “[a]n injury in law is not an injury in fact.”  The Court’s opinion resolved a circuit split on whether increased risk of future harm could constitute an injury in fact sufficient to confer standing.

In the Derrick case, the Court found that Defendant was required under the FCRA to provide Plaintiff with a copy of his consumer report, but failed to do so.  Because Plaintiff never received a copy, he had no reason to know about the inaccurate consumer report and his ability to correct the report was hindered.  The court found that the Defendant’s failure was material insofar as it ultimately prevented him from being hired by Defendant.  In denying Defendant’s Motion, the court held that Plaintiff had sufficiently alleged that he suffered an injury in fact that was concrete and particularized and so had Article III standing.

Derrick seems to underscore a growing number of financial privacy decisions limiting TransUnion’s scope in early stages of litigation for FCRA claims, as opposed to class certification (see our blog post here for another example). For more developments in this area of the law, stay tuned.  CPW will be there to keep you in the loop.

In Green v. Innovis Data Solutions, Inc., 2021 US Dist LEXIS 176996 (N.D. Tex. Sep. 17, 2021), the plaintiff filed suit against Innovis Data Solutions (“Defendant”) and other entities arising out of Defendant’s conduct (or lack thereof) relating to Plaintiff’s tradeline with a financial institution as reported on Plaintiff’s consumer report, and alleges that Defendant violated 15 U.S.C. § 1681e(b) and 1681(i). Read on to learn more.

Plaintiff secured a mortgage for a piece of property located in Florida. The original mortgage was secured with a bank and then the mortgage was subsequently acquired by a third-party financial institution in 2006. In 2018, Plaintiff missed a mortgage payment, resulting in his account falling into delinquency. In response, the financial institution approved Plaintiff for a loan modification in September 2018. When November 2019 came around, Plaintiff obtained his credit report where he contends that there were some inaccuracies—including several late payments between January and July 2018. Plaintiff followed up by sending Defendant a dispute letter contending he “may have missed one payment, if that.” Plaintiff also requested Defendant “reinvestigate[]” his tradeline and report, “in the interim” that the account is “in dispute.”

Defendant responded to Plaintiff’s letter and included an updated credit report reflecting its removal of Plaintiff’s account with the financial institution. Defendant maintains that it contacted the financial institution regarding the dispute, but the financial institution verified the information it reported to Defendant regarding Plaintiff’s account delinquency. In response, Defendant deleted Plaintiff’s entire tradeline.

Plaintiff brought this suit against Defendant alleging it violated 15 U.S.C. § 1681e(b) and 1681(i). Defendant contends that these claims should be dismissed because it was authorized by the FCRA, as a matter of law, to delete.

How does the story end? Let’s discuss the law first.

As a reminder, the purpose of the FCRA is “to ensure fair and accurate credit reporting that protects consumers while meeting the needs of commerce.” For the Defendant to defeat a motion to dismiss under 1681e(b) a plaintiff must allege facts to show the court that:

  1. Inaccurate information was included on a credit report;
  2. Inaccuracy was due to the failure to follow reasonable procedures to assure maximum possible   accuracy;
  3. Injury was suffered; and
  4. Injury was caused by the inclusion of the inaccurate information.

The Court determined that Plaintiff alleged facts sufficient to show that there were inaccuracies on his credit report, meeting the first prong of the above test. However, Plaintiff did not allege facts to support his allegation that the inaccuracy on his disputed November 2019 credit report resulted from Defendant’s failure to follow reasonable procedures. Conversely, Plaintiff relied on statements that Defendant “knew or should have known,” and that “Plaintiff’s account status and payment history were inaccurate.” This is simply not enough to show that Defendant’s inaccuracy was due to itsfailure to follow reasonable procedures.

In addition, Plaintiff did not allege any facts to support his injury claims. Instead, Plaintiff alleged that he “suffered damages, including . . . denial attempts to refinance, loss in ability to finance goods, loss of credit, loss of ability to purchase and benefit from a credit, and suffering the mental and emotional pain, anguish, humiliation and embarrassment of credit denials.” Again, this is simply not enough. In short, Plaintiff has not alleged facts from which the court can reasonably infer Defendant violated Plaintiff’s rights pursuant to 1681e(b).

Plaintiff also claims that Defendant violated 15 U.S.C. § 1681i when it failed to reinvestigate and update Plaintiff’s credit report after he notified Defendant of the dispute. For the Defendant to defeat a motion to dismiss under 1681i, a plaintiff must allege facts to show the court that:

  1. [plaintiff] disputed the completeness or accuracy of an item of information contained in his consumer file and notified [defendant] directly of that dispute;
  2. [defendant] did not reinvestigate free of charge and either record the current status of the disputed information or delete the item from the file in the manner prescribed by Section 1681i(a)(5) within the statutory period;
  3. [defendant’s] noncompliance was negligent or willful;
  4. [plaintiff] suffered injury; and
  5. [plaintiff’s] injury was caused by [defendant’s] failure to reinvestigate and record the current status of the disputed information or delete the item from the file.

It is undisputed that Plaintiff sent Defendant a letter disputing the information about his account—meeting the first prong of the above test. Plaintiff, however, failed to allege facts sufficient to meet the remaining prongs of the above test. Plaintiff only alleged that Defendant “fail[ed] to conduct a lawful reinvestigation,” but he does not allege adequate facts to support this allegation. The Court indicates “[on] its own, this statement is conclusory.”

In addition, Plaintiff has not set forth sufficient allegations that Defendant (1) failed to comply with Section 1681i(a)(5) when it deleted his account or (2) that any noncompliance on Defendant’s behalf was negligent or willful. Further, Plaintiff has not alleged how the deletion of a tradeline reflecting missed payments and delinquency has caused him injury. Thus, the Court held that Plaintiff’s pleadings fail to allege that Defendant violated Section 1681i of the FCRA.

Just a couple weeks ago, we reported on another case from the Eastern District that dismissed a FDCPA case for lack of standing post-TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021). Another recent decision from the same court (different judge) shows, yet again, that Ramirez has teeth.  In Grauman, No. 20-cv-3152 (ENV) (AKT), 2021 U.S. Dist. LEXIS 142845 (E.D.N.Y. July 16, 2021), the court dismissed  a FCRA case for lack of standing, finding that a lowered credit score, by itself, isn’t a concrete harm under Article III.

The plaintiff in this case (Grauman) was a customer at Wells Fargo, which deferred Grauman’s loan payments for a few months in 2020 as a form of relief from the COVID-19 pandemic. Despite the suspension of payments, plaintiff alleges that he made his mortgage payments in a timely manner, and that Wells Fargo had promised it would not report missed payments to the credit bureaus during this time anyway. The gravamen of Grauman’s grievance, though, was that his mortgage suspension was erroneously reported to the credit bureaus, and that his credit score dropped 16 points and didn’t bounce back even when the suspension notation had been removed from his account.  He brought a class action against a credit reporting agency and its vendor, claiming that their reporting of the mortgage loan suspension and the resulting credit score drop constituted a negligent and willful violation of FCRA’s requirement that credit reporting agencies employ reasonable procedures to ensure the accuracy of consumer reports.

The court granted the defendants’ motion to dismiss, finding that the plaintiff’s lowered credit score wasn’t a concrete harm, and the plaintiff thus lacked standing to bring a FCRA claim. In dismissing the case, the court recognized that pre-Ramirez, “many courts had held that a drop in a plaintiff’s credit score was a sufficiently concrete injury in fact under Spokeo, capable of causing real-world harms such as the denial of credit.” But following Ramirez, the court noted, “that holding is no longer tenable.” Unless a plaintiff alleges some “other injury resembling a historically recognized harm,” a reduced credit score isn’t enough to get you into federal court.   This makes sense—Ramirez explicitly held that in cases seeking damages, “the mere risk of future harm, standing alone, cannot qualify as a concrete harm.” And isn’t that quintessentially what a lowered credit score is—just a risk of a future harm?

For more on this, stay tuned.  CPW will continue to keep you in the loop on developments in this area and for other data privacy litigations and trends.

Recently, a federal court considered whether the Fair Credit Reporting Act (“FCRA”) preempts a Missouri Merchandising Practices Act (“MMPA”) claim arising from accurate reporting. Pudic v. Dep’t Stores Nat’l Bank, 2021 U.S. Dist. LEXIS 150910 (E.D. Mo. Aug. 11, 2021). The court held the FCRA does not preempt a MMPA claim, and Defendant’s Motion to Dismiss was denied.

Here are the facts. Plaintiff, an individual, brought an action against Defendants, DSNB and Kohl’s, Inc. (collectively, the “Defendants”) for violating the MMPA when Defendants refused to accept payment on an account. Plaintiff had credit card accounts with the Defendants and fell behind on payments. When Plaintiff tried to resolve the unpaid accounts, the Defendants rejected Plaintiff’s payment citing bankruptcy as the basis for the denial.

From this disclosure, Plaintiff alleged that Defendants “had unfairly combined or linked” his account to his mothers’ (as she also had credit cards with Defendants, a nearly identical Social Security number, and had previously filed for bankruptcy—unlike Plaintiff). Plaintiff contended that Defendants, “in connection with transactions with Plaintiff,” violated the MMPA through “misrepresentations and unfair practice.” He alleged that, as a result of Defendants’ misconduct, his credit score suffered, he could not refinance his vehicle or obtain a reasonable mortgage interest rate, and his credit limit was reduced on other accounts.

The Defendants moved to dismiss Plaintiff’s First Amended Complaint arguing the FCRA preempts Plaintiff’s MMPA claim.  The Court denied Defendants’ motion.

First, a refresher on the FCRA. The purpose of the FCRA, 15 U.S.C. § 1681, is to “ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.” The FCRA also explicitly preempts state law in certain areas by stating, “[n]o requirement or prohibition may be imposed under the laws of any State with respect to any subject matter regulated under section 1681s-2 of this title, relating to responsibilities of persons who furnish information to consumer reporting agencies.” 15 U.S.C. § 1681t(b)(1)(F).

Courts have adopted various approaches to preemption under 1681t(b). On the “most narrow[]” interpretation, § 1681t(b)(1)(F) preempts only state laws concerning either the prohibition on furnishing inaccurate information or the duty to investigate and correct inaccurate reporting upon notification of a dispute. More broadly interpreted, the FCRA might preempt any additional duties imposed on furnishers.

Plaintiff urged the Court to interpret the FCRA narrowly, arguing that his MMPA claim was not preempted by the FCRA because he does not contest the accuracy of Defendants’ reporting. Conversely, Plaintiff alleged that Defendants improperly rejected his payments, not that Defendants reported inaccurate information.

The Court indicated Section 1681s-2 is silent on furnishers duties to accept payment and therefore, does not preempt state claims pertaining to acceptance of payment.Defendants argued that an “implicit claim of injury to [a plaintiff’s] credit score relating to loan payments” can be brought under the FCRA. Defendants cite Eaton v. Citibank, 2010 U.S. Dist. LEXIS 113293, 2010 WL 4272920 (M.D. Pa. Oct. 25, 2010) to support its claim. In Eaton, the court entered summary judgment for the defendant on the grounds that the plaintiff “could not prevail” on a claim under 15 U.S.C. § 1681s-2 because the report at issue was “accurate.” This case, however, actually supports Plaintiff’s position since Plaintiff did not contest the accuracy of Defendants reporting but rather claimed Defendants improperly rejected his payments.

The Court indicated that it is Defendants duty to justify preemption, and they failed to do so in this case. The Court read 15 U.S.C. § 1681t(b)(1)(F) to preempt state actions relating only to the two duties (noted above) imposed on furnishers by § 1681s-2. Here, Plaintiff’s claim was not regulated by 1681s-2, and thus, the FCRA does not preempt Plaintiff’s MMPA claim.

For more developments in this area of the law, stay tuned.  CPW will be there to keep you in the loop.

 

In a recent litigation and appeal involving claims under the Fair Credit Reporting Act (“FCRA”), the Ninth Circuit affirmed the district court’s grant of summary judgment to the defendant, in a win for CRAs named in similar litigation.  Leoni v. Experian Info. Solutions, 2021 U.S. App. LEXIS 17687 (9th Cir. June 14. 2021).  Read on for details about the case and its implications.

First, some background.  Plaintiff filed suit against Experian regarding a purported error in her consumer report.  Plaintiff alleged that the report erroneously stated that Plaintiff owed a debt had been previously discharged by a bankruptcy court.  Plaintiff requested that Experian investigate this issue.  The investigation report subsequently sent to Plaintiff stated that the debt was discharged, but incorrectly noted that the debt was “included in Chapter 13 Bankruptcy on November 08, 2016” (when in actuality, the debt had been discharged several months earlier).  Plaintiff then filed suit for negligent and willful violations of the FCRA—based solely on this misdating issue.

Assessing the case de novo on appeal, the Ninth Circuit first analyzed whether Experian committed a willful violation of the FCRA.  To prevail on this claim, Plaintiff was required to demonstrate that Experian “knowingly violated the statute or recklessly disregarded its requirements.”  Ramirez v. TransUnion LLC, 951 F.3d 1008, 1031 (9th Cir. 2020).  The Court found that the record did not raise a material issue of fact that Experian knowingly or recklessly changed the “included in bankruptcy” date.  Rather, Experian’s error was, at most, negligent.

The Court then turned to the standard for negligent violation of the FCRA, which requires Plaintiff to suffer “actual damages.”  See 15 U.S.C. § 1681o(a)(1); see also Dennis v. BEH-1, LLC, 520 F.3d 1066, 1069 (9th Cir. 2008), as amended.  In support of this requirement, Plaintiff asserted his damages were (1) he “avoided applying for credit for fear of being denied, (2) “the inaccurate information could serve as a factor in Experian credit scores,” (3) he suffered from emotional distress, (4) he incurred transportation costs traveling to his attorneys office, and (5) he “lost time considering issues related to the inaccurate credit reporting.”

The Ninth Circuit rejected all of these attenuated theories of injury, finding they were non-cognizable for purposes of supporting his claim.  For instance, Plaintiff did not point to any evidence that the “included in bankruptcy” date lowered his credit score apart from his actual bankruptcy.  Additionally, the Court found that the cost of traveling to his attorneys’ office or the time Plaintiff spent reviewing the credit reports were likewise not compensable because Plaintiff incurred these expenses for the sole purpose of correcting inaccurate reporting.  Based on these findings, the Ninth Circuit held that the district court properly awarded summary judgment to Experian on Plaintiff’s claims that Experian willfully and negligently violated the FCRA.

This case is a reminder of the requirement of actual damages to support claims under the statute, and how emotional distress and costs incurred to correct inaccurate reporting are inadequate.  Stay tuned to CPW for more important privacy developments out of the Ninth Circuit as well as other courts discussing the FCRA.

Last month, a federal court addressed the kind of harms that need to be included in a plaintiff’s complaint asserting claims under the Fair Credit Reporting Act (“FCRA”) and Fair Debt Collection Practices Act (“FDCPA”) to survive a motion to dismiss.  Magruder v. Capital One, Nat’l Ass’n, 2021 U.S. Dist. LEXIS 94804 (D.D.C. May 19, 2021).  Finding that the plaintiff had “barely” overcome the bar, the court reaffirmed the minimum pleading requirements necessary for such claims.  Read on for more details.

Plaintiff’s initial lawsuit brought claims against several financial institutions and debtor collectors.  Alleging that his attempts to resolve disputes with his credit reports had had him effectively running in circles, Plaintiff brought suit against all the defendants for violations of the FCRA, and against one defendant specifically for violations of the FDCPA.

Prior to going any further with the case, the court ordered Plaintiff to show that he had suffered an “injury in fact” sufficient to satisfy the threshold requirement of Article III standing.  This necessitated that Plaintiff show that he had been harmed in a real sense, that is, that he has personally affected, and the harm was not hypothetical or abstract.  [Note: Injury for purposes of Article III in some instances can include intangible harms, including emotional harms in very specific instances.]

In assessing Plaintiff’s injury claims, the court expressed repeatedly that his claims of a tangible harm were “thin by any measure.”  Plaintiff claimed that he had suffered economic losses, but provided no details explaining the amount of the losses, or how they happened.  Still, the court found that the bar was low enough that Plaintiff’s complaint was sufficient for a number of his claims, at least at this point.

Most notably, the court found that while Plaintiff had not claimed any tangible loss as a result of Trans Union’s alleged violation of FCRA, his emotional harm was enough.  Plaintiff alleged that Trans Union’s failure to follow reasonable procedures to assure maximum accuracy (§ 1681e(b)) and failure to conduct a reasonable investigation” (§ 1681i(a)) had caused him “embarrassment, humiliation and other mental and emotional distress.”

The court found that FCRA was, at least in part, designed with this specific kind of injury in mind.  Plaintiff claimed that his credit reports incorrectly said that he had outstanding debt, when he did not.  That false claim was spread to other parties, causing emotional harms.  “The FCRA was enacted to deter just this.”  The court also extended this to the FDCPA, noting that courts have previously ruled that a plaintiff may have standing in FDCPA cases if the alleged violation “caused anxiety” or “stress and inconvenience.”

Note that in the context of the FCRA and FDCPA, other courts have taken a contrary approach as to whether such damages suffice at the pleadings stage.  This issue is far from settled in this area of data privacy law.  Not to worry, CPW will be there to keep you in the loop.