FCRA Blog

Consumer’s in-person reporting of identity theft to bank branch personnel found to create additional facts preventing summary judgment on whether a reasonable reinvestigation occurred

Andrew Sefzik — Tue, 14 May 2013 00:00:00 -0500

Rogers v. JPMorgan Chase Bank, N.A., 2012 U.S. Dist. LEXIS 82817 (W.D. Wash. June 13, 2012) (Robart, J.)

Facts: An identity thief opened a Washington Mutual (“WaMu”) checking account using a check drawn on Fifth Third Bank (“Fifth Third”). Fifth Third reported that the check was counterfeit shortly after the account was opened. The WaMu records for the account were subsequently transferred to JPMorgan Chase Bank (“Chase”) pursuant to an agreement between the FDIC and Chase. WaMu reported the account as suspected fraud activity (“SFA”) to ChexSystems, Inc.

Plaintiff learned of the SFA reporting when he tried to refinance his mortgage. Plaintiff visited a Chase branch on February 5, 2010, and on February 8, 2010 obtained several account statements, the signature card and a copy of the check deposited into the fraudulent account, at which time he informed the Chase branch personnel that he did not open the account and asked that the information be removed from his report. There was conflicting testimony with respect to what Plaintiff was told by the Chase branch personnel with respect to the information being removed.

Plaintiff visited a second Chase branch on two separate occasions on February 23, 2010 and March 19, 2010, still seeking to have the SFA reporting removed without success. Plaintiff also called Chase on March 19, 2010. Plaintiff then disputed the reporting with ChexSystems on March 20, 2010. ChexSystems reinvestigated the account; and Chase responded by requesting that ChexSystems delete the charge-off information and update the account to settled in full, but the SFA reporting was verified.

In January 2011, Plaintiff attempted to open a checking account with another bank and was refused because of the SFA designation in the ChexSystems report. Plaintiff again visited a Chase branch, and was told he needed to contact the fraud department. Plaintiff claims to have sent an additional letter to ChexSystems on January 27, 2011. There is no evidence that ChexSystems notified Chase of an additional dispute. Plaintiff filed a written complaint on February 3, 2011 with the Office of the Comptroller of Currency. Chase received the OCC complaint, and sent Plaintiff a letter on February 16, 2011 informing Plaintiff that he needed to file a police report and identity theft claim with Chase’s customer claims department. On March 29, 2011, Plaintiff sent a letter to ChexSystems disputing the SFA designation. ChexSystems sent a reinvestigation request to Chase. Chase reviewed its records, including the WaMu records, notes from its OCC investigation, an April 4, 2011 letter from Plaintiff that enclosed a police report and identity theft affidavit and other relevant documents. Chase instructed ChexSystems to delete the tradeline.

• Furnisher Duties: Chase argued that it was not a furnisher in this case because it did not provide the disputed information to ChexSystems, and instead WaMu did. The Court determined that Chase was a furnisher under the FCRA because the agreement by which Chase assumed certain assets and liabilities of WaMu gave Chase the primary responsibility to respond to ChexSystems requests.

• Reasonable Reinvestigation: Plaintiff’s FCRA reinvestigation claims related to his March 20, 2010 dispute letter and his January 27, 2011 dispute letter:

o Plaintiff’s March 20, 2010 letter to ChexSystems and ChexSystem’s notice to Chase: Chase argued that its investigation was reasonable because ChexSystem’s March 2010 notice did not provide any information regarding the nature of Plaintiff’s dispute, did not contain any reference to identity theft, did not state that Plaintiff did not open the account, and did not state that Plaintiff did not deposit the check that was deemed fraudulent by WaMu. Chase asserted that without this information, it acted reasonably in verifying the SFA designation. The Court recognized that ChexSystem’s notice did not contain specific allegations of identity theft, but pointed out that the notice indicated “[c]ustomer states that he is not responsible in any way with the fraudulent activity.” The Court stated that if Plaintiff had not reported the identity theft orally to Chase branch managers, it would have little difficulty concluding that Chase’s investigation was reasonable as a matter of law. The Court, however, stated that Plaintiff’s reporting of the identity theft to Chase branch managers, and the opening of a ticket to investigate his oral dispute, could have prompted additional investigation by Chase, or additional communication between Plaintiff and Chase. The Court denied summary judgment regarding whether Chase’s March 2010 reinvestigation was reasonable because of these additional facts.

o Plaintiff’s January 27, 2011 letter to ChexSystems: The Court noted that a furnisher’s duty to investigate and correct inaccurate information are triggered only upon notice of a consumer’s dispute received directly from a CRA. The Court found that the evidence showed that Chase never received notice of a dispute from ChexSystems in response to Plaintiff’s January 27, 2011 letter to ChexSystems, and that Chase was entitled to summary judgment with respect to whether it violated the FCRA in January or February 2011 because of this.

• Negligent Non-Compliance: Chase argued that it was entitled to summary judgment with respect to Plaintiff’s claim that he was entitled to actual damages because Plaintiff had made no effort to calculate actual or consequential damages, provided no evidence of actual damages and confirmed that he has incurred no actual or consequential damages as a result of the SFA designation. The Court found that Plaintiff’s declaration detailing his emotional distress damages as a result of Chase’s alleged failure to comply with the FCRA was sufficient to create a genuine issue of material fact regarding whether he suffered actual damages.

• Willful Non-Compliance: The Court stated that willful violations of the FCRA can be based on either a knowing or reckless basis, and that a company subject to the FCRA acts with reckless disregard if (1) the action is a violation under a reasonable reading of the statute’s terms, and (2) the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless. The Court found that the evidence was insufficient for a jury to find that Chase knowingly or recklessly violated the FCRA.

• Defamation: Under Washington law, the elements for a defamation claim are (1) falsity, (2) an unprivileged communication, (3) fault and (4) that the communication proximately caused damages. The Court determined that Chase’s March 2010 verification to ChexSystems that the reporting that included the SFA designation was accurate was sufficient for a reasonable jury to conclude that Chase’s response contained a false statement or left a false impression. The second element was undisputed. Since Plaintiff was a private figure, the standard of fault for defamation was negligence. The Court determined that there were genuine issues of material fact as to whether Chase acted negligently in allegedly making a false statement to ChexSystems in its March 2010 response. As for the final element, the Court determined that a reasonable jury could conclude that Plaintiff was denied banking opportunities not simply because a fraudulent check was deposited into his account, but because the SFA designation suggested he was involved in bank fraud. Additionally, the Court found that Plaintiff presented sufficient evidence to create a genuine issue of material fact as to whether he sustained emotional damages as a result of false statements by Chase.

Plaintiff’s FCRA Claims Not Precluded by the Bankruptcy Code

Marc F. Kirkland — Fri, 12 Apr 2013 00:00:00 -0500

Orr v. Allied Interstate, Inc., 2012 U.S. Dist. LEXIS 130039 (N.D.N.Y. Sep. 12, 2012)

Facts: Plaintiff sued Allied alleging that it had violated the FDCPA and the FCRA when it attempted to collect a debt discharged in bankruptcy and obtained Plaintiff’s credit report without Plaintiff’s authorization or a permissible purpose. Allied moved to dismiss Plaintiff’s claims pursuant to Rule 12(c) of the Federal Rules of Civil Procedure asserting that Plaintiff’s filing of bankruptcy precluded those claims. The Court agreed that Plaintiff’s FDCPA claim was precluded, but found that Allied had no legal support for its assertion that Plaintiff’s FCRA claim should also be precluded.

• Preclusion. The crux of Plaintiff’s FDCPA claim is that Allied attempted to collect a debt that had been discharged in bankruptcy. Where a debtor thinks a creditor has violated a discharge order, relief is properly sought in the bankruptcy court rather than a district court. Therefore, the Court found that the bankruptcy court is the proper forum for determining whether Allied violated the discharge order. The Court dismissed Plaintiff’s FDCPA claim for failing to state a claim on which relief can be granted.

• Preclusion. Allied also argued that the principles that precluded Plaintiff’s FDCPA claim extended to Plaintiff’s FCRA claim; however, the vast majority of district courts have held that the Bankruptcy Code does not preclude FCRA claims. Therefore, the Court denied Allied’s motion to dismiss.

Court Finds that Offer of Judgment Moots Plaintiff’s Class Action Lawsuit

Marc F. Kirkland — Thu, 28 Mar 2013 00:00:00 -0500

Sanchez v. Verified Person, Inc., 2012 U.S. Dist. LEXIS 70128 (W.D. Tenn. May 21, 2012)

Facts: Plaintiff filed a class action lawsuit against Verified Person, Inc. for alleged violations of the FCRA. Verified answered the Complaint and the magistrate entered a scheduling order which set the deadline for Plaintiff’s class certification motion on June 30, 2012. On January 11, 2012, Verified served Plaintiff with an Offer of Judgment (the “Offer”) for $25,000. The Offer also contained a clause that provided “reasonable costs and attorneys’ fees are to be agreed upon by the parties, or, if the parties are unable to agree, to be determined by the Court on application by Plaintiff’s counsel.“ On January 18, 2012, Plaintiff filed a motion to strike the Offer claiming, among other things, that offers of judgment should not apply in the class action context due to conflicts between the class representative and the putative class. The Court denied Plaintiff’s motion to strike, dismissed Plaintiff’s case against Verified, and entered a judgment for Plaintiff in the amount of $25,000.

• Offer of Judgment. Federal Rule of Civil Procedure 68 provides that “at least [fourteen] days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued.” Failure to accept an offer of judgment may have adverse consequences: “if a plaintiff rejects a defendant’s offer of judgment, and the judgment finally obtained by plaintiff is not more favorable than the offer, the plaintiff must pay the costs incurred subsequent to the offer.”

• Offer of Judgment. The Offer included an amount in total satisfaction of all claims and causes actions that were or could be asserted by Plaintiff. The damages prayed for in the Complaint were for actual damages of not more than $1,000. Plaintiff also sought punitive damages, which would not likely exceed $10,000, given the 10 to 1 ratio of punitive to compensatory damages approved by the Supreme Court. Therefore the maximum amount of damages Plaintiff could hope to collect would be $11,000 leaving $14,000 for attorneys’ fees owed on the offer. Even if the attorneys’ fees exceed that amount, the clause related to fees in the Offer would cover any excess.

• Moot. A case is moot when the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome of the case. If a controversy is moot, the court lacks subject matter jurisdiction over the action, and the court should dismiss the cause of action. Mootness issues arise in the context of Rule 68 offers of judgment when the offer satisfies all of the plaintiff’s legally recognizable monetary interests. In these situations, courts will force the plaintiff to accept the offer of judgment and then dismiss the claims as moot.

• Class Actions. The effect of an offer of judgment on a putative class action case requires consideration of the interplay between Rule 68 and Federal Rule of Civil Procedure 23. Here the Court stated that “district courts in the Sixth Circuit, but not the Sixth Circuit itself, have recognized that an offer of judgment will not moot a named plaintiff’s claim as long as the plaintiff has been dilatory in bringing his or her certification motion. However, if a named plaintiff’s claim is mooted by an offer of judgment that made before certification of the class or the filing of a class certification motion, dismissal of the action is required.”

• Dismissal. The Court found that because a motion for class certification was not pending before the Court and the Offer satisfied all of Plaintiff’s damages Plaintiff’s claims against Verified were moot. Further, because Plaintiff’s claims against Verified were moot, the putative class’s claims were mooted as well, and therefore, the case against Verified was dismissed. This ruling would not affect the ability of individual putative claims member from bringing his own separate claims against Verified.

Injunctive Relief Again Determined Not to be Available to Private Litigants

Andrew Sefzik — Wed, 06 Feb 2013 00:00:00 -0500

Bleynat v. Trans Union LLC, 2012 U.S. Dis. Lexis 92016 (W.D.N.C. July 2, 2012) (Reidinger, J.)

Facts: Plaintiff sued Trans Union LLC, Equifax Information Services, Inc. and Experian Information Solutions, Inc. seeking monetary damages and declaratory and injunctive relief. Trans Union moved to dismiss Plaintiff’s claim for declaratory and equitable relief.

• Injunctive Relief: The Court stated that the issue was whether an individual plaintiff, rather than the Federal Trade Commission, can seek declaratory and injunctive relief under the FCRA. The Court noted that the Fourth Circuit had not addressed the issue, but recognized that the Fifth Circuit had in Washington v. CSC Credit Services, Inc., 199 F.3d 263 (5th Cir. 2000). The Court also noted that Washington was widely followed by federal district courts in the Fourth Circuit. Plaintiff’s argument that Washington was wrongly decided was rejected. The Court also rejected Plaintiff’s argument that the Court should allow injunctive relief on policy grounds in order to give FCRA plaintiffs an efficient and effective way of pursuing their claims and avoiding further damages. The Court stated that the Plaintiff’s policy arguments were foreclosed by the statutory language of the FCRA, which evidences a clear intention on the part of Congress to preclude private litigants from seeking injunctive and other equitable relief under the FCRA.

Furnisher’s Mere Reliance on the ACDV Without Supportive Investigation Testimony Not Enough To Win on Summary Judgment

Paul W. Sheldon — Thu, 31 Jan 2013 00:00:00 -0500

Peter Dickman v. Verizon Communications, Inc. dba Verizon Wireless, 2012 U.S. Dist. LEXIS 90188 (E.D. NY. Jun. 28, 2012)

Facts: Plaintiff Peter Dickman alleged that Defendant Verizon Communications, Inc. (“Verizon”) violated 15 U.S.C. §§ 1681s-2(a) and (b) of the FCRA, by furnishing inaccurate information to the credit reporting agencies (“the CRAs”) and failing to delete inaccurate information. Plaintiff also alleged that Verizon engaged in deceptive business practices in violation of New York General Business Law § 349 by failing to maintain reasonable procedures designed to assure maximum possible accuracy of the information concerning the Plaintiff. Specifically, Plaintiff filed suit over the inaccurate negative credit reporting of a Verizon phone and DSL account that he believed had been terminated. Verizon claimed that Plaintiff’s old account terminated, but that Plaintiff opened a new account soon thereafter and was sent billing statements which went unpaid. Verizon’s representative provided testimony that the documents provided in discovery were not the actual bills, but rather were merely similar in format to the actual bills sent. Plaintiff wrote a letter to Verizon, in which he stated that he had reviewed his credit report, had disputed the information contained therein with the CRAs, and that the results of the CRAs' investigation came back “verified." In the letter, Plaintiff disputed the $200 delinquency amount, denied having opened a new Verizon account, and requested that Verizon send him the proper proof that what Verizon was reporting was true. Plaintiff also sent this letter to the CRAs which resulted in the account being verified as accurately reporting. Plaintiff claimed that he suffered credit denials and mental anguish damages as a result of the inaccurate credit reporting of the Verizon account. Verizon filed its motion for summary judgment which was denied as to Plaintiff’s §1681s-2(b) claim. Although not raised by Verizon in its motion, Plaintiff’s state law claim was found to be preempted by the FCRA and was appropriately dismissed by the Court.

• Furnisher Investigation. There is "no private right of action" under §1681s-2(a), because the duties imposed under this statute are only enforceable by a governmental agency or official.

• Furnisher Investigation. Although Verizon argued that the existence of the ACDVs showed that Verizon conducted a satisfactory investigation of Plaintiff's dispute in compliance with §1681s-2(b), the Court held that a fact issue exists because Verizon presented no testimony from any of the Verizon employees whose names are listed on the ACDVs nor proffered any testimony from those employees who actually conducted the investigation following the CRAs’ notification of a dispute.

• Furnisher Investigation. Verizon also argued that it conducted a reasonable investigation of Plaintiff's dispute because a review of Plaintiff's bills revealed that over 100 local telephone calls were made and/or received from Plaintiff’s telephone number following the start date of the new account. The Court, however, had no evidence before it that indicated Verizon actually reviewed these bills as part of its statutorily required investigation. Note: Even if there was evidence to that effect, the Court indicated that such evidence alone would not establish as a matter of law that Verizon complied with §1681s-2. The Court pointed to the fact issue that Plaintiff denied receiving any bills from Verizon coupled with Verizon's own witness testimony that the documents proffered by Verizon were not actually "bills," nor did such documents confirm that actual bills were ever sent to Plaintiff’s address.

• Preemption. The key two preemption statutes in the FCRA are §1681h(e) and §1681t(b)(1)(F), which have been noted as contradictory by a number of Federal circuit courts: Though § 1681t(b)(1)(F) appears to preempt all state law claims against furnishers of information, Congress did not withdraw § 1681h(e) -- which preempts certain state law claims, but impliedly permits others -- when it added § 1681t(b)(1)(F) to the Code in 1996.

• Preemption. In addressing the contradiction, district courts have adopted different approaches such as the "statutory approach" – that Section 1681t(b)(1)(F) "preempts only state statutory claims against furnishers of information," the "total preemption" approach – that Section 1681t(b)(1)(F) "preempts both state statutes and common law causes of action that related to the subject matters listed in Section 1681s-2," or the "temporal approach" – that State law claims based on actions of a furnisher that occurred after the furnisher received notice of inaccuracies are held preempted by § 1681t(b)(1)(F), while actions taken before notice has been received may not be preempted. Note: The Court did not need to adopt any one approach as the result would be same under all three: Plaintiff’s claim under GBL § 349 was a statutory claim which therefore would be clearly preempted under the "statutory approach” and “total preemption approach.” Under the temporal approach, the claim would be preempted because Plaintiff’s claim -- that he notified Verizon of his disputes but Verizon continued to incorrectly report that plaintiff owed $200 -- "falls squarely within the scope of § 1681s-2."

Furnisher Chrysler Financial Wins Summary Judgment – Plaintiff’s Credit Damages and Emotional Distress Claims Under the FCRA Cannot Be Linked to the Credit Reporting of Chrysler’s Account

Paul W. Sheldon — Wed, 30 Jan 2013 00:00:00 -0500

Dominic Castleberry v. Daimler Chrysler Truck Financial “aka” Chrysler Financial Services Americas, LLC, 2012 U.S. Dist. LEXIS 106736 (E.D. Mich. Jul. 31, 2012)

Facts: Plaintiff Dominic Castleberry claims that from April 2009 through May 2012, Defendant Chrysler Financial Services (“Chrysler”) reported "conflicting, inaccurate and incomplete" credit information to Experian, Equifax and Trans Union ("the CRAs") regarding his loan payment history with Chrysler for the purchase of a freightliner tractor. Plaintiff disputed the derogatory account history at least six times with no success which prompted Plaintiff to file suit. Chrysler asserted that Plaintiff neglected to make any payments toward the loan obligation after October 28, 2008, thereby defaulting on the financing agreement terms. Plaintiff subsequently rejected Chrysler’s offer of a three month extension of payments, at which time it advised Plaintiff that it would place the vehicle out for repossession. A week later, the vehicle was collected by a third party company at Chrysler’s expense. Plaintiff claims that he offered to deliver the vehicle to a freightliner dealership -- although Chrysler allegedly declined this offer -- and so Plaintiff considered the vehicle as having been voluntarily surrendered, not repossessed. The vehicle was later sold for less than the balance owed resulting in a significant deficiency amount which has not been repaid. Chrysler maintains that it fulfilled its obligations to investigate each of Plaintiff's disputes and reported its findings to the CRAs. Plaintiff claims that the allegedly incorrect derogatory information caused him "credit denials, low credit score, damage to credit ratings, defamation, inconvenience, humiliation, embarrassment, and loss of opportunity." After consideration of Chrysler’s motion for summary judgment and the evidence submitted by both parties, the Court granted Chrysler’s Motion in its entirety.

• Reinvestigation. The Sixth Circuit has acknowledged that a CRA's reinvestigation upon notice of a dispute from a consumer must be reasonable, but has not held that such standard is expanded to include data furnishers such as Chrysler. The Court looked to other circuits and found that most adopted the reasonableness approach when looking at the activity of the data furnisher pursuant to the FCRA. Note: The Court found that Plaintiff failed to provide any evidence that Chrysler’s investigation was unreasonable, and instead relied on conclusory statements such as “the court should be shocked and troubled at Defendant's arrogance and defiance of the FCRA regarding their lack of performing their federally mandated duties."

• Willfulness. Plaintiff argued that Chrysler’s actions were willful because it had sufficient notice of his disputes and yet continued to report the information inaccurately. In its finding that Plaintiff's allegations of willfulness were insufficiently supported, the Court found that even if Chrysler reported minor inconsistencies or somehow failed to conduct a reasonable investigation, such behavior amounted, at most, to a negligent FCRA violation under § 1681o.

• Causation. Plaintiff asserted that his multiple credit denials qualified as actual economic damages, even though the reasons for the denials merely stated: "serious delinquency;" "too few accounts currently paid as agreed;" "length of time accounts have been established;" "repossession;" "too many recent inquiries on credit file;" and "unable to verify employment.” The Court found that there was no evidence to suggest that these factors were based on the Chrysler account at issue in the lawsuit. Note: Plaintiff's evidence showed only the following: 1) that his credit score was low; and 2) that he had difficulty securing new credit because of “his credit history.”

• Emotional Distress. Plaintiff asserted humiliation and extreme mental distress as actual damages. Plaintiff provided no evidence of mental or emotional distress stemming specifically from any inaccuracies in the reporting of the Chrysler account on Plaintiff’s credit file. Note: The Court held that while Plaintiff’s poor credit rating likely caused him distress and humiliation, such distress and humiliation had not been affected in any material or consequential way by the specific reporting of the Chrysler’s account.

• Preemption. Plaintiff alleged that Chrysler defamed him by repeatedly publishing incorrect and harmful information about his credit history and that Chrysler’s conduct was done with malice and willful intent to injure. In granting summary judgment on this claim, the Court noted that such claim was preempted by the FCRA pursuant to § 1681t(b)(1)(F).

Credit Report Is Accurate -- Battle Over Increased Property Tax Assessment Leading to Increased Mortgage Payment Is a Legal Dispute Between Plaintiff and Furnisher Lender Only

Paul W. Sheldon — Mon, 17 Dec 2012 00:00:00 -0500

Melba Gauci v. CitiMortgage, Inc., et al, 2012 U.S. Dist. LEXIS 60153 (C.D. Ca. Apr. 30, 2012)

Facts: Plaintiff Melba Gauci filed suit in the Central District of California alleging FCRA violations against the consumer reporting agencies (“CRAs”) as well as CitiMortgage, Inc. for reporting a derogatory mortgage account on her credit file. When Plaintiff closed on a home loan from CitiMortgage in 2008, she was required to pay $2,211.02/month as her monthly mortgage payment which included $398/month to cover estimated property taxes of $3,800 per year to be managed by CitiMortgage in an escrow account. Plaintiff began making her mortgage payments in November 2008. That same month, the County of Los Angeles charged CitiMortgage for the first property tax payment on the property, which was $8,957.04 instead of the originally estimated $3,800.00. As a result, CitiMortgage raised Plaintiff's escrow account payment from $398.00 to $1,285.00 to reflect this increase which raised her mortgage payment to $3,098.61. Plaintiff called CitiMortgage to dispute the increase in monthly mortgage payments, ignored the change to her bills, and continued paying the original, lower monthly payment. CitiMortgage soon thereafter began reporting the CitiMortgage account as a derogatory account to the CRAs, resulting in Plaintiff submitting multiple disputes to the CRAs claiming that she should not have been required to pay the increased amount because the increased property tax assessment was calculated incorrectly by the County of Los Angeles. Plaintiff alleged that the CRAs’ reinvestigations under the FCRA were “cursory and not responsive to her concerns” and that she was therefore prevented from obtaining other loans to purchase properties or refinance her existing loans due to the derogatory reporting of the CitiMortgage account. All 3 CRAs moved for summary judgment, claiming that (1) the reporting of the CitiMortgage account was accurate, (2) that Plaintiff’s dispute was an impermissible collateral attack on her legal validity of the underlying tax assessment and amount, and (3) that the CRAs conducted a reasonable reinvestigation and maintained reasonable procedures to assure maximum possible accuracy of Plaintiff’s credit report. The Court granted the CRAs’ summary judgment and held that the CitiMortgage account was accurate within the meaning of the FCRA.

• Accuracy. Accurate reporting by a credit reporting agency is a complete defense to claims under both 1681e(b) and 1681i(a). If a plaintiff fails to show that the plaintiff’s credit report was inaccurate, summary judgment should be granted to the credit reporting agency defendant. Note: the Court held that if a Plaintiff can overcome the initial inaccuracy threshold, the question of “reasonable credit reporting and reinvestigation procedures are for a jury to decide.”

• Accuracy. In the 9th Circuit, credit reports are considered accurate under the FCRA where the CRAs correctly report information furnished by the creditor, even when there is a pending legal dispute between plaintiff and creditor as to the validity of the debt. That a consumer has defaulted is certainly relevant to potential creditors and is precisely the type of information that a credit report is meant to supply, regardless of how legally sound the consumer’s reasons for default are.

• Reinvestigation. A consumer who disputes the legal validity of a debt should do so directly at the furnisher level. Had a court ruled that Plaintiff’s mortgage payment debt owed to CitiMortgage was invalid, the CRAs would have then had a duty to correct the derogatory reporting of the account. However, because the CRAs’ credit reports are considered accurate under the FCRA, and because Plaintiff had not resolved the legal dispute with CitiMortgage, the FCRA does not afford Plaintiff a remedy to restore her credit ratings.

Court Finds Fact Issue – Does Providing a Customer with a Merchant Copy of a Receipt Violate FACTA?

Marc F. Kirkland — Tue, 20 Nov 2012 00:00:00 -0500

Todd v. Target Corp., 2012 U.S. Dist. LEXIS 44362 (N.D. Ill. Mar. 30, 2012)

Facts: Plaintiff filed suit against Target for allegedly providing receipts that contained her credit card expiration date in violation of FACTA, § 1681c(g) of the FCRA. On two separate occasions Plaintiff purchased items at Target and both times paid with a combination of a credit and debit cards. After both transactions, the cashier handed two receipts to Plaintiff. The first receipt was a customer receipt that omitted information about her credit card expiration date. The second receipt, which Target labeled the merchant copy, included her card’s expiration date. Target claimed that customers who receive merchant copies are instructed to sign their name and return the copy to the clerk. Merchant copies are only printed when the customer leaves the signature box on the electronic PIN-pad blank or when the cardholder specifically requests a signature transaction. In both instances, Target prints a receipt to be handed to the customer and also prints a merchant copy that the customer returns after signing for Target to keep in its own records. Target filed a motion for summary judgment arguing that the merchant copy was not a receipt as defined by FACTA and that it did not willfully violate FACTA by providing Plaintiff with the merchant copy of the receipt. The Court disagreed with Target and denied its motion.

• FACTA. FACTA provides that “no person that accepts credit cards…shall print …the expiration date upon any receipt provided to the cardholder at the point of sale….” Target argued that FACTA does not apply to merchant copies because those copies are retained for record-keeping purposes and thus are not provided to customers. The Court disagreed with Target’s analysis. First, it concluded that the merchant copy fit the common definition of receipt. Second, the Court found that a reasonable jury could find that the Target cashier intentionally provided the merchant copy to Plaintiff. Specifically, there was nothing in the evidence (either from deposition transcripts or the video from the store) that would contradict Plaintiff’s claim that she was provided a copy of the merchant receipt from the cashier.

• Willfulness. For a violation to be willful, the merchant must knowingly violate the statute or exhibit reckless disregard for its statutory duty. Safeco Insurance Company of America v. Burr, 551 U.S. 47, 56-57 (2007). Specifically, a company subject to the FCRA does not act in reckless disregard of it unless the action is not only a violation under a reasonable reading of the statute’s terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless. Id at 69. Target argued that its interpretation of FACTA regarding the exempt status of a merchant copy, was not reckless. The Court disagreed as it found that a merchant copy actually retained by the merchant is not “provided” to the consumer, and thus is not in violation of FACTA. The real question, the Court concluded, was whether FACTA is violated when a merchant copy is intentionally given, at the point of sale, to the customer.

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The FTC Alleges that Spokeo’s Compilation and Dissemination of Consumer Personal Profiles Violate the FCRA

Andrew Sefzik — Wed, 10 Oct 2012 00:00:00 -0500

www.ftc.gov/opa/2012/06/spokeo.shtm

Facts: Spokeo, Inc. pays $800,000 to the FTC to settle charges that it violated the FCRA when it marketed detailed profiles of consumers to companies in the human resources, background screening and recruiting industries.

• Consumer Reporting Agency. The FTC alleged that Spokeo operated as a consumer reporting agency when it sold internet and social media data in the employment screening context. The FTC alleged that Spokeo collected personal information about consumers from online and offline data sources, and then merged the data to create detailed personal profiles of consumers. The profiles included information such as name, address, age range, email addresses, and might include hobbies, ethnicity, religion, participation on social networking sites, and photos.

• Permissible Purpose. The FTC’s allegations included that Spokeo violated the FCRA by failing to make sure the information it sold would be used only for permissible purposes, also failing to verify the users of the reports.

• Accuracy. The FTC alleged that Spokeo failed to ensure the information in its reports was accurate.

• Notification to User of Obligations. The FTC alleged that Spokeo failed to inform users of its reports of their obligations under the FCRA, including the requirement to notify consumers if the user took an adverse action against the consumer based on information contained in the consumer report.

Consumers May Not use the FCRA to Collaterally Attack the Legal Validity of Their Debts

Amanda Loughmiller — Wed, 10 Oct 2012 00:00:00 -0500

Johnson v. Trans Union, LLC, 2012 U.S. Dist. LEXIS 38747 (N.D. Ill. Mar. 22, 2012)

Facts: In October 2010, Pro Se Plaintiff filed suit against Equifax, Experian and Trans Union (“Defendants”) and claimed violations of the FCRA and Illinois Fraud and Deceptive Practices Act (“ICFA”). Plaintiff further alleged causes of action for negligence and negligent interference with prospective economic advantage. Specifically, Plaintiff disputed his child support obligations as “overdue support” with the Defendants. Plaintiff argued that the adverse remark was erroneous because there was never a judgment entered against him and that Illinois Department of Children and Family Services (“HFS”) lacked the authority to enter an administrative order. Both Defendants and Plaintiff filed motions for summary judgment. The court granted motions for the Defendants and denied the motion from the Plaintiff.

• Accuracy. The court considered whether Defendants violated 15 U.S.C § § 1681e(b) or 1681i by failing to follow reasonable procedures when they reported “overdue support” on Plaintiff’s credit file. For Plaintiff to succeed on either claim, he must first prove that his consumer reports were inaccurate. The court noted that Plaintiff had not presented any evidence that the disputed reporting by the Defendants was indeed inaccurate. Rather than argue he did not owe overdue child support, Plaintiff asserted that he was not legally obligated to pay overdue child support because there was no judgment against him. The court found Plaintiff’s legal assumption incorrect because HFS was required to report overdue payments to the Defendants. The court further explained that Plaintiff’s dispute was with HFS and not the Defendants. Plaintiff was not permitted to collaterally attack the legality of the debt by filing suit against the Defendants who simply reported the debt. The court quoted the Calvalho court which concluded that FCRA reinvestigation claims are “not the proper vehicle for collaterally attacking the legal validity of consumer debts.”

• Preemption. The court likewise disposed of Plaintiff’s state law claims for negligence and negligent interference with an economic advantage by ruling that both are preempted by §168h(e) of the FCRA which only allows such claims if the Plaintiff can prove that the defendant acted with “malice or willfull intent to injure.”

• Preemption. Defendants argued that Plaintiff’s ICFA claims are preempted by §1681t(a) which bars the Defendants from liability for violations of state laws which are inconsistent with the FCRA. The court held that because Plaintiff failed to address his IFCA claims in his motion for summary judgment, such claims were abandoned. As such, the court granted summary judgment on Plaintiff’s ICFA claims as well.

Furnisher Should Report A Debt “Disputed” And Take The Appropriate Time Necessary To Perform A Reasonable Investigation

Paul W. Sheldon — Wed, 10 Oct 2012 00:00:00 -0500

Dennis Van Veen v. Equifax Information, et al., 2012 U.S. Dist. LEXIS 21019 (E.D. Pa. Feb. 14, 2012)

Facts: Plaintiff received a bill for $181.04 from Defendant AT&T (“AT&T”) for long distance telephone calls allegedly made from Plaintiff's home. Plaintiff did not pay this bill. Plaintiff then received a subsequent bill from Defendant for $202.18, which included new calls made as well as charges and fees assessed for the previously unpaid bill. AT&T subsequently re-rated the calls, and issued a credit of $139.63, leaving a $62.55 balance due. Plaintiff refused to pay the $62.55 balance because Plaintiff believed he never consented to AT&T’s telephone service. AT&T subsequently forwarded Plaintiff's unpaid account to a collection agency for the amount of $64.12. Some months later, having still not received payment, AT&T wrote off Plaintiff's $64.12 balance and reported Plaintiff's account to the consumer reporting agencies (“CRAs”) as a "charged off" account. Some time later, AT&T adjusted Plaintiff's account balance to zero and sent Plaintiff a statement notifying him that the adjustment was "due to incorrect AT&T billing." Because AT&T believed the underlying charges were valid and accurately reported as a charged-off account, AT&T did not ask the CRAs to delete the trade-line related to Plaintiff's account. During the timeframe that the AT&T account was reporting on Plaintiff’s credit file, Plaintiff disputed the negative credit reporting with the CRAs. Plaintiff alleged AT&T violated § 1681s-2(b) by reporting false information to the CRAs and that such false information was not removed from his credit report after Plaintiff disputed its accuracy. Defendant AT&T moved for summary judgment, arguing that (1) AT&T did not report inaccurate or incomplete information to the CRAs; (2) even if it reported inaccurate information, AT&T conducted a reasonable investigation into the disputes; and (3) that Plaintiff could not prove he was damaged. The Court granted in part and denied in part AT&T’s motion.

• Reasonable Furnisher Investigation. Furnishers of credit information, like AT&T, are required to investigate disputes conveyed to them by CRAs. The duty to investigate pursuant to §1681s-2(b) is triggered only after the furnisher receives a notice from a CRA regarding the disputed account. Although the FCRA does not define the term "investigation," the Court found that any investigation must be "reasonable." Note: the Court emphasized that the furnisher's investigation should be judged in light of what it learned about the nature of the dispute from the description in the CRA's notice of dispute and that a furnisher could investigate reasonably even if it did not uncover inaccurate information, especially if the CRA notice provided “scant” information.

• Reasonable Furnisher Investigation. In holding that a furnisher may be held liable for failing to report/designate a debt as “disputed” if the Plaintiff has lodged a bona fide dispute, the Court leaned on Ninth Circuit reasoning to arrive at its opinion. Holding otherwise not only might "intimidate consumers into giving up bona fide disputes by paying debts not actually due to avoid damage to their credit ratings, but it also contravenes the purpose of the FCRA, to protect against unfair credit reporting methods. The Ninth Circuit emphasized that a furnisher does not report "incomplete or inaccurate" information "simply by failing to report a meritless dispute, because reporting an actual debt without noting that it is disputed is unlikely to be materially misleading. It is the failure to report a bona fide dispute, a dispute that could materially alter how the reported debt is understood, that gives rise to a furnisher's liability."

• Accuracy of Credit Information. A plaintiff is required to show a factual inaccuracy rather than the existence of disputed legal questions such as whether a plaintiff was legally billed for the services he disputes. Furnishers of credit information are neither qualified nor obligated to resolve matters that turn on questions that can only be resolved by a court of law. Accordingly, a § 1681s-2(b) claim requires a plaintiff to show actual inaccuracies that a furnisher's objectively reasonable investigation would have been able to discover.

• Loss of Reputation Damages. Damages for loss of reputation due to false credit reports are recoverable under the FCRA. Plaintiff nevertheless failed to present any evidence showing how his reputation was affected apart from the very fact of the alleged inaccurate reports themselves. Note: Plaintiff argued that recovery for credit defamation may be predicated merely upon a showing that false and derogatory information about Plaintiff appeared on a credit report furnished to a third party. The Court found however that no credit report was furnished to a third party “during the relevant time period.”

• Emotional Distress Damages. Damages for violations of the FCRA allow recovery for humiliation and embarrassment or mental distress even if the plaintiff has suffered no out-of-pocket losses. Plaintiff testified he suffered severe anxiety and stress as a result of his dealings with AT&T and described his experience with AT&T as a "personal assault," which "was very upsetting in some ways." Plaintiff also testified that he had trouble concentrating at work. The Court denied AT&T’s summary judgment argument that such testimony was uncorroborated and lacked specificity, holding that such deficiencies go “to credibility and weight.”

• Punitive Damages. A plaintiff may recover actual and punitive damages for willful violations of the FCRA under § 1681n(a)(2). "Willful" violations of the FCRA can be based on either a "knowing" or "reckless" basis. In denying AT&T’s motion as to Plaintiff’s punitive damage claim, the Court held that the Experian notice of dispute included a message from Plaintiff that AT&T told him he owed nothing on the account. Plaintiff introduced evidence that AT&T's investigative procedures (1) never permitted deletion of accounts; (2) always resulted in verifying the disputed account as "charged-off;" and (3) never resulted in marking an account as disputed. Note: the Court also stated that “if ACDV analysts took more time than the 5 to 10 minutes allotted for investigations, they might have located records evidencing Plaintiff's dispute and marked his account accordingly.

“Cursory Information” Provided by CRA in ACDV’s Creates Fact Issue on Plaintiff’s Reinvestigation and Willfulness Claims

M. Kasey Ratliff — Fri, 05 Oct 2012 00:00:00 -0500

Edeh v. Equifax Information Servs., LLC, 2012 U.S. Dist. LEXIS 135425 (D. Minn. Sept. 21, 2012)

Facts: Plaintiff corresponded with Capital One over an extended period of time relating to Capital One’s alleged failure to properly credit a payment Plaintiff made on a delinquent credit card balance. Plaintiff also disputed the reporting of the Capital One account with Equifax on numerous occasions as well. Plaintiff eventually filed suit against Equifax and Capital One alleging violations of the Fair Credit Reporting Act (“FCRA”), Truth in Lending Act (“TILA”) and Fair Credit Billing Act (“FCBA”) along with various state common law claims. Cross motions for summary judgment were filed by all parties. The Magistrate assigned to the case issued a Report and Recommendation (“R&R”) recommending a grant of Equifax’s motion in its entirety. After the parties filed objections and responses to the R&R, the Court reviewed whether the R&R properly recommended granting of Equifax's Motion for Summary Judgment. The Court denied the motion as to Plaintiff’s reinvestigation and willfulness claims.

• Reinvestigation. There is a genuine dispute of material fact as to whether Equifax provided to Capital One all relevant information that it received from Plaintiff regarding the dispute and consequently, whether it performed a reasonable reinvestigation under § 1681i(a). First, the ACDV Equifax sent to Capital One following Plaintiff's December 1, 2010, dispute letter simply informed Capital One that Plaintiff disputed his current balance but did not provide to Capital One Plaintiff's November 3 letter to Capital One enclosing the check for $1,700, nor did Equifax notify Capital One of the contents of that letter. Equifax also did not notify Capital One of Plaintiff's claim that he had paid off his account in full or provide Capital One with the copy of Plaintiff's cancelled check.

• Reinvestigation. Second, the December 22, 2010, ACDV from Equifax to Capital One did not make any mention of, much less describe, the contents of the letter from Capital One's Recoveries Specialist, in which Capital One acknowledged receipt of the $1,700 payment and confirmed that Plaintiff's account had been paid in full.

• Reinvestigation. Considering the information and supporting documents that Plaintiff provided to Equifax to verify that his account had been paid in full and the cursory information that Equifax communicated to Capital One via the ACDV's, the Court could not conclude as a matter of law that Equifax provided Capital One with all relevant information regarding the dispute that it had received from Plaintiff as § 1681i(a)(2)(A) requires.

• Reinvestigation. Viewing the facts in a light most favorable to Plaintiff, a jury could reasonably determine that, based on the information and supporting materials provided by Plaintiff, Equifax was on notice that the information provided to it by Capital One in the ACDV regarding the account balance was inaccurate, and accordingly, it should have done more to investigate.

• Willfulness. In light of Plaintiff's repeated communications to Equifax and Equifax's failure to fully apprise Capital One of the substance of Plaintiff's disputes, there is a genuine dispute of material fact as to whether Equifax's conduct constituted a willful violation of the FCRA.

State Common Law Claims are Still Preempted After the Dismissal of an FCRA Claim

Ginny Webb — Fri, 05 Oct 2012 00:00:00 -0500

Purcell v. Bank of America, 2011 U.S. App. LEXIS 20035 (7th Cir. Oct. 3, 2011)

Facts: Plaintiff filed a lawsuit against Bank of America (“BOA”) alleging that BOA furnished information to the CRAs indicating that Plaintiff was behind in her loan payments despite the fact that BOA knew she was current. In addition, Plaintiff alleged various state law claims. BOA removed the suit to federal court and moved for judgment in its favor because Plaintiff’s claims arose under § 1681s-2(a), which does not create a private right of action for a plaintiff. The Court, accordingly, dismissed Plaintiff’s federal claim. Plaintiff contended that her case should be remanded to state court for adjudication of her state law claims; however, BOA argued that Plaintiff’s state law claims were preempted under § 1681t(b). The district court rejected BOA’s argument and dismissed Plaintiff’s state law claims without prejudice to refilling same in state court. BOA appealed and the Seventh Circuit reversed and remanded back to the district court to enter judgment for BOA on all of Plaintiff’s claims.

• Preemption. Section 1681t(b) states that “No requirement or prohibition may be imposed under the laws of any State (1) with respect to any subject matter regulated under … (F) section 1681s-2 of this title, relating to the responsibilities of persons who furnish information to consumer reporting agencies … .” The district court in this case interpreted the term “laws” as limited to only state statutes and not inclusive of common law claims. Further, the district court thought it necessary to read § 1681t(b)(1) narrowly in order to avoid inconsistency with § 1681h(e), which mandates the preemption of claims for defamation, invasion of privacy, or negligence with respect to the reporting of any information except as to false information furnished with malice or willful intent to injure a consumer.

• Preemption. The Seventh Circuit noted that other district courts have found that §§ 1681t(b)(1)(F) and 1681h(e) are incompatible and therefore have given § 1681t(b)(1)(F) a narrowing construction. However, the Seventh Circuit disagreed that there is an inconsistency between these two sections. It held that the first-enacted statute, § 1681h(e), preempts some state regulation of reports to credit agencies, and the second-enacted statute, § 1681t(b)(1)(F), preempts more.

CRA’s Reliance on a Court’s Docket Report for a Reinvestigation Was Reasonable

Marc F. Kirkland — Fri, 05 Oct 2012 00:00:00 -0500

Shepherd v. Liberty Acquisitions, LLC, 2012 U.S. Dist. LEXIS 93054 (D. Colo. July 5, 2012)

Facts: Plaintiff alleged that Defendant Equifax, a CRA, violated the FCRA by failing to properly investigate Plaintiff’s dispute of a Mesa County Court judgment that appeared on her Equifax file. Plaintiff stopped making payments on her Household Bank credit card in 2004. As a result, Household sold the account to Liberty Acquisitions, a collection agency. In January 2008, Liberty filed a lawsuit against Plaintiff in Mesa County Court. Liberty received a default judgment against Plaintiff and began collection on the judgment through a series of lawful garnishments against Plaintiff’s wages. In March 2010, Liberty attempted another garnishment and in response Plaintiff filed a motion for relief claiming that she had satisfied the judgment. In June 2010, the Court entered an order granting Plaintiff’s motion for relief and noted that the judgment against Plaintiff had be satisfied. In August 2010, Equifax began reporting the judgment on Plaintiff’s consumer report without noting that the judgment had been satisfied. Plaintiff then disputed the judgment with Equifax. Plaintiff’s dispute did not identify the court which ruled that the account was paid in full, when the order was entered, or provide any supporting documents. After receipt of the dispute, Equifax informed its public records vendor, LexisNexis, who then accessed a publically available web portal known as CourtLink. Through CourtLink, LexisNexis obtained the judgment docket, which inaccurately listed the 2008 judgment as unsatisfied. Equifax sent Plaintiff the results of the investigation which showed the judgment as pending. Plaintiff then filed suit claiming that Equifax’s investigation was unreasonable. Defendant argued and the Court agreed that Plaintiff failed to meet her burden to establish that its reinvestigation was unreasonable.

• Reasonable Investigation. A CRA may be required to go beyond the original source when performing a reinvestigation if the dispute allows the CRA to target its resources in a more efficient manner. Here, the Court found that a vague, ambiguous, and unsupported dispute notice, such as Plaintiff’s dispute letter, did not permit Equifax to conduct a targeted investigation.

• Reasonable Investigation. Whether a CRA has a duty to go beyond the original source will depend, in part, on whether the consumer has alerted the CRA to the possibility that the source may be unreliable or the CRA itself knows that the source is unreliable. The CRA’s duty will also depend on the cost of verifying the accuracy of the source versus the possible harm inaccurately reported information may cause the consumer. Henson v. CSC Credit Servs. 29 F. 3d 280, 287 (7th Cir. 1994).

• Reasonable Investigation. Because Plaintiff failed to offer any evidence that she alerted Equifax to the possibility that the judgment docket was an unreliable source or provide any evidence that Equifax knew or should have known that the information provide in the Mesa County court docket was unreliable, the Court found that Equifax’s investigation was reasonable.

• Actual Damages. If a plaintiff fails to provide sufficient evidence of actual damages then summary judgment is appropriate. Here, Plaintiff alleged to have suffered emotional distress damages as a result of Equifax’s inaccurate reporting. Plaintiff’s only evidence was her declaration where she claimed that she felt “totally demoralized” and “sad a lot,” worries that she will not be able to refinance her home, suffers depression, anxiety, and embarrassment, and claims that the “emotional trauma…has impacted every area of my life.” However, the Court found that Plaintiff’s self-serving, conclusory, and uncorroborated statements were not sufficient to create a triable issue as to whether Plaintiff suffered emotional distress damages.

Another Court Holds Injunctive Relief is Not Available Under the FCRA

Ginny Webb — Thu, 04 Oct 2012 00:00:00 -0500

Houck v. Creditors Financial Group, 2011 U.S. Dist. LEXIS 103019 (W.D. La. Sept. 13, 2011)

Facts: Plaintiffs filed a lawsuit against Trans Union alleging that Trans Union violated the Louisiana Unfair Trade Practices and Consumer Protection Act (“LUTPA”), the Louisiana Consumer Credit Law (“LCCL”), and the FCRA. Plaintiffs also alleged Trans Union defamed them and sought injunctive relief. Trans Union filed a motion to dismiss Plaintiffs’ state law claims and claims for defamation and injunctive review. The district court granted Trans Union’s motion for partial dismissal, holding that Plaintiff did not provide evidence to establish the elements of the asserted claims and that injunctive relief is not available under the FCRA.

• Injunctive Relief. Plaintiffs requested injunctive relief against Trans Union to prevent them from allegedly engaging in further violations of the FCRA. The Fifth Circuit has consistently held that it is the affirmative grant of power to the FTC to pursue injunctive relief. Further, there is a complete absence of a similar grant of power to private litigants in light of the grant of power to pursue other forms of relief and damages. These two observations viewed together demonstrate that Congress intended the right to injunctive relief to be available only to the FTC. The Court held that based on the Fifth Circuit’s clear precedent on this issue, injunctive relief under the FCRA was not available to Plaintiffs and therefore dismissed this claim.

• State Law Claims. Plaintiffs alleged that Trans Union violated the LUTPA and LCCL as well as made communications that were defamatory per se. The Court found that Plaintiffs could not sustain a claim under the LUTPA based on mere conclusory allegations without any factual basis whatsoever. Further, the LCCL, on its face, did not apply to Trans Union as it is a CRA and therefore, the LCCL claim was also dismissed. Finally, Plaintiffs could not maintain a cause of action for defamation against Trans Union because they failed to provide sufficient facts to state a claim.

Newsletter: September 18, 2012

Paul L. Myers — Tue, 18 Sep 2012 00:00:00 -0500

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Receipt of Proper Identification is a Prerequisite to Consumer Reporting Agency’s Duty to Disclose Credit Report

Andrew Sefzik — Tue, 07 Aug 2012 00:00:00 -0500

Garrison v. Equifax Info. Serv., LLC, 2012 U.S. Dist. Lexis 52937 (E.D. Mich. Feb. 13, 2012) (Binder, Mag.), adopted in part and rejected in part by 2012 U.S. Dist. Lexis 52942 (E.D. Mich. Apr. 16, 2012) (Ludington, J.)

Facts: Pro se Plaintiff sued Equifax Information Services, LLC (“Equifax”) and Trans Union, LLC (“Trans Union”) for failing to provide him with a consumer disclosure and for failing to follow reasonable procedures to assure maximum accuracy of Plaintiff’s credit information. Plaintiff claimed that he provided Trans Union with his state driver’s license, tribal driver’s license, cable bill, and state voter’s registration card. Trans Union requested that Plaintiff complete a disclosure request form, provide his social security number, and provide his prior address or file number, because Trans Union was unable to locate Plaintiff’s report. Plaintiff claimed that he mailed Equifax a copy of his state driver’s license, electric bill, and social security card. Equifax had no record of receiving these items. Plaintiff claimed Defendants violated §§ 1681g and 1681j by willfully and or negligently failing to provide him with a consumer disclosure.

• Consumer Disclosure—Trans Union. In his report and recommendation, the magistrate judge recommended that summary judgment be granted in Trans Union’s favor on Plaintiff’s failure to disclose claim. The magistrate reasoned that a consumer must furnish proper identification as a prerequisite to a consumer reporting agency’s (“CRA”) duty to disclose information to a consumer. Although the FCRA does not define “proper identification,” the documents Trans Union required Plaintiff to furnish are expressly identified as reasonable requirements under 16 C.F.R. § 614.1. The district court adopted the magistrate’s recommendation, granting summary judgment in Trans Union’s favor.

• Consumer Disclosure—Equifax. There is a long-held common law presumption that a properly addressed letter placed in the hands of the postal service reached its destination. Equifax offered evidence that it did not receive Plaintiff’s letter enclosing his identification, and argued that it was entitled to summary judgment in part because Plaintiff did not have evidence of mailing the letter, such as a return receipt. The magistrate judge recommended that summary judgment on Plaintiff’s failure to disclose claim be denied, because a genuine issue of material fact existed as to whether Equifax received the letter enclosing Plaintiff’s identification, which would have given rise to Equifax’s duty to disclose Plaintiff’s credit report to him. The district court rejected the magistrate judge’s recommendation, finding that Plaintiff was not entitled to the presumption that the letter he claims to have mailed reached its destination. The district court determined that Plaintiff failed to present evidence that the letter was properly addressed, had sufficient postage, and was deposited in the mail. The district court therefore found that Equifax was entitled to summary judgment on Plaintiff’s failure to disclose claim.

• Reasonable Procedures. Both Defendants submitted evidence that they have implemented varied procedures and systems to ensure on an ongoing basis that their furnishers of credit information are providing accurate information. The magistrate recommended that summary judgment be granted in favor of both Defendants on Plaintiff’s § 1681e(b) claim, noting, however, that CRAs are not automatically shielded from liability if they accurately report information they receive. The magistrate also noted that a CRA receiving a facially credible report from a source it believes to be reputable is not liable merely because the report contains inaccurate information. Plaintiff failed to allege any facts or submit any evidence that the CRAs had reason to know that information received from the furnishers was inaccurate. The magistrate therefore recommended that the CRAs’ reasonable procedures should be a shield from liability. The district court adopted the magistrate’s recommendation, granting Defendants’ summary judgment.

Federal Court Remands Plaintiffs’ Lawsuit Back to State Court After FCRA Claim is Dismissed

Martin Thornthwaite — Fri, 06 Jul 2012 00:00:00 -0500

Smith v. Quality Loan Service Corp., 2012 U.S. Dist. LEXIS 7513 (E.D. Calif. January 20, 2012)

Facts: Plaintiffs filed suit in state court against Defendants related to events surrounding their mortgage and subsequent notice of default and foreclosure. They asserted seven claims against Defendants including fraud, unjust enrichment, state statutory claims, breach of a security instrument, wrongful foreclosure, quiet title, and violations of the FCRA. Defendants removed the matter to federal court based on both diversity and federal question jurisdiction and filed a motion to dismiss/strike Plaintiffs’ claims. The Court found there was not complete diversity but that removal was proper because Plaintiffs asserted a federal claim under the FCRA. The Court also granted Defendants’ motion to dismiss Plaintiffs’ FCRA claim but did not consider whether the state law claims should be stricken because those claims were remanded back to state court.

• Removal. Removal may be based on diversity jurisdiction or on federal question jurisdiction. The central question is whether the action could have been brought in federal court at the time of removal. Defendants claimed that the only defendant who was not diverse was fraudulently joined by Plaintiffs to defeat diversity and should be considered only a nominal defendant for purposes of diversity jurisdiction. The Court disagreed and concluded that Plaintiffs had asserted at least one potentially viable claim against the resident defendant. Nonetheless, the Court denied Plaintiffs’ motion to remand because there was a federal question in that Plaintiffs’ asserted an FCRA claim against Defendants.

• Dismissal. Plaintiffs’ FCRA claim against Defendants under § 1681s-2(b) was improper because Plaintiffs claimed they disputed the mortgage account at issue with Defendants directly rather than with a consumer reporting agency (“CRA”), who would have been required to initiate a reinvestigation and notify the furnisher of Plaintiffs’ dispute. Plaintiffs asserted that Defendants were “resellers” under the FCRA, should be treated as CRAs, and thus, Plaintiffs were not required to dispute the account via a CRA. The Court rejected Plaintiffs’ assertion and held that Defendants were not resellers because Defendants did not “regularly” engage in “the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports.”

• Remand. Having dismissed Plaintiffs’ single federal claim, the Court declined to exercise supplemental jurisdiction over Plaintiffs’ remaining state law claims and remanded the matter back to state court.

Plaintiff Cannot Seek Emotional Distress Damages in FCRA Lawsuit but Refuse to Reveal Other Potential Causes of Such Damages

Martin Thornthwaite — Fri, 06 Jul 2012 00:00:00 -0500

Pundt v. Select Portfolio Servicing, Inc., 2011 U.S. Dist. LEXIS 146075 (N.D. Iowa December 20, 2011)

Facts: On December 17, 2010, Plaintiff filed suit against Select Portfolio Servicing, Inc. (“Select Portfolio”) and Trans Union Corp. (“Trans Union”) claiming that they falsely reported information on his credit file regarding a real property loan in violation of the FCRA. During Plaintiff’s deposition he testified that he had suffered emotional distress because of Defendants’ actions. Specifically, Plaintiff attributed his problems sleeping, stomach issues, and constant worry solely to the Defendants. However, Plaintiff also admitted that he had suffered other stress in his life during the relevant time period but refused to identify the other issues that caused him stress. Plaintiff’s counsel further instructed Plaintiff not to answer citing privacy, relevance, and prejudice to Plaintiff. Select Portfolio filed a motion to compel seeking an order to reconvene Plaintiff’s deposition and to require Plaintiff to disclose the other issues that were causing him stress. The Court held that because Plaintiff had put his emotional distress at issue, Defendants were entitled to discover other potential causes of his alleged damages.

• Emotional Distress. The Court noted that a jury may conclude that Plaintiff’s alleged sleeplessness, stomach problems, or “constant worry” was caused, at least in part, by other stressors and not Defendants. Further, Plaintiff’s objections on relevance and prejudice were without merit. The Court could not meaningfully consider Plaintiff’s privacy objection because Plaintiff refused to even identify the other matters that were allegedly causing him stress. The Court ordered Plaintiff to answer questions regarding other possible sources for the emotional distress.

Injunctive Relief is Not Available and Malice or Willful Intent to Injure is Required to Maintain Negligence Claims Under the FCRA

Martin Thornthwaite — Thu, 05 Jul 2012 00:00:00 -0500

Gauci v. Citi Mortgage, 2011 U.S. Dist. LEXIS 92905 (C.D. Cal. August 19, 2011)

Facts: Plaintiff obtained a mortgage loan from Citi Mortgage (“Citi”) and claimed that she began making payments on the loan in November 2008. Although Plaintiff claimed she always made timely payments, in April 2009, Citi allegedly contacted Plaintiff and notified her that she was in arrears. The derogatory payment history caused Plaintiff’s credit score to drop, and Plaintiff sued Citi and the consumer reporting agencies (“CRAs”) under the FCRA and other claims. One of the CRAs, Trans Union, LLC, moved to dismiss Plaintiff’s negligence and declaratory relief claims. The Court granted Trans Union’s motion, dismissed the negligence claim with leave to amend, and dismissed the claim for declaratory relief with prejudice.

• Negligence. Negligence claims are preempted by § 1681h(e) of the FCRA unless the false information was reported with malice or willful intent to injure. Plaintiff failed to make such allegations in her complaint and stated only that Defendants “failed to use reasonable care in investigating” and “failed to properly reinvestigate” her dispute. After noting that Plaintiff’s complaint did not meet the required threshold, the Court dismissed the negligence claim with leave to amend.

• Declaratory Relief. Declaratory and injunctive relief is not available to private plaintiffs under the FCRA. Courts have found that the “express inclusion of injunctive relief in certain provisions of the FCRA and its omissions from the provisions creating plaintiff’s cause of action is a sufficiently clear command from Congress that injunctive relied is not available.” Thus, the Court dismissed Plaintiff’s claim for declaratory relief with prejudice.

Plaintiff’s Ratification of Allegedly Fraudulent Car Loan Results in Dismissal of FCRA Claims

Martin Thornthwaite — Thu, 05 Jul 2012 00:00:00 -0500

Boggio v. USAA Federal Savings Bank, 2011 U.S. Dist. LEXIS 99438 (S.D. Ohio September 2, 2011)

Facts: Plaintiff claimed that his ex-wife signed his name as a co-obligor on a car loan with Defendant USAA Federal Savings Bank (“USAA”) without his permission. When his ex-wife defaulted on the loan, USAA reported the debt to the national consumer reporting agencies (“CRAs”). Plaintiff claimed he was subsequently denied credit by several retailers as a result. Plaintiff filed suit against USAA under § 1681s-2(b) of the FCRA claiming that after he disputed the car loan with the CRAs, USAA failed to conduct a reasonable investigation of the defaulted car loan and also falsely verified the loan account as belonging to him. USAA filed a motion for summary judgment seeking dismissal of Plaintiff’s claims. The Court dismissed Plaintiff’s claims finding that Plaintiff ratified his ex-wife’s actions and USAA’s investigation was reasonable as a matter of law.

• Accuracy. The Court reasoned that because Plaintiff executed his divorce decree acknowledging that the car loan was a marital debt and with full knowledge that the car loan appeared on his credit report, Plaintiff ratified his ex-wife’s signature of his name on the bank check to purchase the car. Specifically, an affirmation of an unauthorized transaction can be inferred from a failure to repudiate it. Further, Plaintiff had knowledge of all material facts at the time of ratification. Thus, Plaintiff ratified his ex-wife’s act, and USAA could not be liable for verifying that the account was his.

• Furnisher Investigation. The FCRA requires furnishers of information, upon notice of a dispute from a CRA, to “(1) investigate the veracity of the disputed information; (2) review the information provided by the [CRA]; (3) report the results of the investigation; and (4) correct any inaccuracies uncovered by the investigation.” USAA investigated Plaintiff’s dispute and reasonably concluded that the matter was a civil issue that should be handled in court between Plaintiff and his spouse. As part of its investigation, USAA requested Plaintiff to execute a fraud affidavit stating that his signature on the bank check was forged by his ex-wife, but Plaintiff refused to do so at the time of the investigation. Plaintiff eventually complied and submitted a fraud affidavit after he had already filed suit, and USAA immediately stopped reporting the debt to the CRAs. The Court found that the summary judgment evidence substantiated USAA’s assertion that it conducted a reasonable investigation of the disputed loan account.

LexisNexis’ Employment Background Check System’s Noncompetitive Adjudication of Prospective Employees Found to Have Occurred Prior to Dissemination of Pre-Adverse Action Notice Letter Under the FCRA

Paul W. Sheldon — Fri, 29 Jun 2012 00:00:00 -0500

Keesha Goode et al. v. LexisNexis Risk & Information Analytics Group, Inc., 2012 U.S. Dist. LEXIS 39863 (E.D. Penn. Mar. 23, 2012)

Facts: In this class-action suit, prospective employee Plaintiff argued on behalf of herself as well as the certified class that Defendant LexisNexis took an adverse action against her when it verified a criminal background match following an application for a job, resulting in her adjudication as noncompetitive, all of which occurred before LexisNexis sent her the pre-adverse action letter, in violation of § 1681b(b)(3)(A).

Defendant LexisNexis operates a proprietary system called "Esteem" that helps organizations identify employment applicants who may have a history of theft or fraud. Subscribing member employers pay a fee based on the number of their employees, and in return, LexisNexis performs background checks on current and potential employees. Employers must also give LexisNexis new records of theft incidents (“incident reports”) involving their own employees and customers. Employers may only submit incident reports if the employer referred the incident for criminal prosecution or if the employee admits guilt. If the employee admits guilt, the employer includes an "admission statement" in its submission, which is a statement describing the incident as well as the guilt admission signed by the person who committed the theft. When an employer requests information about a current or potential employee, LexisNexis searches its system for possible matches between the employee's personal information and a record on file. If a match is found, LexisNexis "verifies" the match by comparing the personal data from the inquiry with the incident data and the admission statement supporting the incident. Once a match is verified, LexisNexis classifies the employee in accordance with adjudication scores agreed upon by LexisNexis and the employer. If the employee falls below a certain threshold, LexisNexis assigns the employee a "noncompetitive" score. LexisNexis then generates a "report" detailing the match and the adjudication and sends the report to the inquiring employer.

The FCRA requires that before taking any "adverse action" against an employee, the person taking such action must send the employee a copy of the report and a notice of the consumer's rights in accordance with 15 U.S.C. § 1681b(b)(3). As an additional service, LexisNexis sends these "pre-adverse action letters" on employers’ letterhead to employees or potential employees whose information results in a match. LexisNexis sends the pre-adverse action letter to employees or potential employees after it completes the adjudication and sends the report to the employer. While the pre-adverse action letter contains a copy of the report, it does not contain a copy of the admission statement. The pre-adverse action letter also contains a disclaimer that LexisNexis "did not participate in any employment decision and will be unable to provide any specific reasons as to why the employer may choose to take an adverse employment action." Several days after it sends the pre-adverse action letter, LexisNexis sends the employee a final "adverse action letter" on the employer’s letterhead.

Plaintiff Keesha Goode was an employee of Forman Mills, a subscribing employer of LexisNexis’ Esteem services. Plaintiff was fired due to an accusation of theft. Forman Mills submitted an incident report, including an admission statement, to LexisNexis following her termination. Approximately 6 months later, Plaintiff applied for a job elsewhere and received a pre-adverse action letter from LexisNexis telling her that it had matched her information to the incident report Forman Mills submitted previously. The pre-adverse action letter was on Plaintiff’s new potential employer’s letterhead, but was actually sent by LexisNexis pursuant to the Esteem services agreement between LexisNexis and the new employer. In response to the pre-adverse action letter, Plaintiff sent LexisNexis a request for her entire "file" and a note that she was disputing the alleged theft from Forman Mills. LexisNexis responded with a letter stating that it had reinvestigated the incident and that "the original information provided on the background report was reported accurately." Attached to the letter was a copy of the same report that LexisNexis had supplied to Plaintiff, but did not contain the admission statement previously submitted by Forman Mills. LexisNexis filed its motion to dismiss, claiming that verifying an Esteem match and adjudicating the employee do not qualify as “adverse actions” under the FCRA. Additionally, LexisNexis argued that the employer, not a consumer reporting agency (“CRA”), is solely responsible for fulfilling the requirements of § 1681b(b)(3)(A). The Court disagreed and denied most of LexisNexis’ motion.

• Pre-Adverse Action Notice Requirements. The FCRA is not an employment statute, but it imposes certain duties to provide prospective employees with information about their consumer reports. Thus, under 15 U.S.C. § 1681b(b)(3)(A), before a person takes an adverse employment action against a consumer based in whole or in part on a consumer report, the person intending to take such adverse action shall provide to the consumer to whom the report relates a copy of the report and a description in writing of the rights of the consumer.

• Pre-Adverse Action Notice Requirements. Any "person" who takes an adverse action must comply with § 1681b(b)(3)(A), be it a CRA, an employer, or a staffing agency. This is the case regardless whether the party taking the adverse action did not have the ultimate authority to make the hiring decision.

• Adverse Action Definition. In the employment context, § 1681a(k)(1)(B)(ii) defines an "adverse action" as "a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee." This FCRA definition also includes a catch-all clause: "any action taken or determination that is (I) made in connection with an application that was made by, or a transaction that was initiated by, any consumer, . . . ; and (II) adverse to the interests of the consumer." Plaintiff argued that LexisNexis' "adjudication" of Plaintiff as "noncompetitive" is an adverse action under this definition. The Court agreed.

• Adverse Action Definition. LexisNexis' action in providing the report to Plaintiff’s prospective employer constitutes an "adverse action." However, LexisNexis did more than simply send the report to Plaintiff’s employers. LexisNexis also adjudicated Plaintiff. The employers did not conduct any review of the adjudication nor did it make a final decision based on both the report and what the Plaintiff might provide to rebut such report. Accordingly, the Court found quite easily that the adjudication of Plaintiff by LexisNexis was, quite literally, a "decision for employment purposes that adversely affects" Plaintiff under § 1681a(k)(1)(B)(ii). The adjudication of Plaintiff as “noncompetitive” occurred before LexisNexis sent Plaintiff the required notice.

• Disclosure of Consumer File Requirement. 15 U.S.C. § 1681g(a)(1) states that every CRA "shall, upon request . . . clearly and accurately disclose to the consumer all information in the consumer's file." The FCRA defines "file" as "all of the information on a consumer recorded and retained by a consumer reporting agency regardless of how the information is stored." The Court found that under a plain reading of the statute, the admission statement is clearly part of the file and LexisNexis was required to turn it over to Plaintiff upon her request.

Plaintiffs’ Motion to Remand Granted as Plaintiffs had not Asserted a Federal-Question and the Amount in Controversy did not Exceed the Statutory Requirement for Diversity

Marc F. Kirkland — Tue, 26 Jun 2012 00:00:00 -0500

Dean v. BAC Home Loans Servicing, LP, 2012 U.S. Dist. LEXIS 13115 (M.D. Ala. Feb. 3, 2013)

Facts: Plaintiffs brought a cause of action in state court against Defendant BAC Home Loans Servicing (BAC) related to BAC’s actions concerning a loan modification Plaintiffs attempted under the Home Affordable Modification Program (“HAMP”). Plaintiffs asserted eleven state-law causes of action against BAC. The complaint did not specify an amount of damages and only stated that Plaintiffs sought compensatory and punitive damages. Plaintiffs did not challenge the validity of the mortgage or seek an injunction prohibiting foreclosure or acceleration of the debt. Defendant removed the lawsuit and claimed the Court could exercise federal-question jurisdiction in the case because Plaintiffs’ claims necessarily required an interpretation of the HAMP guidelines. Defendant also claimed the Court could exercise diversity jurisdiction under 28 U.S.C. § 1332(a) as there was both complete diversity (which neither party contested) and the amount in controversy exceeded $75,000. Plaintiffs filed a motion to remand claiming that Defendant’s removal was improper as there was no federal-question and the amount in controversy did not satisfy the requisite for removal. The Court granted Plaintiffs’ Motion, and the case was remanded to state court.

• Removal. Federal courts have subject matter jurisdiction over claims arising under the Constitution, laws, or treaties of the United States. Furthermore, federal-question jurisdiction may extend to state-law causes of action if it appears from the complaint that a right to relief substantially or significantly depends upon the construction or application of federal law. At the same time, if the embedded issue of federal law is not substantially dispositive of the entitlement to relief on a state-law cause of action, then federal-question jurisdiction is lacking. Such may be the case, for example, when the federal issue merely forms part of the backdrop of an otherwise purely state law dispute.

• Removal. Defendant claimed that removal was proper because Plaintiffs’ state law claims necessarily required interpretation of the HAMP regulations. The Court disagreed. First, the Court found the vast majority of Plaintiffs’ claims could be resolved without ever mentioning HAMP or otherwise considering the program’s application to Plaintiffs’ mortgage. Second, the Court found that in some of Plaintiffs’ claims HAMP was merely part of the backdrop of a purely state-law dispute. Third, a small number of Plaintiffs’ claims relied on their assertion that the application of HAMP guidelines to their particular mortgage precluded BAC from initiating foreclosure proceedings. The Court found that while HAMP may guide the Court’s analysis of BAC’s duties and/or breach of those duties, the resolution of the claims likely rested not on the interpretation of the HAMP guidelines, but on the nature of the contract between Plaintiffs and BAC. Finally, the Court noted there is not a private right of action under HAMP. This lack of a federal private right of action must be considered in the assessment of substantiality. Therefore, the Court concluded that there was a lack of substantiality of the federal question to these state-law causes of action.

• Removal. Defendant also argued that removal was proper because there was complete diversity (which neither party contested) and that the amount in controversy exceeded the requisite amount. BAC’s rational was that Plaintiffs’ Complaint challenged Defendant’s right to accelerate the full value of the loan following their default. By making this challenge, BAC argued that the full amount of the debt, $240,000, was in controversy. The Court disagreed with BAC’s analysis and found that nowhere in the complaint did Plaintiff seek any explicit relief against acceleration or foreclosure. The Court stated that the entire value of the loan was not in controversy when Plaintiffs did not challenge the validity of the mortgage or seek an injunction prohibiting foreclosure. Because Plaintiffs only sought compensatory and punitive damages primarily for the money collected by BAC not in accordance with the note, mortgage, loan modification and BAC’s representations, the Court reasoned that it was difficult to imagine that more than $75,000 in improper fees and related charges accumulated in the six years between the issuance of the mortgage and the date Plaintiffs brought the action.

• Removal. BAC also argued that the amount in controversy was satisfied by a preponderance of the evidence because Plaintiffs sought punitive damages. However, the Court noted that BAC failed to provide an estimate of Plaintiffs’ compensatory damages, which would have been helpful in informing the Court of potential punitive damages. The Court stated that this was not a case where judicial experience and common sense could lead the Court to reasonably deduce that the amount in controversy was satisfied simply based upon the inclusion of a demand for punitive damages. Therefore, the Court granted Plaintiffs’ Motion and remanded the case because BAC failed to prove the amount in controversy by a preponderance of the evidence and uncertainties are resolved in favor of remand.

Plaintiff’s State Law Cause of Action Preempted by the FCRA

Marc F. Kirkland — Mon, 25 Jun 2012 00:00:00 -0500

Van Veen v. AT&T Corp., 2011 U.S. Dist. LEXIS 88939 (E.D. Pa. May 25, 2011)

Facts: Plaintiff sued AT&T alleging violations of the FCRA and the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) for the reporting of an AT&T account on Plaintiff’s credit files. AT&T moved to dismiss Plaintiff’s claim asserting that: (1) Plaintiff pled insufficient facts under the FCRA; (2) Plaintiff’s FCRA claim is time barred; (3) FCRA preempts Plaintiff’s state law claim; (4) Plaintiff’s state law claim is time barred; and (5) Plaintiff plead insufficient facts on his state law claim. After reviewing the Motion and Plaintiff’s response, the Court held that: (1) Plaintiff had timely plead and asserted an FCRA claim; and (2) the FCRA preempted Plaintiff’s claim under UPTPCL.

• Preemption. Section 1681t(b)(1)(F) preempts state laws governing persons who furnish information to credit agencies: “no requirement or prohibition may be imposed under the laws of any State … with respect to any subject matter regulated under … Section 1681s-2 of the title, relating to the responsibilities of persons who furnish information to consumer reporting agencies …. Plaintiff argued that the Court should adopt the so-called “temporal approach” to § 1681t(b)(1)(F). The temporal approach would only preempt state claims based on conduct that occurred after a furnisher was notified by the credit bureaus that a plaintiff was contesting his credit information. Therefore, Plaintiff argued that conduct and violations that occurred before AT&T was notified by the CRA would not be preempted. However, the Court noted that it, the district courts in the Fourth Circuit, and the Fourth Circuit itself have rejected the temporal approach, holding instead that § 1681t(b)(1)(F) preempts all statutory claims against furnishers of information to CRAs. Therefore, the Court granted AT&T’s motion to dismiss Plaintiff’s UTPCPL claim.

Plaintiff’s Statutory and Common Law Claims Against Furnisher Preempted by 15 U.S.C. § 1681(t)(b)(1)(F)

Amanda Loughmiller — Wed, 13 Jun 2012 00:00:00 -0500

El-Aheidab v. Citibank (S.D.), N.A., 2012 U.S. Dist. LEXIS 19038 (N.D. Cal. Feb. 15, 2012)

Facts: Plaintiff filed suit against Citibank and alleged that Citibank erroneously reported that Plaintiff owed a past due balance on a student loan. Plaintiff claimed that he paid the loan on time every month but that he and his wife were denied a home loan due to Plaintiff’s credit report indicating that he was 270 months past due on his student loan. Plaintiff claimed that Citibank wrongfully reported the past due balance to the consumer reporting agencies ruining his credit and causing his name to be removed from his mortgage loan application. Plaintiff filed suit and alleged statutory violations of California Civil Code § 1785.25 and California Business and Professional Code § 17200. Plaintiff also alleged a common law claim for negligence. Citibank filed a motion to dismiss under Federal Rule 12(b)(6) for failure to state a claim upon which relief may be granted. Citibank argued that Plaintiff failed to state a claim for his statutory violations. Additionally, Citibank argued that all of Plaintiff’s claims were preempted by the Fair Credit Reporting Act (“FCRA”) § 1681s-2(a). The Court granted Citibank’s 12(b)(6) motion to dismiss with prejudice as to Plaintiff’s negligence claim, § 17200 claim, and any claim based on § 1785.25(b)-(g). However, the dismissal was without prejudice as to Plaintiff asserting other claims based solely on a § 1785.25(a) violation as such claim would not be preempted by the FCRA.

• Preemption of State Statutory Claims. Section 1681t(b)(1)(F) provides that “[n]o requirement or prohibition may be imposed under the laws of any State –with respect to any subject matter regulated under 15 USCS § 1681s-2, relating to the responsibilities of persons who furnish information to consumer reporting agencies, except that this paragraph shall not apply to—with respect to section 54A(a) of chapter 93 of the Massachusetts Annotated Laws or with respect to section 1785.25(a) of the California Civil Code.” First, the Court considers whether Plaintiff’s § 17200 claim is preempted. The Court notes that every district court to consider the issue has determined that a § 17200 is preempted if it is based on violations of the FCRA. The Court in turn ruled that Plaintiff’s § 17200 claim is preempted as far it claimed violations based § 1681s-2 of the FCRA.

• Preemption of State Statutory Claims. Next, the Court considered if Plaintiff’s § 17200 claim is based on violations of § 1785.25(a), which is expressly exempted from preemption under § 1681t(b)(1)(F) of the FCRA. The Court noted that such a claim does not impose additional duties on furnishers but rather acts as an additional “procedural vehicle for enforcing § 1785.25(a).” The 9th Circuit explained that the FCRA preemption provision distinguished between state statutes that created additional duties and those that allow for additional remedies. State statutes which merely allow plaintiffs additional remedies are not preempted while those statutes that create additional obligations or duties are preempted. Citibank argued that it was unclear whether Plaintiff was attempting to allege violations of § 1785.25(a) as a basis for his § 17200 claim or was attempting to allege violations of one of the other subsections of § 1785.25 because Plaintiff only refers to § 1785.25 and not a particular subsection of the statute. The Court notes that some of Plaintiff’s allegations are covered by the preemption provision while others seem like § 1785.25(a) claims. The Court ultimately dismissed Plaintiff’s claim under § 1785.25 with leave to amend should Plaintiff wish to directly allege a § 1785.25(a) claim.

• Preemption of Common Law Claims. Additionally, the Court considered whether Plaintiff’s common law claim of negligence was preempted by § 1681t(b)(1)(F). The Court explained that there has been disagreement among the district courts as to whether § 1681t(b)(1)(F) preempted both common law and state statutory claims or exclusively state statutory claims. The Court noted that they must first accurately determine the meaning of “laws of any state”, as contained in the language of § 1681t(b)(1)(F) before making this determination. The Court went on to explain that the majority of district courts in the 9th Circuit have taken a total preemption approach, interpreting § 1681t(b)(1)(F) to preempt both state statutory and common law claims. Further, the Court pointed out that the only circuit court to rule on this matter had also found in favor of total preemption of state statutory and common law. Accordingly, the Court found that Plaintiff’s common law claim for negligence was preempted by § 1681t(b)(1)(F) and explained that “’the laws of any state’ literally encompasses common law.”

Newsletter: June 5, 2012

Ryan Langston — Tue, 05 Jun 2012 00:00:00 -0500

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Court Dismisses Majority Of Consumer’s FCRA Claims But Certain Alleged Damages Related to Reasonable Procedures Claim Against One CRA Survive Summary Judgment

Martin Thornthwaite — Tue, 08 May 2012 00:00:00 -0500

Eller v. Experian Info. Solutions, Inc., 2011 U.S. Dist. LEXIS 85858 (D. Colo. August 4, 2011)

Facts: Plaintiff asserted claims against Trans Union LLC (“Trans Union”) under § 1681e(b) and § 1681i and against Experian Information Solutions, Inc. (“Experian”) under § 1681e(b) and § 1681g of the FCRA. With respect to Trans Union, Plaintiff claimed that it reported an account on Plaintiff’s credit file that belonged to another person and that because of prior history, Trans Union was aware that the account should not have been reporting on Plaintiff’s credit file. As to Experian, Plaintiff claimed that he was denied credit by Citibank because Experian failed to report enough satisfactory credit references on his Experian consumer report. Further, Plaintiff also claimed that Experian did not provide him with a copy of the consumer report it sent to Citibank. Trans Union and Experian moved for summary judgment on all claims, and Plaintiff also filed motions for summary judgment against the Defendants.

The Court granted summary judgment in favor of Trans Union except on Plaintiff’s § 1681e(b) claim for alleged mental anguish damages, a credit denial, and punitive damages. Experian’s motion for summary judgment was granted in its entirety, and Plaintiff’s motion for summary judgment was denied.

• Reasonable Procedures. To show negligent noncompliance under § 1681e(b), a plaintiff must show: (1) the existence of an inaccurate credit report; (2) that the CRA failed to follow reasonable procedures to assure the maximum possible accuracy of its reports; (3) that the plaintiff suffered an injury; and (4) that the CRA’s failure caused the plaintiff’s injury. With respect to Trans Union, the Court concluded that there was some evidence that it failed to take reasonable precautions to ensure that information regarding another specific individual did not appear on Plaintiff’s credit report.

• Punitive Damages. Under § 1681n, a plaintiff need not prove actual damages but may recover punitive and statutory damages as well as costs and fees if a defendant willfully violates the FCRA. A “willful violation” is either an intentional violation or a violation committed by an agency in reckless disregard of its duties under the FCRA.

• Consumer Report. Pursuant to § 1681g, an individual may request a copy of his or her consumer credit file. However, a CRA is not required to provide a copy of a consumer’s report when one is requested for evaluation by a potential credit grantor. Thus, Plaintiff’s claim against Experian that it did not provide him a copy of the credit report provided to Citibank failed as a matter of law.

Court Denies CRA’s Motion to Dismiss Because It Relied Entirely on Furnisher’s Investigation

Ryan Langston — Fri, 27 Apr 2012 00:00:00 -0500

Lazarre v. JPMorgan Chase Bank, N.A., 780 F. Supp. 2d 1330 (S.D. Fla. June 23, 2011)

Facts: Plaintiff alleged that a bank account was opened fraudulently at Washington Mutual (later acquired by JPMorgan Chase) (“Chase”). The account was allegedly used to commit fraud. Early Warning Systems, LLC (“Early Warning”) notified Wachovia Bank (“Wachovia”) where Plaintiff had a longstanding bank account and reported the fraudulent activity. As a result of the report, Plaintiff’s Wachovia account was placed on a financial hold. Plaintiff notified Early Warning that it was incorrectly reporting the Chase account and that the Chase account did not belong to him. Early Warning contacted Chase, and Chase confirmed that the account belonged to Plaintiff and had been used by him to engage in fraudulent activity. Plaintiff disputed his account with Early Warning on several occasions thereafter. As a result of an Early Warning consumer report, Plaintiff’s newly opened bank account at Region’s Bank (“Region’s”) was closed. Plaintiff alleged that Early Warning violated the following two provisions of the FCRA: 15 U.S.C. §§ 1681e(b) and 1681i(a). Early Warning filed a Motion to Dismiss on both counts under Fed R. Civ. P. 12(b)(6) for failure to state a claim upon which relief may be granted. The Court denied the Motion to Dismiss as to both claims.

• Reasonable Reinvestigation. To state a claim for a violation of § 1681i(a) a plaintiff must allege: "(1) the consumer's credit report contains inaccurate or incomplete information; (2) the [plaintiff] notified the [CRA] of the alleged inaccuracy; (3) the dispute is not frivolous or irrelevant; (4) the [CRA] failed to respond or conduct a reasonable reinvestigation of the disputed items; [and] (5) the failure to reinvestigate caused the [plaintiff] to suffer out-of-pocket losses or intangible damages such as humiliation or mental distress."

• Reasonable Reinvestigation. The Court found that Early Warning’s communications with Plaintiff suggested that it relied entirely on Chase’s reinvestigation of the account and conducted only a minimal reinvestigation of its own. The fact that Early Warning sent Plaintiff the same response after each reinvestigation indicated that it was not taking Plaintiff’s complaint seriously. Assuming Plaintiff’s factual allegations were true, the Court held that a jury could conclude that Early Warning’s reinvestigation procedure was unreasonable.

• Reasonable Procedures. To state a claim for a violation of § 1681e(b) a plaintiff must allege: (1) the CRA published an inaccurate consumer report to a third party; (2) in publishing its consumer report, the CRA failed to follow reasonable procedures to assure the maximum possible accuracy of the consumer report; and (3) the plaintiff suffered actual damages as a result of the CRA's failure to follow reasonable procedures.

• Reasonable Procedures. The Court stated that under some circumstances, a violation of § 1681i(a) logically entails a violation of § 1681e(b). In this case, Region's closed one of Plaintiff’s accounts based on Early Warning’s consumer report. The Court held that if the fact-finder concluded the reinvestigation procedures Early Warning followed in response to Plaintiff's complaints were unreasonable under § 1681i(a), then the fact-finder may also conclude that the consumer report issued by Early Warning to Region's was not prepared following reasonable procedures to assure maximum accuracy as required by § 1681e(b).

Court Holds Willfulness Determination Under FACTA Is a Question of Fact for the Jury

Ryan Langston — Fri, 27 Apr 2012 00:00:00 -0500

Shurland v. Bacci Café & Pizzeria on Ogden, Inc., 2011 U.S. Dist. LEXIS 97058 (N.D. Ill. Aug. 30, 2011)

Facts: Plaintiff received a credit card receipt from Defendant Bacci Café & Pizzeria on Ogden, Inc. ("Defendant") that displayed all of the digits of his credit card number and its expiration date. Plaintiff filed this action on behalf of himself and a class of customers alleging a violation of § 1681c(g) of the Fair and Accurate Credit Transactions Act ("FACTA"), which prohibits businesses from printing non-truncated credit card numbers on the receipts issued to customers. Defendant moved for summary judgment on Plaintiff’s allegation that Defendant’s alleged violations of FACTA were willful under § 1681n(a)(1)(A). The Court denied Defendant’s motion for summary judgment stating that Plaintiff demonstrated genuine issues of material fact as to when Defendant became aware of FACTA’s truncation requirements and whether it acted willfully. Plaintiff then moved for summary judgment against Defendant on the same issue. The Court denied Plaintiff’s motion as well stating that the issue of willfulness is a fact issue that must go to the jury.

• FACTA. FACTA § 1681c(g) provides that "no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of sale or transaction." Section 1681n(a) states that the penalty for "[a]ny person who willfully fails to comply" with the truncation requirement of FACTA is an award of "damages of not less that $100 and not more than $1,000." By contrast, if the conduct is not willful, Plaintiff is entitled to actual damages only under § 1681o.

• Willfulness. In examining § 1681n(a), the United States Supreme Court concluded that willfulness in this context "cover[s] not only knowing violations of [the] standard, but reckless ones as well." Safeco Ins. Co. v. Burr, 551 U.S. 47, 57, 127 S. Ct. 2201, 167 L. Ed. 2d 1045 (2007). The court went on to explain that while the term recklessness is not self-defining, the common law has generally understood it in the sphere of civil liability as conduct violating an objective standard: action entailing an unjustifiably high risk of harm that is either known or so obvious that it should be known. Thus, recklessness for FACTA purposes is something more than negligence but less than knowledge of the law's requirements.

• Summary Judgment. As of the time of this lawsuit, no FACTA class action alleging a willful failure to truncate credit card numbers had been decided in favor of a plaintiff at the summary judgment stage. The issue of willfulness is generally a question of fact for the jury. Plaintiff argued that summary judgment was nevertheless appropriate because in this case, unlike others, there was undisputed evidence that the Defendant received actual written notice of FACTA's truncation requirement. Plaintiff referred specifically to the fact that Defendant’s billing statement from its credit card processor included a notice explaining the requirements of FACTA. Further, Defendant's name appeared on a list of clients that its credit card processor called regarding FACTA compliance. However, Defendant disputed that any of its representatives actually read the notice on the credit card statement and contended that none of its employees ever spoke to anyone from its credit card processor regarding FACTA compliance. Defendant also claimed that it believed whatever terminal it received from its credit card processor would be compliant with all applicable laws.

• Summary Judgment. The Court held that a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts at the summary judgment stage. Thus, any factual determination as to whether Defendant's actions were merely negligent, or were reckless or otherwise willful must be made by the jury.

Newsletter: April 23, 2012

Marc F. Kirkland — Mon, 23 Apr 2012 00:00:00 -0500

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Consumer Reports Obtained in Connection With Commercial Loans Are Not Subject to the FCRA

Ryan Langston — Wed, 18 Apr 2012 00:00:00 -0500

Johnson v. Wells Fargo Home Mortg., Inc., 2011 U.S. Dist. LEXIS 92718 (D. Nev. Aug. 17, 2011)

Facts: Plaintiff alleged that in July 2004, Wells Fargo Bank, N.A. (Wells Fargo), was servicing loans on two properties Plaintiff had purchased (“Loan A” and “Loan B”). In September 2004, Plaintiff's wife sent in two payments on Loan A, but inadvertently noted on the checks that they were intended to pay off Loan B. Wells Fargo applied the checks to Loan B, which it erroneously believed to be in arrears. As a result, Loan A became delinquent. Plaintiff asserted that Wells Fargo erroneously reported the loans as delinquent to CRAs. Plaintiff filed suit asserting claims under the FCRA and multiple other statutes. The trial court issued an order granting Wells Fargo’s motion for summary judgment on all Plaintiff’s claims except for those under the FCRA. Wells Fargo later moved for summary judgment as to Plaintiff's surviving FCRA claim, arguing that it is based on credit Plaintiff sought for business purposes. The trial court issued an order granting the motion in part, and denying it in part, reiterating that there were genuine issues of material fact as to Wells Fargo's liability under the FCRA. Specifically, the court concluded a genuine issue of material fact existed as to whether Plaintiff could recover damages under the FCRA with respect to four of Plaintiff’s individual transactions.

The parties subsequently stipulated to submit the matter to binding arbitration. The arbitrator entered an award of damages in the amount of $260,910 in favor of the Plaintiff, which included an award for attorneys’ fees. Wells Fargo filed a motion to vacate or modify the arbitration award, which the court denied. The Ninth Circuit issued its opinion on February 15, 2011, remanding the case with instructions for the court to reconsider the motions to confirm and vacate the arbitrator's award under the FAA. The Court vacated the arbitration award of damages for foreclosure fees ($5,410.00), but affirmed the rest of the award ($720,308.11). Below are some of the important points from the Court’s pre-arbitration analysis of Plaintiff’s allegations under the FCRA:

• Consumer Report. With respect to Plaintiff’s FCRA claim, the trial court found that the credit reports obtained in connection with Plaintiff's commercial loans did not fall under the FCRA, but those obtained with Plaintiff's personal lines of credit and personal financing were "consumer reports" falling within the coverage of the FCRA.

• Damages. The Court held that damages related to an individual’s inability to secure credit to pursue his business ventures are not recoverable under the FCRA.

• Attorneys’ Fees. A party who is successful in an action brought under the FCRA is entitled to recover costs and reasonable attorneys’ fees under §§ 1681n(a)(3) and 1681o(a)(2).

3rd Circuit Holds That a Fact Issue Exists on Whether Use of an ACDV Constitutes a Reasonable Reinvestigation

Ryan Langston — Wed, 18 Apr 2012 00:00:00 -0500

Schweitzer v. Equifax Info. Solutions LLC, 2011 U.S. App. LEXIS 16595 (3rd Cir. Aug. 10, 2011)

Facts: Plaintiff filed a lawsuit against Equifax Information Solutions LLC (“Equifax”) alleging that Equifax violated the FCRA by: (1) failing to follow reasonable procedures to maintain accuracy of his consumer report under § 1681e(b); (2) failing to reinvestigate disputed information under § 1681i(a); (3) failing to delete information found to be inaccurate under § 1681i(a)(5)(C); (4) failing to provide notice of deleted information under § 1681i(d); and (5) failing to maintain strict procedures to insure that information reported for employment purposes is complete and up to date under § 1681k. Plaintiff also brought a state common law claim for negligent misrepresentation, relying on Section 552 of the Restatement (Second) of Torts. Plaintiff complained about six different trade lines on his consumer report, including an Americredit account that he alleged was being inaccurately reported as “Included in Bankruptcy.” The district court granted Equifax’s motion for summary judgment on all claims, holding that Plaintiff did not provide evidence to establish the elements of the asserted claims on any of the disputed accounts; Plaintiff subsequently appealed. The 3rd Circuit affirmed the district court’s grant of summary judgment on all Plaintiff’s claims except as to Plaintiff’s Americredit account for the reasons detailed below.

• Reasonable Procedures. In order to establish a prima facie violation of § 1681e(b), the FCRA implicitly requires that a consumer must present evidence tending to show that a CRA prepared a report containing inaccurate information. A report is inaccurate when it is patently incorrect or when it is misleading in such a way and to such an extent that it can be expected to have an adverse effect. Thus, a consumer report that contains technically accurate information may be deemed inaccurate if the statement is presented in such a way that it creates a misleading impression. However, even if a consumer report contains an inaccuracy, CRAs are liable only when the inaccuracies are the result of the CRAs’ failure to follow reasonable procedures.

• Reasonable Procedures. The 3rd Circuit concluded that Plaintiff produced sufficient evidence to survive summary judgment as to his Americredit account. Plaintiff alleged that his Americredit account was not "related in any way" to the bankruptcy. While Equifax confirmed that the account was not reporting as “Included in Bankruptcy,” subsequent credit reports identified the account as such. Accordingly, the Court vacated the district court’s entry of summary judgment on Plaintiff’s § 1681e(b) claim as to the Americredit account only.

• Reasonable Reinvestigation. Under § 1681i(a), CRAs must promptly conduct a reasonable reinvestigation of information in a credit report when a consumer disputes the validity of that information. The 3rd Circuit held that although the parameters of a reasonable reinvestigation will often depend on the circumstances of a particular dispute, it is clear that a reasonable reinvestigation must mean more than simply including public documents in a consumer report or making only a cursory investigation into the reliability of information that is reported to potential creditors. Thus, in order to fulfill its obligation under § 1681i(a), a CRA may be required, in certain circumstances, to verify the accuracy of its initial source of information. The grave responsibility imposed under § 1681i(a) must consist of something more than merely parroting information received from other sources.

Court refused to allow a business to step into the consumer’s shoes for the purposes of FCRA

Amanda Loughmiller — Thu, 12 Apr 2012 00:00:00 -0500

Wisdom v. Wells Fargo Bank NA, 2012 U.S. Dist. LEXIS 8256 (D. Ariz. Jan. 25, 2012)

Facts: Plaintiff alleged that his son obtained credit from Wells Fargo and that Plaintiff was not a co-signor or guarantor on the card. When his son was unable to make payments on the card, Plaintiff offered to pay part of the balance in exchange for cancellation of his son’s debt. Defendants refused and sued both Plaintiff and his son. Plaintiff was dismissed with prejudice after proving he had no liability for his son’s debt. After the dismissal, Wells Fargo reported the account as charged-off to the Credit Reporting Agencies. Plaintiff claimed that both he and his business’ credit had been damaged by Wells Fargo’s actions. The Court previously granted Wells Fargo’s motion for partial dismissal because the Court held that FCRA would not allow recovery for losses incurred by Plaintiff’s business because a business is not considered a “consumer” under the FCRA. Plaintiff filed a motion for reconsideration and argued that because he did not follow the necessary corporate formalities that he and his business were the same entity. The Court denied the motion for reconsideration.

• Damages. Plaintiff claimed that due to his own failure to follow the required corporate procedure that his individual and his business’ losses are consumer losses. Plaintiff explained that his failure to observe corporate formalities could expose him personally to his business’ liabilities. He used this reasoning to argue that this same failure on his part should be a reason for the Court to consider his personal losses and business losses as one in the same. The Court denied Plaintiff’s motion for reconsideration pointing out that Plaintiff failed to offer any evidence indicating that a shareholder’s failure to observe the corporate formalities allows the business to recover damages under the FCRA.

Court Held that Employer Failed to Prove that it’s Background Check Procedure and Consent Form Complied with the FCRA

Amanda Loughmiller — Thu, 12 Apr 2012 00:00:00 -0500

Singleton v. Domino's Pizza, LLC, 2012 U.S. Dist. LEXIS 8626 (D. Md. Jan. 25, 2012)

Facts: Class action Plaintiffs Adrian Singleton and Justin D’Heilly both completed Background Investigation Information and Consent (“BIIC form”) forms when applying for work as delivery drivers at Dominos Pizza. The form included a paragraph releasing Domino’s from liability regarding the information obtained in the background check. The form also stated “I acknowledge that this is a standalone consumer notification informing me that a report will be requested and that the information obtained shall be used solely for the purpose of evaluating me for employment, promotion, reassignment, or retention as an employee.” Both Plaintiffs signed the forms and began work. Plaintiffs were later terminated due to information contained in their background check. On July 1, 2011, Plaintiffs filed a class action suit against Dominos for numerous violations of the FCRA. After Domino’s filed a motion to dismiss, Plaintiffs filed an amended complaint that alleged that Domino’s violated the FCRA by: (1) failing to provide employees with copies of their background investigations prior to taking adverse action against them; (2) using a BIIC form that did not comply with the disclosure requirements of the FCRA; and (3) using a BIIC form that did not comply with the authorization requirements of the FCRA. Domino’s again filed a motion to dismiss for failure to state a claim asserting that Plaintiff’s did not allege willful violations of the FCRA and that the BIIC form complied with the FCRA. The Court denied Domino’s motion to dismiss.

• Willfulness. Plaintiffs argued that “Domino’s engaged in the practice of violating the FCRA by systematically failing to provide employees with copies of their background checks prior to taking adverse action against them” and by repeatedly failing to provide applicants with the “prerequisite disclosure and authorization information in a ‘standalone document’” before obtaining their consumer reports. Domino’s argued that if Plaintiffs didn’t receive a copy of their background checks that it was the result of mistake. Further, Domino’s argued that it made a good-faith effort to ensure that the BIIC forms complied with the FCRA. The Court stated that in a motion to dismiss the “plaintiffs need only provide allegations sufficient to demonstrate entitlement to relief, they need not prove their case at such and early stage in the proceedings.” The Court found that the complaint adequately alleged willfulness and was sufficient to withstand Domino’s motion to dismiss.

• Background Report. Domino’s argued that Plaintiffs failed to state a claim for relief because their BIIC form complied with the FCRA. Plaintiffs argued that the form failed to meet the requirements of the FCRA’s disclosure and authorization requirements because (1) it was included in the Domino’s application packet, and (2) it contains a liability release. The Court explained that the plain language of the statute insist that the document consist “solely” of the disclosure. Therefore, the Court concluded that Domino’s failed to show that the BIIC form complied with the FCRA.

Claim for Equitable Relief Under Louisiana Law Is Preempted by the FCRA

Ginny Webb — Wed, 14 Mar 2012 00:00:00 -0500

Clark v. Saxon Mortg. Co., 2011 U.S. Dist. LEXIS 74052 (M.D. La. July 7, 2011)

Facts: Plaintiff sued the three CRAs and Saxon Mortgage Company alleging that Defendants defamed him, violated Louisiana consumer protection and privacy laws, and violated the Fair Credit Reporting Act (“FCRA”). Plaintiff requested, in addition to actual and punitive damages, that the Court declare that Defendants violated the FCRA and issue an injunction forcing Defendants to remove the allegedly false entries. Trans Union and Experian moved to dismiss Plaintiff’s claim for injunctive relief under the FCRA. The Court held that a private litigant may not seek injunctive relief under the FCRA and that Plaintiff’s claims for injunctive relief under Louisiana consumer protection laws were directly preempted by the FCRA.

Injunctive Relief. Sections 1681n and 1681o set out the potential civil liability available to a private litigant under the FCRA, and neither section makes any mention of equitable relief. Further, § 1681s(a) allows for only the FTC to seek equitable relief under the FCRA. In accordance with the Fifth Circuit and the vast majority of federal courts that have analyzed this issue, this Court held that private litigants may not file for injunctive relief under the FCRA.

Preemption. The Court determined that Plaintiff did not have a claim for equitable relief under Louisiana consumer protection laws because they were directly preempted by the FCRA, which regulates similar conduct. It further held that under § 1681h(e), Plaintiff’s defamation and privacy claims warranted equitable relief only if Plaintiff showed that Defendants acted with malice or with willful intent to injure him. Plaintiff failed to allege any specific facts to support his conclusory statements that Defendants acted with willful intent to injure him. Thus, Plaintiff’s claims could not survive Defendants’ Rule 12(b)(6) motions to dismiss.

Defendant CRA’s Motion to Dismiss Denied; Court Finds Plaintiff Stated a Claim for Violations of §§ 1681i and 1681e

Marc F. Kirkland — Wed, 29 Feb 2012 00:00:00 -0500

Lazarre v. JPMorgan Chase Bank, N.A., 780 F. Supp. 2d 1330 (S.D. Fla. 2011)

Facts: Plaintiff filed suit against JP Morgan Chase and Early Warning Services, a CRA, for alleged violations of the FCRA related to a fraudulent bank account. Specifically, Plaintiff claimed that a Washington Mutual bank account (the “Account”) was fraudulently opened with his identifying information and was used to process forged, altered, stolen and counterfeited checks. In November 2009, Plaintiff began to dispute the reporting of the account with Early Warning claiming that the account was fraudulently opened and that he was the victim of identity theft. On three separate occasions, Early Warning conducted a reinvestigation and verified that the account was accurately reported. Based on correspondence sent to Plaintiff, Early Warning appeared to rely solely on the account information maintained by JP Morgan Chase (the then-current owner of the Account) and conducted only a minimal reinvestigation on its own. The correspondence did not show that Early Warning made any effort to verify that Plaintiff, as opposed to an identity thief, opened the account. In June 2010, Regions Bank closed one of Plaintiff’s accounts based on an Early Warning consumer report which contained the Account. Early Warning filed a motion to dismiss Plaintiff’s § § 1681i(a) and 1681e(b) claims on grounds that the Complaint failed to state a claim upon which relief may be granted. The Court disagreed and denied Defendant’s motion.

Reinvestigation. To state a claim for violation of § 1681i(a) a plaintiff must allege: (1) the consumer’s credit report contained inaccurate or incomplete information; (2) the plaintiff notified the CRA of the alleged inaccuracy; (3) the dispute was not frivolous or irrelevant; (4) the CRA failed to respond or conduct a reasonable reinvestigation of the disputed items; and (5) the failure to reinvestigate caused the plaintiff to suffer out-of-pocket losses or intangible damages. The Court, assuming Plaintiff’s allegations were true, found that Plaintiff stated a claim for violation of § 1681i because a jury could conclude that Early Warning’s reinvestigations were unreasonable, given the nature of Plaintiff’s dispute and Early Warning’s response.

Reasonable Procedures. To state a claim for violation of § 1681e(b) a plaintiff must allege: (1) the CRA published an inaccurate consumer report to a third party; (2) in publishing its consumer report, the CRA failed to follow reasonable procedures to assure the maximum possible accuracy of the consumer report; and (3) the plaintiff suffered actual damages as a result. The Court determined that if the fact-finder concluded that Early Warning’s reinvestigation procedures were unreasonable under § 1681i, the fact-finder may also conclude that the report issued to Region’s Bank in June 2010 was not prepared following reasonable procedures as required by § 1681e(b). Accordingly, Plaintiff adequately plead a § 1681e(b) claim.

Employer’s Withdrawal of Job Offer to Applicant Causes Class Action Suit To Be Filed - Electronic FCRA Disclosures to Prospective Employee At Issue

Paul W. Sheldon — Fri, 10 Feb 2012 00:00:00 -0500

Recently, a new class action lawsuit Eric Dante Pitt v. Kmart Corporation was filed in the Eastern District of Virginia challenging electronic disclosures made by Kmart to a prospective job applicant.

Background: FCRA Requires Disclosure.

The Fair Credit Reporting Act (“FCRA”) applies to all kinds of consumer reports, including routine background checks that many employers purchase from background screening agencies. The FCRA has special provisions for consumer reports that are obtained for employment purposes. Section 1681b(b)(2)) outlines two of the key employer obligations in the context of this new class action suit which include:

a. disclosing to the applicant that the employer is obtaining a report for employment purposes; and

b. obtaining the applicant’s authorization for the employer to obtain the report.

The Claim: E-SIGN Only Works For Consumers.

Plaintiff applied online for a job with Kmart. The application included an electronic notice concerning Kmart’s consumer report requirements and consent request in order to obtain a consumer report on Plaintiff (after Kmart offered Plaintiff a job). After it reviewed the results of a criminal record search for Plaintiff which contained a criminal history, Kmart withdrew the job offer. Although not the subject of the suit, Plaintiff contends that given their age the misdemeanors found on the report should not have been considered. Plaintiff’s suit proposes a class action based on Kmart not fulfilling the disclosure and authorization requirements discussed above and alleges:

a. The FCRA requires that the disclosure be “in writing.” Absent the E-Sign Act, an electronic disclosure is not one made “in writing”.

b. The only means to “legalize” the electronic signature application of Defendant is through application of the E-Sign Act.

c. The E-Sign Act does not apply to the Defendant’s electronic application, because the term “consumer” in the Act is defined as “an individual who obtains through a transaction, products or services which are to be used primarily for personal, family, or household purposes.”

d. A job applicant does not fit the definition of “consumer” and therefore the E-Sign Act does not authorize the Defendant’s electronic application.

Plaintiff’s Position.

Plaintiff’s position leads to an incorrect conclusion and tends to follow along these steps:

a.     The FCRA requires disclosures in writing.

b.     An electronic disclosure is not one made in writing without finding some other law that says so.

c.    The E-SIGN Act only authorizes electronic signatures by consumers.

d.     Therefore, the FCRA-required disclosures cannot be electronic.

Plaintiff’s First Premise: The FCRA Requires Disclosures In Writing.

The first premise is correct as § 1681(b)(2)(A) provides that:

a person may not produce a consumer report … for employment purposes with respect to any consumer, unless … a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured …, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes.

Plaintiff’s Second Premise: An Electronic Disclosure Is Not One Made In Writing Under The FCRA.

The second premise has arguments on both sides. For several years, the Federal Trade Commission (the agency then charged with interpreting and enforcing the FCRA) issued opinion letters that gave informal guidance to the consumer reporting industry. In one such letter (known as the Landever Letter), the FTC opined about § 1681b(a)(2), which allows anyone to obtain a consumer report “in accordance with the written instructions of the consumer to whom it relates.” The FTC’s opinion was that this section did not allow someone to obtain a report based on a consumer clicking an online “yes” button in response to a question about whether the consumer authorizes the report. Among other things, the FTC noted that Congress specifically allowed electronic communications in other sections of the FCRA. While this letter does not interpret § 1681b(b)(2)(A), the same argument certainly exists and will likely be raised by the Plaintiff.

Plaintiff’s Third Premise: E-SIGN doesn’t apply.

Plaintiff’s assertion that E-SIGN does not apply will be a difficult hurdle for Plaintiff to overcome. Section 7001(a) of E-SIGN provides:

Notwithstanding any statute, regulation, or other rule of law (other than this subchapter and subchapter II of this chapter), with respect to any transaction in or affecting interstate or foreign commerce -

(1) a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and

(2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.

This statute holds that a record relating to a transaction in interstate or foreign commerce may not be denied legal effect solely because it is in electronic form.

In case one worries that the problem is hidden somewhere in the definitions, rest assured that § 7006(9) defines the term “record” broadly enough that a FCRA disclosure must be a record:

“The term ‘record’ means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.”

Further, the language of § 7001(b) bolsters the conclusion that Congress meant § 7001(a) to get rid of requirements that any be in writing. Section 7001(b) provides:

This subchapter does not -

(1) limit, alter, or otherwise affect any requirement imposed by a statute, regulation, or rule of law relating to the rights and obligations of persons under such statute, regulation, or rule of law other than a requirement that contracts or other records be written, signed, or in non-electronic form; or

(2) require any person to agree to use or accept electronic records or electronic signatures, other than a governmental agency with respect to a record other than a contract to which it is a party.

Here, the key language is that the E-SIGN Act does not affect any statutory requirement other than a requirement that records be written.

The Confusion: Consumers Get Heightened Protection.

So where did the Plaintiff get the idea that the E-SIGN Act only “legalizes” consumer transactions? Section 7001(c) establishes a heightened standard for the E-SIGN Act to make electronic disclosures satisfy a legal requirement that a disclosure to consumers be in writing. What is required is a set of disclosures along with a consent. (For example, look to any website where individuals purchase goods and services.)

As the Plaintiff correctly notes, § 7006(1) defines “consumer” as “an individual who obtains, through a transaction, products or services which are used primarily for personal, family, or household purposes.” Therefore, job applicants aren’t “consumers” under the E-SIGN Act, even though they are under the FCRA. This does not, however, remove Kmart’s disclosure from being considered legally valid under the E-SIGN Act. It simply means that Kmart did not need to meet the heightened standard of § 7001(c). There is another fundamental flaw in Plaintiff’s argument, especially in light of business-to-business transactions. If one has to be a “consumer” for the E-SIGN Act to apply to the transaction, then huge companies doing business with each other would have to do that business on paper. Accordingly, we believe the argument is quite strong that electronic disclosure is still the equivalent of a written disclosure under the FCRA.

Additionally, the Federal Trade Commission explicitly acknowledges the effect of the E-SIGN Act on the FCRA. In a second opinion letter (known as the Zalenski Letter), the FTC states that the E-SIGN Act had superseded the logic in the Landever Letter: “under the E-SIGN Act, a[n FCRA-governed] consumer’s electronic authorization may not be denied legal effect solely based on its electronic nature.” In this Letter, the FTC endorsed most of the reasoning set out above, which is reaffirmed in the FTC’s July 2011 Staff Report on the FCRA.

Kmart recently filed a motion to dismiss some of the claims, arguing that the electronic consent form satisfies the FCRA and that Plaintiff was also provided and signed a paper consent form. We will keep our eye on what the court decides and provide a follow-up in a subsequent newsletter.

Plaintiff’s Defamation Claim Preempted by the FCRA

Marc F. Kirkland — Tue, 17 Jan 2012 00:00:00 -0500

Longman v. Wachovia Bank, N.A., 2011 U.S. Dist. LEXIS 105450 (D. Conn. Sep. 16, 2011)

Facts: Plaintiff sued Wachovia alleging violations of the FCRA and state law defamation related to Wachovia’s reporting of Plaintiff’s real estate loan. Plaintiff, a real estate developer, financed a land purchase with a three-year balloon lot note with Wachovia. At the end of the three-year term Plaintiff informed Wachovia that he was unable to continue making monthly interest payments on the balloon payment and offered to continue to make payments if Wachovia would reduce the interest rate and lengthen the amortization period. Wachovia rejected Plaintiff’s offer. Plaintiff then attempted to obtain an agreement with Wachovia for a short sale on the property, however the parties were unable to agree on terms. Although Plaintiff failed to pay the balloon obligation on the note, he continued to make monthly interest payments. Plaintiff then filed suit against Wachovia. After suit was filed Plaintiff began disputing Wachovia’s negative reporting of the account with the CRAs. In response to each dispute Wachovia verified that the account was accurately reported on Plaintiff’s credit file. Wachovia then moved for summary judgment on Plaintiff’s claims. The Court held that: 1) the FCRA preempted Plaintiff’s defamation claim; 2) he did not have private right of action under § 1681s-2; and 3) his complaint did not assert § 1681s-2(b) claim.

• Preemption. Section 1681t(b)(1)(F) expressly preempts the application of state law with respect to matters regulated under § 1681s-2. Therefore, because Plaintiff’s claim that Wachovia reported false information to the CRAs asserted a violation of § 1681s-2(a), the Court determined that Plaintiff’s defamation claim would be preempted by § 1681t(b)(1)(F).

• Preemption. Plaintiff argued that despite the language in § 1681t(b)(1)(F), § 1681h(e) permits recovery for state law defamation. Section 1681h(e) provides that: no consumer may bring any action. . . in the nature of defamation. . . with respect to the reporting of any information against any CRA, any user of information, or any furnisher, based on information disclosed pursuant to 1681g, 1681h, or 1681m of this title or based on information disclosed by a user of consumer report to or for a consumer against whom the user has taken adverse action based in whole or in part on the report, except as to false information furnished with malice or willful intent to injure such consumer. Plaintiff argued that because he alleged that Wachovia had intentionally reported false information to the CRAs his allegations satisfied the malice or willful intent provision in § 1681h(e).

• Preemption. Section 1681h(e) only applies to CRAs and those who take adverse action against consumers based on consumer reports. Consequently, § 1681h(e) only applies where a plaintiff brings a claim against a CRA or against someone who has taken adverse action based on a consumer report. Because Plaintiff did not assert that Wachovia was a CRA or that Wachovia took action against him on the basis of a consumer report, the Court determined that Plaintiff defamation claim was preempted.

• Private Right of Action. The Court found that Plaintiff’s § 1681s-2(a) claim failed as a matter of law because there is no private right of action under that section. Instead, federal agencies, federal officials, and specified state officials have exclusive authority to enforce § 1681s-2(a).

• Reasonable Investigation. Section 1681s-2(b) requires a furnisher of credit information, on receiving notice from a CRA that a consumer has disputed a debt, to investigate the dispute and to report the results of the investigation to the CRA. Here the Court granted summary judgment to Wachovia because (in his complaint) Plaintiff never asserted claims related to his disputes to the CRAs. The complaint was filed prior to Plaintiff disputing the account with the CRAs and the Court was not inclined to grant Plaintiff leave to amend his complaint as discovery had closed. Wachovia had filed its motion for summary judgment and Plaintiff was put on notice of the deficiency by Wachovia when it filed its answer to the complaint.

Court Holds That the Government Waived Its Sovereign Immunity Under the FCRA Pursuant to the Little Tucker Act

Ryan Langston — Wed, 11 Jan 2012 00:00:00 -0500

Bormes v. U.S., 2010 U.S. App. LEXIS 23611 (Fed. Cir. Nov. 16, 2010).

Facts: Plaintiff paid a filing fee using his credit card, and the transaction was processed through the government's pay.gov system. The online confirmation page contained the expiration date of Plaintiff’s credit card. Alleging that the display of his and similarly situated plaintiffs' credit card information violated § 1681c(g)(1) of the FCRA, Plaintiff filed a class action lawsuit against the government. Plaintiff alleged jurisdiction under 28 U.S.C. § 1346(a)(2) (commonly referred to as the “Little Tucker Act”) and the FCRA’s own jurisdictional provision, § 1681p. The government filed a motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted. The district court concluded that it had jurisdiction under the FCRA, but granted the government’s motion to dismiss under Rule 12(b)(6) on the grounds that the FCRA did not waive the federal government’s sovereign immunity. Because the district court exercised jurisdiction under the jurisdictional provisions of the FCRA, it held that Plaintiff’s arguments for jurisdiction under the Little Tucker Act were moot. In vacating and remanding the decision, the Federal Circuit Court held that the FCRA was a “money-mandating” statute that established jurisdiction under the Little Tucker Act and acted as a waiver of the government’s sovereign immunity. The Court also stated that it would allow the district court to consider the government’s motion to dismiss on remand on grounds other than lack of subject matter jurisdiction.

Subject Matter Jurisdiction. The Little Tucker Act gives district courts jurisdiction, concurrent with the Court of Federal Claims, over any civil action (other than a tax refund) or claim against the United States, not exceeding $10,000 in amount that is founded upon any act of Congress. Thus, the Little Tucker Act works as a jurisdictional provision that also operates to waive sovereign immunity for claims premised on other sources of law. Because the Little Tucker Act operates to waive sovereign immunity, the Court held that the district court erred in dismissing Plaintiff’s case without considering whether the Little Tucker Act provided an alternative basis for jurisdiction. If the Little Tucker Act authorized the district court to hear this case, it would have also provided the waiver of sovereign immunity that the trial court found lacking in the FCRA’s jurisdictional provision.

Subject Matter Jurisdiction. To establish jurisdiction under the Little Tucker Act, the substantive law that provides the basis for Plaintiff’s claims must be “money-mandating.” A source of law is money-mandating if it can fairly be interpreted as mandating compensation by the Federal Government for the damage sustained. The Court found that § 1681n unquestionably provides for money damages. Moreover, the record showed that, at least for purposes of jurisdiction, Plaintiff fit within the class of plaintiffs entitled to recover under the FCRA. Thus, the Court reversed and remanded the case to the district court for reconsideration under the Little Tucker Act.

Eleventh Circuit Says Revealing Full Credit Card Number On Sales Receipt Is Not A “Publication”

Paul W. Sheldon — Tue, 27 Dec 2011 00:00:00 -0500

E.T. Limited, Inc. v. United States Liability Insurance Company and Essex Insurance Company, 2011 U.S. App. LEXIS 19990 (11 Cir. Fla. Sep. 30, 2011)

Facts: Plaintiff-Appellant E.T. Limited, Inc., ("ETL") appealed the district court's grant of summary judgment to Defendant-Appellee Essex Insurance Company ("Essex") pertaining to an alleged violation of the Fair and Accurate Credit Card Transaction Act ("FACTA"). The alleged violation occurred when a credit card receipt revealed more than five digits of a customer’s credit card number. The district court concluded that Essex's commercial general liability policy (the "Policy") imposed no duty to defend ETL in the underlying litigation in state court. Specifically, the district court concluded that Essex owed no duty to defend ETL under the Policy because ETL's issuance of a credit card receipt did not constitute a "publication" as required under the Policy's coverage for “personal and advertising” injury. The 11th Circuit agreed with the district court’s finding that "publication" as used in the Policy was unambiguous and that providing, a credit card receipt to a customer involves no "publication" within the meaning of the Policy.

• FACTA Requirements. Section 1681c(g)(1) provides: "[N]o person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction."

• FACTA Requirements. The providing of a credit card or debit card receipt to a customer fails to constitute a "publication" within the meaning of Essex's Policy. Note: the Court specifically stated that it rejected ETL's argument that the language of "publication, in any manner" was ambiguous, and instead applied the dictionary definition of "publication" as used by the Florida Supreme Court in prior case decisions that "publication" meant "communication (as of news or information) to the public: public announcement" or "the act or process of issuing copies . . . for general distribution to the public." (quoting Webster's Third New International Dictionary 1836 (1981)).

• FACTA Requirements. The credit card receipt was a contemporaneous record of a private transaction between ETL and the customer, and ETL neither broadcasted nor disseminated the receipt or the credit card information to the general public. ETL provided the receipt only to the customer (who already knows the credit card number and its expiration date).

The FCRA Does Not Literally Preempt All State Laws Regulating Furnishers of Credit Information

Allison Reddoch — Tue, 20 Dec 2011 00:00:00 -0500

Menashi v. Am. Home Mortg. Servicing, Inc., 2011 U.S. Dist. LEXIS 114387 (M.D. Fla. Oct. 4, 2011)

Facts: Plaintiff filed suit against the three major Consumer Reporting Agencies (“CRAs”), Wilmington Trust Company and American Home Mortgage Servicing, Inc. (“AHMSI”), the servicer of Plaintiff’s mortgage, alleging violations of § 559.72(5), (6), and (9) of the Florida Consumer Collection Practices Act (“FCCPA”). Plaintiff’s claim arose from the modification of his home mortgage under the Home Affordable Modification Program (“HAMP”). Plaintiff and AHMSI negotiated a mortgage modification under HAMP and after a three-month HAMP “trial period plan,” AHMSI offered Plaintiff a permanent HAMP agreement, which he accepted. Less than a year later, AHMSI rejected a mortgage payment from Plaintiff and informed him that the HAMP modification, while a valid contract, was a “mistake” that AHMSI would no longer honor. AHMSI then reported to the three CRAs that Plaintiff was behind on his mortgage. AHMSI sought to dismiss the FCCPA claim arguing they were pre-empted by the FCRA. AHMSI alleged and Plaintiff conceded that §§ 559.72(5) and (6) are preempted by the FCRA. The Court held that the FCRA only preempts those state law causes of action against furnishers of credit information that regulate credit reporting – including a cause of action under a state law not directed expressly to the regulation of credit information, such as a debt collection act.

• Preemption. Section 1681t(b)(1)(F) prohibits states from imposing a law “with respect to any subject matter regulated under § 1681s-2 of [the FCRA], relating to the responsibilities of persons who furnish information to consumer reporting agencies.” If a state law regulates credit reporting only in limited circumstances, § 1681t(b)(1)(F) preempts the state law only in those limited circumstances. Here, the FCRA preempted the FCCPA only if AHMSI violated § 559.72(9) while engaged in credit reporting activity regulated by § 1681s-2. Plaintiff did not allege that AHMSI rejected the mortgage modification with the purpose of altering or inaccurately reporting his credit information. If AHMSI refused to honor the mortgage modification because it decided the modification was a “bad deal,” that decision had no connection to the purpose of § 1681s-2 and falls outside its scope. The Court rejected AHMSI claims that the FCRA literally preempts all state causes of action against furnishers of credit information.

Mere Assumption that the FCRA Applies to Facts Alleged is Insufficient for Removal to Federal Court

Allison Reddoch — Tue, 20 Dec 2011 00:00:00 -0500

Ferkler v. RCN Corp., 2011 U.S. Dist. Lexis 104209 (E.D. Pa. Sept. 13, 2011)

Facts: Plaintiff alleged he was erroneously billed by his cable service provider, RCN Corporations, Inc. (“RCN”). Plaintiff and RCN allegedly resolved the issue and Plaintiff made a payment for full and final payment on the account. Plaintiff asserted that despite RCN’s knowledge that the account was paid in full, it forwarded the account to two different collection agencies who thereafter supplied the CRAs with false or erroneous information. Plaintiff filed suit against RCN and NCO Financial Systems, Inc. (“NCO”), one of the collection agencies. NCO removed the case alleging federal question jurisdiction pursuant to 28 U.S.C. §1331. NCO contended that Plaintiff’s allegation that NCO provided the CRAs false or erroneous information is a claim asserted under § 1681s-2 of the FCRA. Plaintiff sought remand arguing that his complaint made no mention of any violation of a federal statue, but relied exclusively on Pennsylvania consumer protections laws and, as such, there was no basis for the Court to assert federal question jurisdiction. In response, NCO asserted that “[w]hen the FCRA and its proscriptions [are] examined along-side plaintiff’s averment that NCO supplied false and erroneous information to three reporting agencies, it is irrefutable that plaintiff’s action against NCO is one for an alleged violation of the FCRA.” The Court found NCO’s assumption that Plaintiff must be pursuing a federal claim insufficient to establish ground for federal jurisdiction.

• Removal. Under 28 U.S.C. § 1441(a), a defendant may remove a civil action originally filed in state court if the federal court would have had original jurisdiction over the action. The “well pleaded complaint” rule prescribes that federal question jurisdiction exists only where an issue of federal law appears on the face of the complaint and the federal law under which the claim arises must be a direct and essential element of plaintiff’s case. The well pleaded complaint rule is subject to the “artful pleading doctrine” whereby a defendant will not be denied a federal forum when the plaintiff’s complaint contains a federal claim “artfully pled” as a state law claim. The artful pleading doctrine allows for removal when (1) the state law that serves as the basis of plaintiff’s complaint is completely preempted by federal law, or (2) a federal question, not pleaded in plaintiff’s complaint, is nonetheless both intrinsic and central to plaintiff’s cause of action. The Court found that Plaintiff’s well-pleaded Complaint made no mention of a federal statute and, on its face, failed to assert a federal question. While the FCRA could apply to the facts alleged, Plaintiff clearly decided to base his claims exclusively on state law and in state court. NCO’s assumption that Plaintiff must be pursuing a federal claim was insufficient to meet its burden of establishing grounds for federal jurisdiction.

Court Says ACDV Process is Reasonable as a Matter of Law

Ryan Langston — Tue, 29 Nov 2011 00:00:00 -0500

Okocha v. Trans Union LLC, 2011 U.S. Dist. LEXIS 39998 (E.D.N.Y. Mar. 31, 2011)

Facts: Plaintiff alleged that Trans Union, Experian, and Equifax violated the FCRA, the New York FCRA, and New York common law by inaccurately reporting five accounts on his consumer report and by failing to conduct an adequate reinvestigation of those accounts. The Court granted Defendants’ Motions for Summary Judgment because Plaintiff failed to produce any evidence to support his claims.

Reasonable Procedures. Under § 1681e(b), CRAs have a duty to follow reasonable procedures to assure maximum possible accuracy of consumer information when preparing a consumer report. The threshold question is whether the challenged information was inaccurate. If the information was inaccurate, a plaintiff must then present some evidence from which a trier of fact could infer that a CRA failed to follow reasonable procedures in preparing Plaintiff’s consumer report. The Court dismissed Plaintiff’s claims under § 1681e(b) because Plaintiff failed to produce any evidence that Defendants did not follow reasonable procedures to ensure the accuracy of the information once notified of the alleged inaccuracies.

Reasonable Procedures. Whether Plaintiff had a legal obligation to pay the debts reported by the underlying creditors turned on questions of law that Defendants could not have possibly resolved through a reinvestigation. Thus, even if the accounts were reported inaccurately, the Court held that Defendants were entitled to report the account information until Plaintiff properly resolved the issues with his creditors in a legal proceeding.

Reasonable Reinvestigation. Section 1681i(a) and NY FCRA § 380-f require a CRA to reasonably reinvestigate any disputed information contained within an individual’s consumer report after receiving a direct dispute from the consumer. The Court held that even if Plaintiffs’ accounts were reported inaccurately, Plaintiff failed to produce any evidence to suggest that Defendants failed to discharge their duty to reinvestigate Plaintiff’s disputes in a reasonable manner. Each Defendant properly used the ACDV process and timely notified Plaintiff of the results. Because Plaintiff did not raise any significant factual challenges to the accuracy or reliability of the original source of the reported information and did not make any actual allegations of fraud, the Court held that the ACDV process followed by Defendants was reasonable as a matter of law.

Reinsertion. Section 1681i(a)(5) mandates that disputed information must be deleted from a consumer report if it cannot be verified pursuant to a reinvestigation. Before a CRA may reinsert previously deleted information into a consumer’s report, it must certify the accuracy of the information with the furnisher and must notify the consumer of the reinsertion. In this case, the CRAs removed an Alllied Interstate, Inc. account from Plaintiff’s consumer report in November of 2006. The original debt was then sold to Harvard Collection Services, who in turn reported the debt again to the CRAs. The Court held that because the account information was provided by two different furnishers and was identified by two completely different account numbers, the appearance of the Harvard Collection Services account did not constitute a reinsertion of previously deleted information under the FCRA.

Reinvestigation. Pursuant to § 1681i(a)(6)(A), a CRA is required to send notice to a consumer following the completion of a reinvestigation of disputed information. The notification must include a notice that the consumer has a right to add a statement to his file disputing the accuracy or completeness of the information. While Equifax failed to send Plaintiff a notification of its reinvestigation, the Court held that a CRA was entitled to require proof of proper identification from the consumer under § 1681h(a)(1) before providing such notice. In this instance, Plaintiff failed to comply with repeated requests to provide identifying information, so the Court granted summary judgment on this claim.

Preemption. Section 1681h(e) prohibits a consumer from bringing any action or proceedings for defamation, invasion of privacy, or negligence except as they relate to false information furnished with malice or willful intent to injure such a consumer. Because Plaintiff failed to provide any evidence supporting his allegations that Defendants showed malice or willful intent to injure and because the procedures Defendants utilized were reasonably calculated to assure accuracy in the consumer reports it produced, the Court held that Plaintiff’s state common law claims for defamation, invasion of privacy, false light and negligence were preempted by the FCRA and were dismissed.

Court Determines That CRAs’ Summaries Of Consumers’ Disputes As Part Of Their Automated Reinvestigation Process Were Inadequate For Summary Judgment

Martin Thornthwaite — Mon, 28 Nov 2011 00:00:00 -0500

Bradshaw v. BAC Home Loans Servicing, LP., 2011 U.S. Dist. LEXIS 110781 (D. Or. Sept. 27, 2011)

Facts: In March 2008, Plaintiffs applied for a home loan modification. Plaintiffs filed suit after encountering problems with the home loan modification process and derogatory information was reported on their credit file. Specifically, there was a dispute about whether Plaintiffs made timely payments pursuant to BAC Home Loans Servicing, LP’s (“BAC”) instructions while the loan modification was pending. Plaintiffs alleged that they always paid in accordance with BAC’s directions yet BAC reported Plaintiffs as delinquent to the consumer reporting agencies (“CRAs”).

After Plaintiff settled with BAC and Equifax Information Services, LLC, Defendants Trans Union, LLC and Experian filed motions for summary judgment regarding Plaintiffs’ FCRA claims. Plaintiffs alleged that Defendants willfully and negligently failed to comply with the FCRA by (1) failing to follow reasonable procedures under § 1681e(b) and (2) failing to comply with the reinvestigation provisions of § 1681i. Defendants argued that they accurately reported the BAC account or, in the alternative, that Plaintiffs’ dispute with BAC regarding the validity of their loan modification was a legal issue that Defendants were not obligated to resolve. The Court denied summary judgment for Defendants on the FCRA claims.

Summary Judgment. The Court viewed the facts in a light most favorable to Plaintiffs and found that Plaintiffs had presented facts that they entered into a binding modification agreement that enabled them to lower their monthly mortgage payments. Thus, the Court found that a factual dispute existed regarding the accuracy of Plaintiffs’ reports.
Reasonable Procedures. The Court concluded fact issues existed as to whether Defendants had reasonable procedures to assure the maximum possible accuracy of the information associated with Plaintiffs’ BAC account solely because Plaintiffs disputed that Defendants’ procedures were reasonable.

Reinvestigation. The Court also found that factual issues precluded summary judgment as to whether a reasonable reinvestigation could have discovered the inaccuracies in Plaintiffs’ reports. Defendants used an automated dispute system to verify the accuracy of Plaintiffs’ BAC account. The Court noted that the automated consumer dispute verifications (“ACDVs”) in this matter listed only general reasons why Plaintiffs were disputing the payment information on their account and did not fully summarize the nature of Plaintiffs’ dispute. The Court also stated that the ACDVs did not describe the contents of the documents submitted by Plaintiffs with their dispute letters in a manner that would alert BAC of the alleged inaccuracies. The Court determined that a reasonable jury could infer that Defendants’ reinvestigations were unreasonable based on Defendants’ exclusive reliance on an automated system and their failure to provide BAC with a detailed summary of Plaintiffs’ letters and supporting documentary evidence.

Emotional Distress. The Court determined that Plaintiffs’ allegations that they suffered stress and embarrassment from the negative information listed on their reports and being denied credit was enough to create a fact issue for the jury to determine emotional distress damages, if any. The Court opined that objective evidence is not a requirement for emotional distress damages.
Punitive Damages. In this matter, the Court reasoned that a reasonable jury could find that the CRAs acted in reckless disregard of their duties by relying exclusively on automated procedures when the CRAs were on notice of the possible inaccuracy of the automated responses.

FCRA Does Not Support Private Plaintiff’s Claim For Equitable Relief

Martin Thornthwaite — Wed, 23 Nov 2011 00:00:00 -0500

Picon v. Bank of Am., N.A., 2011 U.S. Dist. LEXIS 65951 (M.D. Fla. June 21, 2011)

Facts: Plaintiff filed suit against Bank of America, FIA Card Services, Trans Union, Equifax, and Experian for violation of the FCRA seeking statutory and economic damages, attorneys’ fees and costs, and declaratory relief. In response, Trans Union filed a Motion for Partial Dismissal.

Injunctive Relief. Trans Union filed a motion for partial dismissal pursuant to Fed. R. Civ. P. 12(b)(6) arguing that as a private person, Plaintiff could not seek equitable, declaratory or injunctive relief under the FCRA. The Court found that by excluding equitable relief from the list of remedies available to private individuals, Congress intended to vest injunctive relief solely with the Federal
Trade Commission. Thus, the Court held that the FCRA does not support a private plaintiff’s request for equitable relief, and Trans Union’s Motion to for Partial Dismissal was granted.

As Long as the Account Information is Accurate, Plaintiff has no FCRA Claims Despite Furnisher’s Fault

Martin Thornthwaite — Mon, 14 Nov 2011 00:00:00 -0500

Paul v. Experian Info. Solutions, Inc., 2011 U.S. Dist. LEXIS 68292 (D. Minn. June 22, 2011)

Facts: Plaintiff opened numerous accounts with U.S. Bancorp in January 2007. In early 2008, Plaintiff decided she had too many debit and credit cards and went to a bank branch location to pay the outstanding balances and close many of the accounts. The bank representative informed Plaintiff she was current on her accounts and that they were closed. However, the bank representative missed one credit account that still had a balance.

In April 2008, Plaintiff noticed the account had derogatory reporting history after reviewing an Experian consumer report. She contacted the bank and was given a letter from the bank stating the derogatory reporting was the result of bank error, and it should be removed. Plaintiff forwarded this letter to Experian and disputed the account. Experian did not rely on the letter because it could not authenticate it but instead sent a dispute verification to the bank which included a summary of the letter. In response to Experian’s reinvestigation, the bank verified that the late payments were accurate.

As a result, Plaintiff sued Experian under the FCRA for failing to employ reasonable procedures to assure maximum possible accuracy in Plaintiff’s consumer reports and for failing to conduct a reasonable investigation and remove the inaccurate information from her credit file. Experian moved for summary judgment all claims, and Plaintiff moved for partial summary judgment with respect to liability. The Court granted summary judgment for Experian on all claims.

Reasonable Procedures. The Court found that Plaintiff could not meet her prima facie burden to show that Experian failed to follow reasonable procedures to assure maximum accuracy. Experian responded to Plaintiff’s dispute by notifying the bank and describing the contents of the letter from the bank that Plaintiff included with her dispute. The Court rejected Plaintiff’s claim that the letter itself should have been sent because such procedure would have led to greater accuracy.
Inaccuracy. Plaintiff must first show that there was an inaccuracy on her file with respect to her § 1681e(b) and § 1681i claims. The Court concluded that it did not matter whether it was Plaintiff’s fault or the bank’s fault that the payments were late because the FCRA concerns accuracy. In other words, the reason for the late payments is irrelevant. The Court also rejected Plaintiff’s claim that the information reported was so misleading as to be inaccurate.

Reinvestigation. The Court agreed with other courts in that the “furnisher of credit information stands in a far better position to make a thorough investigation of a disputed debt than the CRA does on reinvestigation. With respect to the accuracy of disputed information, the CRA is a third party, lacking any direct relationship to the consumer ….”

Reinvestigation. No language in the FCRA requires a CRA to forward documents it receives in a consumer’s dispute to data furnishers in order to satisfy its obligation to include all relevant information regarding the dispute. In this case, Experian accurately summarized the letter in its dispute verification sent to the bank.

Court Finds Arbitration Clauses Dealing with CROA Disputes are Permissible but Stays Case Pending Supreme Court Review

Martin Thornthwaite — Mon, 14 Nov 2011 00:00:00 -0500

Adams v. ACSO of Tex., Inc., 2011 U.S. Dist. LEXIS 63406 (W.D. Tex. June 13, 2011)

Facts: Plaintiffs sued Defendant, ACSO of Texas, Inc. (“ACSO”), alleging violations of the Credit Repair Organizations Act (“CROA”). ACSO moved to compel arbitration and stay litigation based on the arbitration provision in the credit services contracts executed by Plaintiffs. Alternatively, ACSO moved to stay the case pending the U.S. Supreme Court’s decision in Compucredit v. Greenwood or for dismissal for failure to state a claim upon which relief could be granted. While the Court agreed that the case should be sent to arbitration, it stayed all proceedings pending the U.S. Supreme Court’s decision.

Arbitration. The Court determined that because the arbitration provision in the credit services contracts covered “all claims based upon a violation of any state or federal constitution, statute or regulation,” Plaintiffs’ allegations regarding violations of CROA fell within the scope of the arbitration provision.

Credit Repair Organizations Act. There is presently a split between the circuits as to whether CROA provides consumers with the non-waivable right to bring claims in court as opposed to arbitration against credit repair organizations. As the Fifth Circuit had not yet addressed the issue, the Court followed the Third and Eleventh Circuits rather than the Ninth Circuit in concluding that CROA does not exclude arbitration as a means of settling disputes under the Act. However, because the U.S. Supreme Court granted certiorari in Compucredit to resolve this issue, the Court decided to stay its order compelling arbitration pending the Supreme Court’s holding in CompuCredit.

Plaintiff’s Conclusory and Unsworn Allegations are Insufficient to Survive Summary Judgment

Martin Thornthwaite — Mon, 07 Nov 2011 00:00:00 -0500

Nagim v. Equifax Info. Servs., LLC, 2011 U.S. Dist. LEXIS 49425 (D. Colo. May 9, 2011) & Nagim v. Equifax Info. Servs., LLC, 2011 U.S. Dist. LEXIS 49424 (D. Colo. Feb. 8, 2011)

Facts: Plaintiff filed for bankruptcy under Chapter 7 of the Bankruptcy Code on or about October 15, 2005. Other than a tax lien, Plaintiff’s debts were discharged as part of the bankruptcy on May 16, 2006. The tax lien was paid and released on August 13, 2008. Plaintiff claimed in a lawsuit filed on February 1, 2010, that Defendant CRAs reported “inaccurate entries on his credit report” and “depressed” his credit scores. Plaintiff argued that Defendants acted unlawfully under the FCRA by maintaining information in Plaintiff’s credit file that related to Plaintiff’s discharged debts and closed accounts despite Plaintiff’s disputes to have the information removed.

The CRAs filed motions for summary judgment on all of Plaintiff’s claims. The Magistrate found that the CRAs submitted evidence showing that Plaintiff’s credit files were accurate, complete, and verifiable and that Plaintiff failed to submit any competent summary judgment evidence in response. Thus, the Magistrate recommended that summary judgment be granted against Plaintiff on all of his claims. Plaintiff objected to the Magistrate’s recommendations, but on May 9, 2011, the Court accepted the Magistrate’s findings and conclusions and ordered that judgment be entered in favor of Defendants.

Summary Judgment. Once a defendant moving for summary judgment has made a “prima facie demonstration” that the information reporting on a plaintiff’s consumer report was accurate, complete, and verifiable, the burden shifts to the plaintiff to put forth sufficient evidence that a reasonable jury could find that information on his credit report was actually inaccurate, incomplete, or unverifiable.

Summary Judgment. A plaintiff that fails to submit any exhibits or sign his pleadings under penalty of perjury so that they can be construed as affidavits has not presented a court with any competent summary judgment evidence.

Plaintiff’s Conclusory and Unsworn Allegations are Insufficient to Survive Summary Judgment

Martin Thornthwaite — Mon, 07 Nov 2011 00:00:00 -0500

The FCRA Does Not Require Perfection, Only a Reasonable Response

Ginny Webb — Tue, 01 Nov 2011 00:00:00 -0500

Beachley v. PNC Bank, N.A., 2011 U.S. Dist. LEXIS 94236 (D. Md. Aug. 22, 2011)

Facts: Plaintiff sued PNC Bank, N.A. (“PNC”) alleging defamation, invasion of privacy, violation of the Maryland Fair Credit Reporting Act, that PNC failed in its duty to prevent foreseeable injury, and violation of § 1681s-2(b) of the FCRA. Beachley claimed that PNC reported inaccurate information about her credit history to CRAs, which in turn caused her to be denied credit and charged higher interest rate for credit that was granted. Her claims stemmed from an installment loan she took out with her husband. After they took out the loan, they separated and Beachley filed for Chapter 7 bankruptcy and her responsibility for the installment loan was discharged. The original loan was with Farmers & Mechanics Bank, which later merged into Fredericktown-Mercantile Bankshares, which later merged into PNC. At various times, all three banks were reporting the account to the CRAs. Beachley disputed the account directly with PNC. Later, she disputed the Farmers & Mechanics trade line with Equifax claiming it should be shown as included in her bankruptcy. In the same month, Beachley disputed the Fredericktown-Mercantile Bankshares trade line with Trans Union claiming she was not liable for the account. Both CRAs initiated investigations with PNC who timely responded. Plaintiff never disputed the PNC account with the CRAs. The Court granted PNC summary judgment on all of Beachley’s claims.

Furnisher Duties. Section 1681s-2(b) states that after receiving a notice pursuant to § 1681i(a)(2), a furnisher has a duty to: (1) investigate with respect to the disputed information; (2) to review all relevant information provided by the CRA; (3) to report the results of its investigation to the CRA; (4) if the investigation shows the disputed information is incomplete or inaccurate, to report those results to all other CRAs to which it furnished the original information; or (5) if the disputed information is incomplete or inaccurate or cannot be verified, either to (a) modify it, (b) delete it, or (c) permanently block reporting of it. All these duties must be completed within 30 days. In regard to Beachley’s two disputes, the Court stated that the FCRA does not require perfection, only a reasonable response. It held that PNC’s responses to Beachley’s two disputes to the CRAs were reasonable based on the information the CRAs gave to PNC.

Furnisher Duties. Beachley also attempted to show that PNC violated the FCRA in its response to her direct dispute to PNC and by reporting inaccurate information to the CRAs. A furnisher’s duties under § 1681s-2(b) do not arise until the consumer lodges a dispute with a CRA. Further, § 1681s-2(b) does not address the situation in which a consumer directly disputes account information with the credit grantor. Because Plaintiff never disputed the PNC account with the CRAs, there was no liability under the FCRA for these two claims.

Defamation. Section 1681h(e) states that to the extent a cause of action for common-law defamation is asserted, that cause of action is preempted by the FCRA except in cases where the false information is furnished with malice or willful intent to injure a consumer. Maryland has adopted the Supreme Court’s definition of malice in the context of defamation. In New York Times v. Sullivan, the Supreme Court held that malice can be established by evidence showing the defendants made a false statement “with knowledge that it was false or with reckless disregard of whether it was false or not.” In order to establish a willful intent to injure, Beachley was required to show that PNC knowingly and intentionally committed an act in conscious disregard for Beachley’s rights. The Court held that at most, Beachley’s evidence showed that PNC made errors in supplying the CRAs with incomplete and inaccurate information about the account. However, Beachley failed to meet the standard to establish a claim for defamation.

Background Check Company’s Investigative Efforts on Potential Job Candidate Do Not Violate the FCRA

Paul W. Sheldon — Tue, 01 Nov 2011 00:00:00 -0500

Shawn Smith v. Waverly Partners, LLC et al., 2011 U.S. Dist. LEXIS 90135(W.D.N.C. Aug. 12, 2011)

Facts: Plaintiff was contacted by Harrison Turnbull ("Turnbull"), a principal of Defendant Waverly Partners, LLC ("Waverly") to discuss her interest in a general counsel position with a company outside of North Carolina. Over the next two weeks, Plaintiff faxed her resume and a list of references to Waverly, had several in-depth telephone conversations about the position, and had an in-person interview with Turnbull. Soon thereafter, Turnbull sent various forms to Plaintiff, including a Fair Credit Reporting Act ("FCRA") consent form. Plaintiff signed and returned the form, which permitted verification of Plaintiff's former employment. Significantly, the consent form did not permit Waverly to contact Plaintiff's current employer, Cato. Turnbull told Plaintiff that no references would be contacted unless she was the final candidate for the job and then only the specific individuals listed as personal references would be contacted. Waverly hired Defendant AlliedBarton Security Services, LLC ("AlliedBarton") to conduct a background check on Plaintiff. AlliedBarton faxed a copy of the consent form to Cato, which resulted in her firing days later. Subsequently, Waverly informed Plaintiff that she was not considered for the general counsel position. AlliedBarton moved to dismiss Plaintiff's claim for invasion of privacy, claim for a violation of the FCRA, and a claim for unfair and deceptive trade practices. The Court granted the motion to dismiss. Plaintiff subsequently filed his Motion to Reconsider as to Plaintiff’s § 1681d(d) and § 1681b claims. The Court denied Plaintiff’s Motion.

Investigative Consumer Reports. Under § 1681a(e), an "investigative consumer report" is a consumer report in which information about a consumer is "obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information. In support of its ruling denying Plaintiff’s Motion to Reconsider, the Court found that AlliedBarton did not prepare an investigative consumer report on Plaintiff because it did not conduct any personal interviews of Plaintiff's neighbors, friends, or associates. AlliedBarton merely attempted to confirm Plaintiff's employment status with Cato which did not include conducting any personal interviews. Note: the Court also held that AlliedBarton did not violate Section 1681d(d) because Waverly obtained the requisite consent to inform Plaintiff and then provided the same to AlliedBarton. The consent form that Plaintiff signed and which Waverly provided to AlliedBarton specifically states "[s]everal consumer reports may be obtained on you . . . The reports may be investigative consumer reports . . . ."

Permissible Purpose. Plaintiff argued that AlliedBarton did not have a permissible purpose under §§ 1681b(a), 1681b(b)(1), and 1681b(b)(2) when it faxed Plaintiff’s consent form to Cato. None of these provisions, however, prohibit a consumer reporting agency (“CRA”) from communicating with a consumer's employer, which was the basis of Plaintiff’s contention under this claim.

Consumer Report. A consumer report is defined in § 1681a(d) as a communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor for establishing the consumer's eligibility for--(A) credit or insurance to be used for personal, family or household purposes; (B) employment purposes; or (C) any other purpose authorized under § 1681b. Note: The Court found that AlliedBarton merely provided Plaintiff's name, Social Security Number, prior addresses, date of birth, and driver's license information to Cato. Such minimal information does not bear on any of the seven enumerated factors in § 1681a(d), and is thus not a consumer report.

Plaintiffs’ California State Law Cause of Action Not Preempted by the FCRA

Marc F. Kirkland — Wed, 26 Oct 2011 00:00:00 -0500

Brown v. Mortensen, 51 Cal. 4th 1052 (Cal. 2011)

Facts: Plaintiffs sued Mortensen, a debt collector, alleging violations of the California Confidentiality of Medical Information Act, related to the debt collector’s disclosure of Plaintiffs’ and their children’s medical information to the CRAs. Mortensen argued that those claims were preempted because the operative complaint stated that Plaintiffs complained to the CRAs that the disclosures were inaccurate and, alternatively, because the Plaintiffs’ claims rest on the idea that Defendant misled the CRAs by incorrectly implying either that Plaintiffs’ children owed a debt or that their medical records were in some way relevant to Plaintiffs’ disputed debt. Defendant argued that Plaintiffs’ allegations brought the claim within § 1681s-2(a)’s regulation of furnisher accuracy and thus § 1681t(b)(1)(F)’s preemptive scope. The trial court and court of appeal concluded that Plaintiffs’ claims were preempted by the FCRA. The California Supreme Court reversed the lower courts and concluded that Plaintiffs’ state law claims, as pleaded, were not preempted because they involved issues neither of accuracy nor of credit dispute resolution and therefore did not involve the same subject matter as § 1681s-2.

Preemption. The Court determined that Defendant’s argument mistook the nature of a Confidentiality Act claim, both in the abstract and as pleaded. That the information disclosed was inaccurate is not an element of a claim; instead it requires only that the disclosure, whether true or not, occurred without authorization. Plaintiffs’ causes of action repeatedly alleged that the disclosures occurred, were unauthorized, and injured Plaintiffs. Under such claim Plaintiffs are not required to show that the disclosures were inaccurate or misleading. Nor did the Complaint establish that any of Defendant’s disclosures were made in the course of responding to official notice of a credit information dispute, such that § 1681s-2(b) would apply. Therefore, the Court concluded that Plaintiffs’ claims were not preempted.

Court Denies Credit Furnisher’s Motion For Summary Judgment In Part Because Credit Furnisher’s Argument Is More Suited For A Motion To Dismiss

Ryan Langston — Wed, 12 Oct 2011 00:00:00 -0500

Cosmas v. American Express Centurion Bank, 2010 U.S. Dist. LEXIS 58780 (D. N.J. June 11, 2010)

Facts: Plaintiff originally filed suit against American Express Centurion Bank (“Defendant” or “AMEX”) alleging claims under the FCRA and various state law claims. Plaintiff was issued a Business Gold Card as an employee for Tri State Environmental Co., Inc. (TriState”). Plaintiff had the card for nine years and TriState paid the bill each month. At the time of TriState’s bankruptcy, the card had a $48,000 balance. AMEX hired a collection agency to collect the unpaid balance. The collection agency filed suit against Plaintiff in state court. Plaintiff prevailed and the state court held that he was not liable for the business debt. However, AMEX continued to report the account as delinquent. Although Plaintiff allegedly wrote multiple letters to AMEX and Equifax, AMEX did not cease reporting the derogatory account. Plaintiff also had a personal credit card account issued by AMEX on which he had accumulated over 600,000 Membership Reward points. Correspondence from AMEX indicated that AMEX revoked Plaintiff’s Reward points because he failed to pay the business card balance.

Defendant moved for summary judgment on all of Plaintiff’s claims, and Plaintiff moved for partial summary judgment on his claims under the FCRA. The Court granted Defendant’s motion as to Plaintiff’s first count asking for specific performance, but denied AMEX’s motion as to Plaintiff’s FCRA state-law claims. The court denied without prejudice Defendant's motion for summary judgment on Plaintiff’s state law claims and directed Defendant to file a motion within fourteen (14) days addressing whether the state law claims were preempted. Plaintiff’s motion for partial summary judgment was also denied.

Statute of Limitations. AMEX contends that Plaintiff’s claims are time barred under § 1681pbecause Plaintiff did not file suit until three years after discovering the delinquent account. The Court held, however, that Plaintiff’s claims were based on AMEX's continued reporting of the delinquency after entry of the state court judgment in August of 2006. Counting from the August 2006 date, the Court held that Plaintiff’s filing date of November 2007 was within the FCRA limitations period.

Credit Furnisher. AMEX argued that the FCRA applies only to CRAs and that it could not be held liable because it did not provide a consumer report as required under § 1681s-2(a). The Court disagreed, holding that even though Plaintiff did not cite to a specific subsection of the FCRA, it was clear from his pleading that Plaintiff alleged violation of § 1681s-2(b).
Summary Judgment. AMEX further argued that Plaintiff’s FCRA claim was insufficiently pled under Rule 8(a)(2), because he failed to cite the specific FCRA subsection applicable to AMEX's actions. The Court disagreed stating that such a challenge may be raised on a Rule 12(b)(6) motion to dismiss, but is inappropriate at summary judgment. Additionally, the Court found AMEX’s argument disingenuous because it was evident from the record that AMEX was well aware of the basis for Plaintiff's claims.

Reasonable Procedures. To succeed under the FCRA, Plaintiff must not only demonstrate that AMEX received notice of his dispute, but also that AMEX failed to conduct a reasonable investigation and correct any inaccurate information uncovered by the investigation. Whether a furnisher has conducted a reasonable investigation is generally a question of fact for the jury. Additionally, the Court held that a fact issues existed as to whether Plaintiff suffered damages from AMEX’s alleged FCRA violation. Therefore, the Court denied Plaintiff’s motion for partial summary judgment.

Court Allows FACTA Class Action to Proceed but Cautions that Even the Minimum Statutory Damages Award Would Likely Violate Defendant’s Due Process Rights

Martin Thornthwaite — Mon, 10 Oct 2011 00:00:00 -0500

Aliano v. Joe Caputo & Sons – Algonquin, Inc., 2011 U.S. Dist. LEXIS 48323 (N.D. Ill. May 5, 2011)

Facts: On February 12, 2008, Plaintiff purchased groceries at Defendant’s market by using her Discover credit card. Defendant provided her a receipt that showed every digit of her credit card in violation of the Fair and Accurate Credit Transactions Act (“FACTA”). As a result, Plaintiff filed a putative class action lawsuit against Defendant alleging willful violations of FACTA and seeking statutory damages of $100 to $1,000 per FACTA violation plus attorneys’ fees and costs. On September 21, 2010, the Court certified the putative class. Defendant alleged that it did not know its software failed to comply with FACTA’s truncation requirements until it received the lawsuit. The Court denied Defendant’s motion for summary judgment because there was a genuine issue of material fact as to whether Defendant knew about FACTA’s truncation requirements in September 2007.

FACTA. Pursuant to FACTA, persons and entities that accept credit and debit card payments for the transaction of business may not print more than “the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.”

Damages. FACTA statutory damages are limited to willful noncompliance under § 1681n(a), which includes both knowing and reckless behavior. The Court found that because Defendant admitted in its interrogatory answers (although Defendant later changed its response) that it first learned of credit and debit card truncation requirements in September 2007, there was a fact issue as to whether Defendant’s behavior constituted a willful violation of FACTA.

Damages. The Court put the parties on notice that given the minimum statutory damages award for willful FACTA violations coupled with the number of potential class members in this case, the damages could range between $29.4 million and $294 million. The Court noted that such a damage award where Plaintiff sought no actual damages would violate Defendant’s due process rights and would be “shocking, grossly excessive, and punitive in nature.”

Court Approves Class Action Settlement and Award of Attorney’s Fees and Costs

Marc F. Kirkland — Fri, 07 Oct 2011 00:00:00 -0500

Chakejian v. Equifax Info. Servs. LLC, 2011 Dist. LEXIS 63455 (E.D. Pa., June 14, 2011)

Facts: Plaintiff brought a §1681i claim related to Equifax’s standard reinvestigation procedures letter related to a reinvestigation of public record information appearing on his Equifax credit file. Equifax employed an independent records vendor to go to the original source of information, review the information, and report the results to Equifax. Equifax then responded directly back to Plaintiff that “it contacted each source directly,” and indicated it reviewed Plaintiff’s “bankruptcy information” and “verified” that the bankruptcy item belonged to him. Plaintiff claimed that Equifax’s reinvestigation letter misrepresented the source of Equifax’s public records information and misstated the result of its reinvestigation. After some discovery, Plaintiff sought and was granted certification to move forward as a class action claim. In the litigation that followed, the parties engaged in significant discovery and the case was eventually consolidated with two similar class actions pending in New Jersey and Virginia. In August 2010, the parties agreed to basic terms of settlement and submitted the settlement for the Court’s review. The settlement included the following terms: an agreement that Equifax would cease the practice giving rise to the suit; each class member would receive eighteen months of credit monitoring services free of charge; class members who did not opt out would be bound by the terms of the settlement with regard to statutory damages under the FCRA, retaining their rights to bring individual suits against Equifax for any actual damages sustained; Equifax making payment to class counsel in the amount of $1,075,000, subject to court approval. After review, the Court: certified the class; found the settlement to be fair, reasonable, and adequate; approved the awards to the attorneys and named Plaintiffs; and entered a final judgment dismissing the case pursuant to the terms of the parties’ agreement.

Class Certification. The Court found that the class, which consisted of all persons in New Jersey, Pennsylvania and Virginia who were sent a letter similar to the one identified in Plaintiff’s Complaint, for time periods specific to each state, met the requirement for class certification under Federal Rules of Civil Procedure 23(a) and 23(b). Specifically the class met the requirements of numerosity, commonality, typicality, and adequacy outlined by 23(a) and the predominance and superiority requirements of 23(b).

Settlement Approval. The Court, as required by the Federal Rules, also examined the proposed settlement and determined that was fair, reasonable and adequate. In the Third Circuit that determination is assessed according to the factors listed in Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975) and relevant factors outlined in In re Prudential Ins. Co. Am. Sales Practice Litig., 148 F.3d 283, 309 (3d Cir. 1998). Here the Court considered the following in approving the settlement: 1) the complexity, expense, and likely duration of the litigation; 2) the reaction of the class to settlement; 3) the stage of the proceedings and the amount of discovery completed; 4) the risks of establishing liability; 5) the risks of establishing damages; 6) the risks of maintaining the class action through the trial; 7) the ability of the defendants to withstand a greater judgment; 8) the range of reasonableness of the settlement fund in light of the best possible recovery and all the attendant risks of litigation; and 9) the Prudential considerations.

Attorney’s Fees and Costs. Because the FCRA includes a mechanism for attorneys’ fees, the Court employed the lodestar method in approving the attorneys fees requested by the attorneys for the class and then cross-checked that with the percentage-of-recovery method which is generally favored in cases involving a common fund. The lodestar award is calculated by multiplying the number of hours reasonably worked on a client’s case by a reasonable hourly billing rate for such services based on the given geographical area, the nature of the services provided, and the experience of the attorneys.

Award to Class Representatives. The Court also approved the $15,000 individual settlement award for each representative plaintiff. The Court found that the representative Plaintiffs merited incentive awards because: 1) they played a role in enforcement of the FCRA; 2) they brought substantial benefit to a large group of people; 3) they participated substantially and crucially in the litigation; 4) gave up their right to bring suit for actual damages; and 4) the $15,000 sum is within the range of incentive awards recently accepted by other courts.

Employee Applicant Successfully Disputes Entries on Background Report, But Is Disqualified Anyway

Paul W. Sheldon — Mon, 03 Oct 2011 00:00:00 -0500

Eric C. Johnson v. ADP Screening and Selection Services, Inc. et al., 2011 U.S. Dist. LEXIS 18361(D. Minn. Feb. 24, 2011)

Facts: Plaintiff claimed that Defendant employment agency Robert Half International, Inc. (“RHI”) violated the FCRA following the running of a background check on him as a prospective employment candidate. The background report stated that Plaintiff had numerous criminal convictions in Minnesota, Texas and Virginia. RHI sent Plaintiff a letter stating that it had placed his employment application on hold as a result of the report and included a copy of it and a summary of rights under the FCRA. The notification letter further stated that Plaintiff could dispute the information, and that Plaintiff had ten business days in which to submit a revised report to RHI if the dispute resulted in a change to his background report. Plaintiff subsequently disputed the report. Plaintiff was informed that the investigation might take thirty days. Soon thereafter, and before the investigation was completed, RHI sent a letter to Plaintiff stating that he had been disqualified as an employment candidate. Defendant ADP Screening and Selection Services, Inc. (“ADP”) subsequently sent letters to Plaintiff indicating that the criminal records from Texas and Virginia would be removed from his background report. ADP also informed RHI of this investigation result. Despite this result, RHI decided not to overturn its decision to disqualify Plaintiff. Plaintiff claimed that RHI violated 15 U.S.C. § 1681b(b)(3) by disqualifying him fourteen days after it sent the required FCRA notice instead of waiting a longer period which would have been “reasonable” under the statute. Defendant RHI filed its summary judgment as to Plaintiff’s claim, claiming that the FCRA does not mandate a waiting period between the notice and subsequent adverse action. The Court agreed and granted RHI’s motion in its entirety.

Pre-Adverse Action Notice Requirements.The FCRA is not an employment statute, but it imposes a duty on employers to provide prospective employees with information about their consumer reports. Thus, under 15 U.S.C. § 1681b(b)(3)(A), before a person takes an adverse employment action against a consumer based in whole or in part on a consumer report, the person intending to take such adverse action shall provide to the consumer to whom the report relates a copy of the report and a description in writing of the rights of the consumer.

Adverse Action Notice Requirements. The FCRA only requires a person intending to take adverse action to provide a copy of the consumer report and FCRA rights before taking action. It does not mandate a waiting period between the notice and the adverse action. Note: the Court noted that Congress's use of the word "before" shows that there must be some time between notice and action.

Adverse Action Notice Requirements. Although Plaintiff argued that the time between notice and action must be a "reasonable" amount of time, and raised the point that the FCRA gave credit reporting agencies thirty days in which to investigate disputed information, the Court found that Plaintiff’s interpretation would create an unreasonable constraint on employers. Specifically, the Court noted that if Plaintiff’s argument was to be adopted, each time an employer wanted to hire, it would be prevented from taking action if the consumer report of any applicant -- even one that it had no intention of hiring -- contained information that reduced that applicant's competitiveness. The employer would then have to place the entire process on hold and leave the position unfilled until the reporting agency had thirty days to investigate. Likewise, Defendant RHI’s interpretation rendered the term "before" meaningless, because if adopted, an employer could deliver the notice and then take adverse action within seconds. Note: The Court did not adopt either interpretation, and found that waiting 4 days (which is what took place between Plaintiff and RHI) provided Plaintiff ample opportunity to dispute the report, even under a “reasonable” standard. The Court also held that nothing in the FCRA required an employer to consider any correction that a reporting agency might make based on an investigation.

Newsletter: September 14, 2011

Paul W. Sheldon — Wed, 14 Sep 2011 00:00:00 -0500

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Receipt Received Via Email Is Not “an Electronically Printed” Receipt Under FACTA

Ryan Langston — Wed, 14 Sep 2011 00:00:00 -0500

Simonoff v. Expedia, Inc., 634 F.3d 1202, 2011 U.S. App. LEXIS 10374 (9th Cir. 2011)

Facts: Defendant Expedia, Inc. emailed Plaintiff a receipt, which included the expiration date of Plaintiff’s credit card. Plaintiff alleged that the receipt he received via email violated the Fair and Accurate Credit Transactions Act (“FACTA”), an amendment to the FCRA. The lower court dismissed Plaintiff’s claims under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. The 9th Circuit confirmed the dismissal on appeal.

FACTA. Pursuant to § 1681c(g)(1) of FACTA, “no person that accepts credit cards … for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” The question considered by the Court was FACTA’s interpretation of the words “print” and “electronically printed” in connection with an emailed receipt. Under FACTA, a printed receipt is a receipt that exists in physical form, not one displayed on a computer screen. An electronically printed receipt is simply a receipt printed with an electronic device. The Court concluded that a receipt that is transmitted to the consumer via email and then digitally displayed on the consumer’s screen is not an “electronically printed” receipt and is not regulated by FACTA.

Plaintiff Need Not Prove That Defendant Is A CRA Under The FCRA To Survive A Motion to Dismiss

Ryan Langston — Wed, 07 Sep 2011 00:00:00 -0500

Robins v. Spokeo, Inc., 2011 U.S. Dist. LEXIS 54102 (C.D. Cal. May 11, 2011)

Facts: On January 27, 2011, the Court dismissed Plaintiff's Complaint for lack of standing and gave Plaintiff twenty days to amend to meet the standing requirements. On February 16, 2011, Plaintiff filed an amended complaint and alleged that Defendant operated its website, Spokeo.com, in violation of the FCRA. Specifically, Plaintiff claimed that reports generated by Defendant contained inaccurate consumer information that was marketed to entities performing background checks. As a result of Defendant's FCRA violations, Plaintiff alleged that Defendant caused him actual and/or imminent harm by creating, displaying, and marketing inaccurate consumer reporting information about Plaintiff. In response to Plaintiff’s amended complaint, Defendant brought a second Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(1) and (12(b)(6) arguing that it could not be sued for FCRA violations because it was not a consumer reporting agency (“CRA”). Defendant’s Motion to Dismiss was denied.

Subject Matter Jurisdiction. Defendant argued that the Court did not have subject matter jurisdiction to consider Plaintiff's claims. The Court disagreed. A plaintiff has Article III standing to sue where the plaintiff alleges facts showing that (1) it has suffered an injury in fact; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely that the injury would be redressed by a favorable decision. In light of Plaintiff's amended complaint, the Court found that Plaintiff alleged sufficient facts to confer Article III standing. Specifically, Plaintiff alleged that Defendant marketed inaccurate consumer reporting information about Plaintiff in violation of the FCRA, which was likely to be redressed by a favorable decision from this Court. Thus, Plaintiff established the requisite standing to sue and the Court had subject matter jurisdiction over Plaintiff's claims.

Motion to Dismiss. Alternatively, Defendant moved to dismiss Plaintiff's amended complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim, asserting, among other things, that Defendant was not a CRA under the FCRA.

Consumer Reporting Agency. Defendant contended that it was not a CRA as defined by 15 U.S.C. § 1681a(f) because it did not regularly engage in providing consumer credit information for the purpose of furnishing consumer reports. Conversely, Plaintiff alleged that Defendant fell within the scope of FCRA because Defendant collected and created consumer information consisting of consumers’ economic wealth and creditworthiness for the purpose of furnishing it to paid subscribers who regularly provide monetary fees in exchange for Defendants s reports. The Court denied Defendant’s Motion to Dismiss Plaintiff’s FCRA claims holding that Plaintiff’s complaint needed only to contain sufficient factual matters that, if accepted as true, would state a claim to relief that was plausible on its face. Plaintiff did not need to prove that Defendant was in fact a CRA at the initial dismissal phase of the litigation. Thus, Plaintiff’s allegations that Defendant regularly accepted money in exchange for reports that contained data and evaluations regarding consumers’ economic wealth and creditworthiness were sufficient to support a plausible inference that Defendant’s conduct fell within the scope of the FCRA.

Discussing An Employment Applicant’s Financial Issues With Co-Workers, Even After Obtaining A Proper Credit Report On Such Applicant, Is Not A Proper Use Under the FCRA’s Permissible Purpose Statute

Paul W. Sheldon — Mon, 15 Aug 2011 00:00:00 -0500

K.H. Jane Doe v. Nicole Saftig, City of New Berlin, et al., 2011 U.S. Dist. LEXIS 50713 (E.D. Wis. May 11, 2011)

Facts: Plaintiff claimed that Defendant police officer Nicole Saftig (“Saftig”) violated her rights under the FCRA, as well as under other federal and state law statutes, when she disclosed the Plaintiff's credit information without a permissible purpose during Plaintiff’s employment screening process for a position with the local police department. During the screening process, Saftig approached various police department personnel and discussed Plaintiff’s credit information including information that Saftig had completed the background investigation, that the Plaintiff told her that during the background check, they would find out she had a loan or was in debt because of her stomach surgery in Mexico, that she was to have the procedure redone and that insurance did not cover the procedure, which put Plaintiff in debt. After completing a second interview, and upon completion of the investigatory process, the police department hired the Plaintiff. Some time later, Plaintiff ended her employment due to what she claimed, in part, was the alleged stress caused by Saftig’s disclosure of her credit information to other police department personnel. Saftig filed her motion for summary judgment, claiming that Plaintiff did not have a cause of action under the FCRA because Saftig did not qualify as a consumer reporting agency (“CRA”) and that Saftig had a permissible purpose under § 1681b(a). The Court disagreed and denied the motion as to the FCRA claim.

Permissible Purpose. Contrary to Saftig’s position, the FCRA’s permissible purpose statute found at § 1681b(f) applies to users of credit reports as well as CRAs and subjects them to potential liability for actual damages, attorneys’ fees, and costs. Congress amended the FCRA in 1996 which included the adding of § 1681b(f). The Court, therefore, found that based on this amendment, the FCRA imposes liability for using or obtaining a consumer report in violation of the FCRA, not simply for releasing or disseminating a report.

Permissible Purpose. There are three requirements that a plaintiff must establish to prevail on a claim of improper use or acquisition of a consumer report: (1) there was a “consumer report” within the meaning of the statute; (2) the defendant used or obtained it; and (3) the defendant did so without a permissible statutory purpose.

Permissible Purpose. The FCRA provides several exhaustive "permissible purposes" including "using the information for employment purposes" under § 1681b(a)(3)(B). The Court noted that while this provision may appear to protect Saftig because the Plaintiff’s consumer report was obtained and used for an employment purpose, the act alleged in this case - Saftig's discussion of the Plaintiff's financial issues with coworkers – was not included in the list of enumerated permissible purposes. Because of this, it was an impermissible purpose and Saftig would therefore be liable for using a consumer report for this purpose under the FCRA.

Furnisher Complies With Its Investigation Duties When Notified Directly By A Consumer Reporting Agency

Paul W. Sheldon — Mon, 15 Aug 2011 00:00:00 -0500

Glen Llewellyn v. Allstate Home Loans, Inc. d/b/a Allstate Funding, et al., 2011 U.S. Dist. LEXIS 63607 (D. Co. June 16, 2011)

Facts: Plaintiff brought a FCRA claim and Outrageous Conduct claim against Defendants Ocwen Loan Servicing, LP (“Ocwen”) and its parent company, Nomura Credit and Capital, Inc. (“NCCI”) because of their negative credit reporting of Plaintiff’s mortgage payment history to the consumer reporting agencies (“CRAs”). Plaintiff refinanced a mortgage loan, but the company servicing the original loan, Ocwen, did not receive the refinancing proceeds intended to pay off the loan. When Plaintiff understandably stopped making monthly payments on the original loan, Ocwen understandably began treating the original loan as in default and started reporting negative information to the CRAs. Plaintiff's FCRA claims under § 1681s-2(b) alleged that Ocwen furnished inaccurate credit information to the CRAs and failed to conduct a reasonable or timely investigation after receiving notice from the CRAs that Plaintiff had disputed the credit information. Ocwen and NCCI filed their motion for summary judgment, claiming that such FCRA claims should be dismissed because they accurately reported the loan as being in default (because Ocwen was never paid), and that Ocwen's investigation complied with the statute. The Court agreed.

Furnisher Duty. Ocwen's duty under § 1681s-2(b) to conduct an investigation was not triggered until it was notified by a CRA of a dispute regarding information previously furnished to the CRA -- not when Plaintiff contacted Ocwen disputing the information. The vast majority of Courts have concluded that the furnisher’s duty to investigate disputes under § 1681s-2(b) arise only when the furnisher is notified of the dispute by a CRA -- not when the borrower directly contacts the furnisher. Note: The Court found as a matter of law that when Ocwen was notified directly by the CRA of a dispute, it conducted an investigation in compliance with § 1681s-2(b)(1)(A).

Actual Damages Required. A plaintiff pursuant to § 1681o(a) may recover his actual damages caused by a defendant's negligent violations of the FCRA. Where a plaintiff fails to meet his burden of showing actual damages caused by a FCRA violation, summary judgment is appropriate. Note: In granting Ocwen’s motion, the Court found that any decline in Plaintiff's creditworthiness was not caused by Ocwen's reporting but instead on Plaintiff defaulting on sixteen mortgage loans, that Plaintiff was still afforded significant credit during the relevant time period, and that there was no evidence that Plaintiff was ever denied credit during the relevant time period.

Emotional Distress Damages. A plaintiff's own testimony can be sufficient in itself to establish emotional damages under the FCRA, but the testimony must contain more than conclusory allegations of harm and causation. Actual damages under the FCRA may include humiliation and embarrassment, even if the consumer suffered no out-of-pocket losses. Note: Plaintiff's declaration detailed severe physical, emotional, and psychological conditions he was experiencing during the general time period at issue. The Court noted, however, that during this same time period Plaintiff defaulted on sixteen mortgage loans which destroyed his business and livelihood. In light of these facts, the Court concluded that Plaintiff’s unsupported statements attributing these medical conditions to Ocwen's conduct were too conclusory to show that Ocwen caused Plaintiff's emotional harm.

Colorado’s Outrageous Conduct Claim. Plaintiff's Outrageous Conduct claim against Ocwen and NCCI alleged that Defendants "engaged in extreme and outrageous conduct by knowingly providing false credit information to several credit bureaus." Under Colorado law, the elements of the tort of outrageous conduct are: (1) the defendant engaged in extreme and outrageous conduct; (2) recklessly or with the intent of causing the plaintiff severe emotional distress; and (3) causing the plaintiff severe emotional distress.

Colorado’s Outrageous Conduct Claim. The level of outrageousness required is extremely high and must go beyond all possible bounds of decency and must be considered as atrocious and utterly intolerable in a civilized society. While the Court found that Ocwen’s inactivity following certain phone calls by Plaintiff could amount to negligence, it would serve as no basis for a claim of Outrageous Conduct.

Plaintiff’s FCRA Claim for Failure to Issue an Adverse Action Notice Dismissed

Marc F. Kirkland — Fri, 05 Aug 2011 00:00:00 -0500

Neals v. Mortg. Guar. Ins. Corp., 2011 U.S. Dist. LEXIS 53183 (W.D. Pa. Apr. 6, 2011)

Facts: Plaintiff filed a class action complaint against Mortgage Guaranty Insurance Corporation (“MGIC”) claiming that MGIC has a policy and practice of denying private mortgage insurance (“PMI”) to persons on short term disability leave, including women on maternity leave, in violation of the Fair Housing Act and the Equal Credit Opportunity Act. Plaintiff also claimed that MGIC violated § 1681m of the FCRA by failing to issue notice of its adverse action taken against her in connection with her loan application. Plaintiff’s claims related to her mortgage application for which she claimed the Defendant discriminated against her on the basis of her sex and familial status when it declined to issue PMI to her lender while she was on maternity leave. Defendant moved for dismissal of Plaintiff’s FCRA claim on the grounds that the FCRA does not provide a private right of action for claims under § 1681m. The Magistrate Judge agreed and recommended that Plaintiff’s FCRA claim be dismissed.

FCRA. Section 1681m (a) provides that “if any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall – (1) provide oral, written, or electronic notice of the adverse action to the consumer.” The Court found that Plaintiff’s claim for an alleged notice violation under § 1681m was barred because the FCRA does not provide a private right of action for that claim.

Employee Applicant Confuses FCRA Employer Notice Requirements In Adverse Use Of Credit Report

Paul W. Sheldon — Thu, 04 Aug 2011 00:00:00 -0500

John D. Reinke v. Cargill, Inc., 2011 U.S. Dist. LEXIS 66313 (E.D. Wis. June 21, 2011)

Facts: Plaintiff claimed that Defendant Cargill, Inc. (“Cargill”) violated his rights under the FCRA when it rescinded an offer of employment based on information obtained from a consumer report. Plaintiff began working as a temporary employee at Cargill and applied three months later for a permanent position. Upon receiving the application, Cargill obtained Plaintiff’s consumer report that contained personal financial, credit and other private information pertaining to him, including his conviction record. The consumer report inaccurately stated that the Plaintiff was convicted of intentional homicide when in fact he was convicted of reckless homicide. Cargill mailed the Plaintiff a conditional offer letter stating that it had obtained a consumer report on him, and enclosed a copy of the consumer report and a statement of the Plaintiff's rights under the FCRA. The letter did not identify from which reporting agency the report came or any information on how to contact the agency. It also did not state that Cargill could rescind its offer of employment or take any other adverse action on his employment based on the consumer report. In the days that followed, Cargill rescinded its offer of employment to the Plaintiff. Plaintiff filed suit, claiming among other allegations, (1) that Cargill failed to notify Plaintiff that it may take adverse action on the Plaintiff’s employment status based on information contained in the report; (2) that Cargill failed to identify the person or agency that provided the consumer report, and (3) that Cargill failed to provide information about how the Plaintiff could contact the person or agency that provided the report. Cargill filed its partial motion to dismiss all 3 of these claims. The court agreed and granted Cargill’s motion in its entirety.

Motion to Dismiss Response Requirements. If a defendant seeks a motion to dismiss, the plaintiff must support in its response to the motion any and all claims it seeks to advance at trial. Any allegation not supported in the plaintiff's response to the defendant's motion to dismiss is waived. Accordingly, because Plaintiff did not respond to Cargill’s motion to dismiss on the three claims, the court found that Plaintiff waived his right to have those claims go forward in the litigation. Note: regardless of this ruling, the Court nevertheless found it important to address the merits of Cargill’s motion in granting it in its entirety.

Pre-Adverse Action Notice Requirements. Pursuant to § 1681b, before taking an adverse action based on an applicant’s consumer report, the employer must provide the applicant with (1) a copy of the report, and (2) a description in writing of the applicant's rights under the FCRA. If the employer fails to provide the applicant with either of these two items, either willfully or negligently, the applicant may file a private suit against the employer.

Post-Adverse Action Notice Requirements. Pursuant to § 1681m(a)(1)-(2), if an employer takes adverse action against the applicant by refusing to hire him, the employer must provide the applicant with: (1) notice of the adverse action; (2) the contact information for the consumer reporting agency that furnished the report and a statement that the reporting agency did not make the decision to take adverse action; and (3) notice of the consumer's rights to obtain a free copy of the report and to dispute the accuracy or completeness of any information. If the employer fails to provide the applicant with any of this information, the applicant may file grievances only with federal agencies or officials identified by the FCRA. The applicant may not file a private suit against the employer. Note: The Court noted that in granting Cargill’s motion, the Plaintiff appeared to confuse pre-adverse action notice requirements and post-adverse action notice requirements under the FCRA, alleging that Cargill did not follow post-adverse action notice requirements in the pre-adverse action stage. Accordingly, even when taking all inferences in favor of the Plaintiff, the Court found that the disputed claims failed as a matter of law.

ClosetMaid’s Failure To Provide Stand-Alone Disclosure Forms to Employment Applicants in Obtaining Credit Report Authorization Is Enough To State A Claim Under the FCRA

Paul W. Sheldon — Wed, 03 Aug 2011 00:00:00 -0500

R. Cathy Reardon v. ClosetMaid Corporation, 2011 U.S. Dist. LEXIS 45373 (W.D. Pa. Apr. 27, 2011)

Facts: Plaintiff brought this FCRA action against Defendant, ClosetMaid Corporation ("ClosetMaid"), claiming that ClosetMaid had a standard practice of disqualifying applicants for employment on the basis of consumer reports in violation of the FCRA. Specifically, she alleged that ClosetMaid relied upon information in consumer reports obtained from LexisNexis without obtaining the appropriate disclosures from employment applicants. She also alleged that ClosetMaid failed to provide employment applicants a reasonable time to dispute the information contained in the consumer reports prior to refusing to hire them. Plaintiff moved for class certification. After a hearing, the court found that Plaintiff had stated a claim under the FCRA and that class certification would be allowed.

Permissible Purpose. Pursuant to § 1681a(h), credit reports may be issued to employers for "employment purposes." An employment purpose is defined as a purpose relating to the evaluation of "a consumer for employment, promotion, reassignment or retention as an employee.”

Notice Requirements. Pursuant to § 1681b(b)(4), prior to procuring a consumer report on an applicant for employment, an employer must: (1) provide a clear and conspicuous disclosure from each applicant for whom a consumer report may be procured; and (2) obtain the applicant’s authorization, in writing. Plaintiff argued that ClosetMaid's disclosure forms were not stand alone documents as required under the statute, but was a part of an application form that contained multiple disclosures and releases. Note: the Court found Plaintiff’s argument “novel” and found it was enough to state a claim under the FCRA.

Notice Requirements. The FCRA further requires that an employer provide an applicant with advance notice of the employer's intention to deny employment on the basis of information contained in the credit report. Plaintiff argued that ClosetMaid was required to provide her at least five (5) business days to dispute the derogatory information in her credit report. Although the FCRA is silent as to the amount of time an employer is required to provide an applicant with notice prior to refusing to hire her on the basis of derogatory credit information, Plaintiff relied on an informal advice letter issued by the Federal Trade Commission ("FTC") in 1997, which stated that the FTC considered five (5) days notice to be a reasonable time period as required by the statute (which ClosetMaid did not satisfy). Note: the Court stated that the FTC informal advice letter was worthy of “respect,” and while five (5) days may not be required as a matter of law, the Court found that in its class certification analysis, a jury could find that Plaintiff was entitled to more time than she was given. The Court was careful to also note that this finding was without prejudice as to ClosetMaid’s right to raise the same issues in a motion for summary judgment at a later time.

Pleas Of Insanity and Old Age Cannot Save Plaintiff’s Claim From The FCRA’s Statute of Limitations

Ryan Langston — Mon, 25 Jul 2011 00:00:00 -0500

Andresakis v. Capital One Bank (USA) N.A., 2011 U.S. Dist. LEXIS 29886 (S.D.N.Y. Mar. 23, 2011)

Facts: Pro se Plaintiff filed a lawsuit against Defendant Capital One Bank (USA) N.A. ("Capital One") alleging that Capital One supplied false information to a CRA resulting in Plaintiff’s inability to obtain a mortgage. Plaintiff’s claims were based on the FCRA. Capital One moved to dismiss Plaintiff's claims as barred by the FCRA’s statute of limitations, which was granted by the court.

Statute of Limitations. The FCRA requires that any "action to enforce any liability created under this subchapter...be brought...not later than the earlier of ... 2 years after the date of discovery by the plaintiff of the violation that is the basis for such liability; or...5 years after the date on which the violation that is the basis for such liability occurs." 15 U.S.C. § 1681p. Plaintiff argued that his FCRA claims is not time barred because he discovered the facts that supported his claim in 2009 or, in the alternative, the Statute of Limitations should have been tolled. The Court held that there was no basis for Plaintiff to argue that he discovered the FCRA violation within the two year statute of limitations. The latest that Plaintiff could allege a violation is when he was allegedly denied a mortgage in November 2006. Plaintiff did not file suit until 2009, more the two years later. Since Plaintiff failed to allege a possible FCRA violation within the statute of limitations, his FCRA claim must be dismissed as a matter of law.

Statute of Limitations. In the alternative Plaintiff sought to toll the running of the statute on the grounds of his age, disability or infirmity. The Court rejected this argument holding that Plaintiff failed to allege sufficient facts to toll his claims under New York CPLR § 208, which provides for tolling on the grounds of a “disability because of infancy or insanity.”

A Request For Reinvestigation Without A Dispute of Information Is Not Enough To Trigger CRA’s Duty

Ryan Langston — Mon, 25 Jul 2011 00:00:00 -0500

Gagliardi v. Equifax Info. Servs, LLC, 2011 U.S. Dist. LEXIS 10634 (W.D. Pa. Feb. 3, 2011)

Facts: Columbia Gas of Pennsylvania ("Columbia"), Plainitff’s gas provider, terminated Plaintiff’s gas service for non-payment of past due invoices totaling $1,487.70. Columbia sent Plaintiff a denial letter stating that he failed to meet its credit guidelines based on a credit score obtained from Equifax and further stated that he was required to pay the past due amount plus an additional deposit and fees if he wanted to restore the gas service to his residence. Plaintiff filed the above referenced lawsuit against Columbia and Equifax on November 2, 2009. Plaintiff settled his claims with Columbia Gas and then filed an amended complaint against Equifax alleging violations of the RICO Act, the FCRA, and Pennsylvania state law. In response, Equifax filed a Motion for Summary Judgment.

RICO Act. The only instance of racketeering activity alleged by Plaintiff was the letter he received from Columbia stating that Plaintiff failed to meet its credit guidelines. The Court granted summary judgment on this issue because Plaintiff did not allege at least two acts of racketeering as required by 18 U.S.C. § 1961(5), and because there was no evidence that Equifax played a role in Columbia’s decision to discontinue gas service.
FCRA. When a consumer reporting agency (“CRA”) is notified pursuant to 15 U.S.C. § 1681s-2(a)(3) that information furnished to the CRA "is disputed by the consumer," 15 U.S.C. § 1681c(f) requires the CRA to "indicate that fact in each consumer report that includes the disputed information.” Thus, in order to establish that Equifax violated § 1681c(f),, Plaintiff needed to show (1) that Columbia furnished disputed information to Equifax; and (2) that Columbia notified Equifax that the information being furnished was in dispute. Plaintiff failed to provide evidence of either prong.

FCRA. Section 1681d contains provisions governing requests for, and the preparation of, investigative consumer reports as defined in 15 U.S.C. § 1681a(e). Plaintiff provided no evidence to suggest that he was the subject of an investigative consumer report. The most that can be inferred from the letter he received from Columbia is that Equifax may have communicated factual information concerning Plaintiff’s credit score to Columbia. Plaintiff could not show that an investigative consumer report was created and therefore failed to establish a violation of § 1681d.

FCRA. Section 1681e(b) requires a CRA preparing a consumer report to "follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates." In order to establish an actionable violation of § 1681e(b), Plaintiff must show that: (1) a consumer report prepared by Equifax contained inaccurate information about him; (2) the inaccuracy was attributable to Equifax's failure to "follow reasonable procedures to assure maximum possible accuracy of the information" contained in the consumer report; (3) he sustained an injury; and (4) his injury was caused by Equifax's inclusion of the inaccurate information in the consumer report. Pursuant to the terms of the settlement agreement reached between Plaintiff and Equifax in a prior lawsuit, Plaintiff verified that his credit disclosure was true, accurate and complete as of March 2009. Further, Plaintiff testified in his deposition that he had not received any credit-based denial letters subsequent to Columbia’s letter. Plaintiff could not demonstrate that Equifax prepared a consumer report containing inaccurate information about him. Even if he were able to make such a showing, the Court held that he would be unable to establish that his injuries were caused by Equifax's conduct due to Plaintiff’s failure to provide any evidence that the Equifax report was the reason for Columbia's decision to terminate Plaintiff’s gas service.

FCRA. Section 1681g requires a CRA, at the request of a consumer, to "clearly and accurately disclose" "[a]ll information in the consumer's file at the time of the request," including "[t]he sources of the information" and "[a] record of all inquiries received by the agency during the 1-year period preceding the request that identified the consumer in connection with a credit or insurance transaction that was not initiated by the consumer." Plaintiff alleged that Equifax violated § 1681g by failing to produce its alleged communications with Columbia. However, a representative from Equifax testified that Equifax had no record of inquiries into Plaintiff’s credit history initiated by Columbia. The Court held that Equifax is not legally required (and cannot be expected) to disclose information that does not exist.

FCRA. Section 1681h requires CRAs to retain "trained personnel" possessing the knowledge necessary to explain the information that is disclosed to consumers. Plaintiff claimed that Equifax violated § 1681h because of the alleged difficulties Plaintiff experienced while trying to speak directly with Equifax personnel by telephone. Even though Equifax provided a phone number to Plaintiff to use if he had questions about his credit disclosure, Plaintiff obtained and used a different phone number. The Court held that no reasonable trier of fact could conclude that Equifax violated § 1681h(c) because Plaintiff failed to produce any evidence that he contacted the trained personnel employed by Equifax.

FCRA. Plaintiff alleged that Equifax failed to reinvestigate dispute credit information under 15 U.S.C. § 1681i(a)(1)(A). A CRA has no statutory duty to conduct a reinvestigation prior to being notified that information contained in a consumer's credit file is disputed. Plaintiff never disputed the completeness or accuracy of an item of information contained in his credit file. Instead, he simply asked Equifax to reinvestigate its records in order to determine whether Columbia was mistaken regarding the involvement of Equifax in the decision to terminate his gas service. The Court held that since Plaintiff could not show that he disputed an item of information contained in his credit file, he could not establish that Equifax had a duty to reinvestigate.

Newsletter: July 19, 2011

M. Kasey Ratliff — Tue, 19 Jul 2011 00:00:00 -0500

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FCRA Does Not Preempt Defamation Claim Against Furnisher

Ginny Webb — Thu, 14 Jul 2011 00:00:00 -0500

Baker v. Gen. Elec. Capital, Corp., 2011 U.S. Dist. LEXIS 48626 (M.D. Ga. Mar. 30, 2011)

Facts: Plaintiff filed suit against Defendant alleging violations of multiple sections of the FCRA and credit defamation. In 2005, Plaintiff’s husband opened an account that was financed by Defendant. Plaintiff was added as an authorized user to the account and her husband then filed for Chapter 7 bankruptcy in August 2009. The account was discharged in December 2009. Beginning in September 2009, Defendant and three collection agencies attempted to collect on the subject account from Plaintiff. Despite that fact that Plaintiff disputed the account and provided documentation of the bankruptcy records to Defendant, Defendant continued to report the account as belonging to Plaintiff, charged off, and delinquent. Defendant filed a motion to dismiss Plaintiff’s claim for credit defamation claiming that § 1681t(b)(1)(F) preempted Plaintiff’s claim. The Court denied Defendant’s motion.

Preemption. The FCRA contains two preemption provisions. The earlier provision, § 1681h(e), preempts common law torts based on disclosures required under several provisions of the FCRA unless the defendant reported the information with malice or willful intent to injure the consumer. The later enacted preemption provision, § 1681t(b)(1)(F), preempts only state law claims with respect to furnishers of information based on duties regulated under § 1681s-2.
Preemption. District Courts have taken three main approaches when interpreting these two preemption sections. The first approach, the theory of “total preemption,” operates so that § 1681t(b)(1)(F) preempts all state law claims against furnishers. The second approach, the “temporal” approach, holds that state law claims against a furnisher of information that arose after the furnisher received notice of a dispute is barred by § 1681t(b)(1)(F), but preemption of state law claims that arose before the furnisher received notice of a dispute is governed by § 1681h(e). The courts that follow the third approach, the “statutory” approach, hold that § 1681t(b)(1)(F) applies to state statutory law claims, while § 1681h(e) applies to state common law claims.
Preemption. The Court found an inherent conflict between in §§ 1681h(e) and 1681t(b)(1)(F). Section 1681h(e) has an exception to preemption if the defendant is found to have reported consumer information with malicious or willful intent to injure the consumer, while § 1681t(b)(1)(F) contains no such exception. The Court also interpreted the plain language of § 1681t(b)(1)(F) to exclude common law causes of action finding that the phrase “requirement or prohibition … imposed under the laws of any State” intended to capture only State statutory law. Therefore, because Defendant did not assert preemption under § 1681h(e), Plaintiff’s state common law claim for credit defamation was not preempted.

Plaintiff’s FCRA Claims Are Dismissed Because She Could Show No More Than Negligent Violations And Had No Actual Damages

Martin Thornthwaite — Mon, 27 Jun 2011 00:00:00 -0500

Lagrassa v. Jack Gaughen, LLC, 2011 U.S. Dist. LEXIS 38838 (M.D. Pa. Mar. 11, 2011)

Facts: Plaintiff filed suit against Defendants for allegedly violating the FCRA in connection with obtaining her consumer report and subsequently terminating her employment. Plaintiff claimed the employer willfully failed to comply with the FCRA in obtaining her consumer report and in failing to give her a copy of the report and her rights under the FCRA. Defendants, the employer and the consumer reporting agency (“CRA”) that provided the report to the employer, filed motions for summary judgment on Plaintiff’s claims. The employer argued that even if it did violate the FCRA, any such violations were no more than inadvertent mistakes and could not be considered willful, and Plaintiff conceded she had no actual damages. The CRA claimed the employer had a permissible purpose to request the report, the report it provided to the employer was accurate, and that as a CRA, it had no duty to provide Plaintiff with a copy of the report or her rights under the FCRA. The Magistrate Judge agreed with Defendants’ arguments and recommended that Defendants’ motions for summary judgment be granted on Plaintiff’s claims. The Court subsequently adopted the Magistrate’s Recommendation. See Lagrassa v. Jack Gaughen, LLC, 2011 U.S. Dist. LEXIS 34323 (M.D. Pa. Mar. 30, 2011).

Permissible Purpose. Pursuant to § 1681b(b), an employer may obtain a consumer report for employment purposes. Under § 1681b(b)(3), before taking any adverse employment action, an employer must provide a copy of the report and a description in writing of the individual’s rights under the FCRA. The disclosure requirements do not apply to CRAs but rather to entities that obtain the reports. A violation of this section by itself does not amount to willful noncompliance of the FCRA.

Damages. Plaintiff sought statutory and punitive damages due to the employer’s alleged willful violations of the FCRA. The Court explained that to show willful noncompliance, Plaintiff must prove that Defendants recklessly disregarded the FCRA’s requirements. The employer argued that it had a policy in place to comply with the FCRA and required authorizations from applicants before requesting their consumer reports. In this case, the employer argued that its failure to obtain the authorization was an inadvertent mistake. The Court determined that the employer’s evidence supported a finding that procedures were in place to ensure FCRA compliance, and its failure to get Plaintiff’s authorization was, at best, no more than a negligent violation. Plaintiff’s claims for negligent violations also failed because Plaintiff conceded she had no actual damages.

Insurance Company’s Timing In Seeking Consumer Reports Results In Court’s Denial Of Its Motion For Summary Judgment On Consumers’ Permissible Purpose Claim

Martin Thornthwaite — Mon, 27 Jun 2011 00:00:00 -0500

RLI Ins. Co. v. Klonsky, 2011 U.S. Dist. LEXIS 13995 (D. Vt. Feb. 11, 2011)

Facts: Two of the Defendants, the Klonskys, were responsible for an automobile accident in which the other Defendant, Rosatone, was injured. Rosatone filed a claim with Plaintiff, the Klonskys’ insurance company. Plaintiff denied coverage based on alleged material misrepresentations made by Mr. Klonsky when he applied for and renewed the Klonskys’ policy. Plaintiff filed a declaratory judgment action against Defendants and sought a judicial determination of its rights and responsibilities under the insurance policy. The Klonskys asserted a counterclaim under the FCRA alleging that Plaintiff obtained their consumer reports for an impermissible purpose. Plaintiff filed a motion for summary judgment claiming it complied with the FCRA, but the Court denied Plaintiff’s motion.

Permissible Purpose. Pursuant to § 1681b(a)(3)(C), insurance underwriting is one of the permissible purposes for which a consumer reporting agency (“CRA”) may furnish a consumer report to an insurer. Plaintiff argued that Defendants’ motor vehicle reports (“MVRs”) did not qualify as consumer reports because “they did not contain any information bearing on their ‘personal characteristics.’” However, MVRs are considered to be consumer reports when they are sold by state motor vehicle departments for insurance underwriting purposes. The Court noted that while Plaintiff’s stated purpose for seeking the Klonskys’ MVRs may have been for legitimate underwriting purposes, the Court questioned the fact that Plaintiff decided to assess the risk of insuring the Klonskys only after receiving notice of a substantial claim against them. Further, Plaintiff sought to void the Klonskys’ policy after it denied coverage for Rosatone’s claim, which had nothing to do with underwriting. As a result, the Court denied Plaintiff’s motion for summary judgment on the Klonskys’ FCRA claim.

Consumer Could Litigate Her Claims Regarding A Derogatory Account On Her Credit File Because Defendants’ Arbitration Agreement Is Ambiguous

Martin Thornthwaite — Fri, 24 Jun 2011 00:00:00 -0500

Johnson v. Branch Banking & Trust Co., 2011 U.S. Dist. LEXIS 2589 (E.D. Pa. Jan. 10, 2011)

Facts: Plaintiff sued Branch Banking & Trust Company and BB&T Financial, FSB (“Defendants”) under the FCRA and for state-law claims including defamation, invasion of privacy, and negligence. She claimed that Defendants furnished inaccurate information to consumer reporting agencies (“CRAs”) regarding a credit account she opened for her small business. Further, she claimed that Defendants failed to properly investigate her disputes. While Plaintiff had been a personal guarantor of the company account, she had allegedly negotiated her removal from the account. However, Defendants continued to report derogatory information related to the account on her personal credit file. Defendants sought to stay the proceedings and compel arbitration based on an agreement between Plaintiff’s business and Defendants. The Court denied Defendants’ motion to compel arbitration because the agreement to arbitrate was between Defendants and Plaintiff’s business, rather than Plaintiff individually, and because the dispute-at-issue fell outside the scope of the agreement’s arbitration provision.

Arbitration. The Court determined that the arbitration provision was ambiguous because the term “Cardholder” was not defined and although Plaintiff’s name was identified as a name that would appear on the card connected to the account, the application was for the business. The agreement was construed against Defendants as the drafter, and the Court determined that Plaintiff was not a party to the arbitration agreement. The Court further concluded that the claims-at-issue fell outside the scope of the arbitration agreement because they dealt with Plaintiff’s personal credit file, and Defendants did not dispute that the business was the only entity that borrowed money and did not claim that Plaintiff was also personally liable for all debts arising from the agreement.

Arbitration. While the Court acknowledged that parties could agree to arbitrate “gateway” questions of arbitrability, the Court rejected Defendants argument that the agreement to arbitrate arbitrability applied as Defendants could not show that Plaintiff clearly agreed to have an arbitrator decide the issue.

Court Bans Defendants from Engaging in Credit Repair Activities

Ginny Webb — Thu, 16 Jun 2011 00:00:00 -0500

FTC v. 1st Guar. Mortg. Corp., 2011 U.S. Dist. LEXIS 38152 (S.D. Fla. Mar. 30, 2011)

Facts: The FTC brought an action against corporate Defendants and individual Defendants, Stephen Lalonde, Amy Lalonde, and Michael Petroski (collectively referred to as “Defendants”), alleging they engaged in unfair or deceptive acts or practices in connection with the sale and offering for sale of credit repair services in violation of FTC Act, the Credit Repair Organizations Act (“CROA”), and the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”). Defendants operated a credit repair organization wherein they misrepresented their abilities to assist consumers in repairing their when seeking to obtain a mortgage. Defendants used internet advertising and the telephone to induce consumers to use their services. Defendants charged a flat fee for the services and work did not begin until the consumer had paid all or a substantial portion of the fee. Defendants made promises to which they could never deliver, such as guarantees of deletion of all negative items from the consumers’ credit reports, irrespective of the accuracy of such items. One Defendant went as far as stating that he could improve a consumer’s score by 100 points in 30 days by disputing all negative items. The FTC moved for summary judgment against the individual Defendants on the basis that each individual played an integral role in one or more of the three scams that defrauded consumers and resulted in injuries of at least $2.7 million. The Court granted summary judgment against Stephen Lalonde and Petroski finding no genuine issue of material fact, but denied summary judgment as to Amy Lalonde.

Credit Repair Organizations Act. Section 1679(b) of the CROA protects the public from unfair or deceptive advertising and business practices by credit repair organizations. Section 1679h(b)(1) makes violations of the CROA violations of Section 5 of the FTC Act.

Credit Repair Organizations Act. A credit repair organization is defined as “[a]ny person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of … improving any consumer’s credit record, credit history, or credit rating … .” The Court found that Defendants were subject to the CROA because they used the internet and telephones to sell, provide, or perform credit repair services for the purpose of improving consumers’ credit records, credit history, or credit rating. The Court further found that the evidence proved Defendants violated the CROA by misrepresenting credit repair services and charging their customers before the services were fully performed in violation of §§ 1679b(a)(3) and 1679B(b).

FTC. The FTC’s expert, Marietta Rodriguez, stated in her report that without proof that a negative item is inaccurate, the item will not be removed, and the credit score will not be improved. She went on to state that nobody can remove accurate information from a credit report. The Court found that Defendants violated § 45(a) of the FTC Act by making false promises that misled reasonable consumers in an express effort to induce them to purchase the Defendants’ credit repair services.

Actual Damages Not Necessary to Prove Willful Noncompliance

Ginny Webb — Fri, 10 Jun 2011 00:00:00 -0500

Zaun v. Tuttle, Inc., 2011 U.S. Dist. LEXIS 47916 (D. Minn. May 4, 2011)

Facts: Plaintiff alleged that Defendant, a bowling center and restaurant, willfully violated the FCRA when it provided a receipt that included the expiration date of his credit card. Defendant moved for judgment on the pleadings, which the Court denied from the bench during oral argument. The Court published an Order to clarify the reasoning behind its decision.

FACTA. Section 1681c(g) prohibits merchants from printing more than the last five (5) digits of a credit card number or the expiration date on any receipt provided to a customer.
Willful Noncompliance. A successful claim for willful noncompliance under § 1681n does not require a plaintiff to prove actual damages. Plaintiff alleged that Defendant was aware of the FCRA’s truncation requirements, had the ability to change its credit card terminals to redact expiration dates, was warned by its third party credit card terminal vendor that upgrades were necessary to comply, and disregarded such warnings. The Court held that these allegations were sufficient to allege a plausible willful violation of FCRA’s truncation requirements.

Plaintiff’s Motion to Remand Denied as Defendant’s Removal was Timely

Marc F. Kirkland — Fri, 10 Jun 2011 00:00:00 -0500

Hill v. Equifax Info. Servs., LLC, 2011 U.S. Dist. LEXIS 47488 (M.D.N.C. May 3, 2011)

Facts: Defendant removed the lawsuit filed by pro se plaintiff in North Carolina state court because it raised a federal cause of action under the FCRA. Plaintiff filed a motion to remand claiming that Defendant’s notice of removal was filed outside the 30 day period permitted for removal to federal court under 28 U.S.C. § 1446(b). Plaintiff also argued that he intended to join an additional party to the suit, a North Carolina business, and that joinder would destroy diversity thus depriving the Court of subject matter jurisdiction. The Court denied Plaintiff’s Motion.

Removal. Under 28 U.S.C. § 1441(a), a party may remove an action from state court to federal court if the action is one over which the federal court possesses subject matter jurisdiction. The removing party bears the burden of showing that federal jurisdiction exists and that removal was proper.

Removal. 28 U.S.C. § 1446(b) requires notice of removal to be filed (1) within 30 days after the defendant receives of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or (2) within thirty days after the defendant is served with summons if the initial pleading has then been filed in court and is not required to be served on the defendant, whichever is shorter. Here Defendant was served with the Complaint on January 7, but was not served with a copy of the summons as is required for proper service under the North Carolina rules. Plaintiff argued that the case should be remanded because Defendant filed its notice of removal on February 9, more than 30-days after being served with the Complaint. The Court disagreed and held that Plaintiff’s failure of service of process was fatal to his argument that the removal was untimely.

Removal. Plaintiff’s claim that joinder of the North Carolina business would destroy diversity was dismissed by the Court as the removal was based on federal question and not diversity jurisdiction.

Plaintiff's Invasion of Privacy Claim Against Debt Collector Can Proceed

Marc F. Kirkland — Tue, 07 Jun 2011 00:00:00 -0500

Anastasion v. Credit Serv. of Logan, 2011 U.S. Dist. LEXIS 40316 (D. Utah. Apr. 13, 2011)

Facts: Plaintiff alleged that Allied, a debt collector, invaded her privacy and violated the FCRA and other statutes by attempting to collect a debt for an apartment Plaintiff had leased. Defendant and Plaintiff moved for summary judgment and the Court dismissed Plaintiff’s FCRA claims, part of her other state law claims, and part of Plaintiff’s FDCPA claims. The Court also limited Plaintiff’s invasion of privacy claims to only alleged conduct that fell outside of the subject matter of the FCRA. Defendant moved the Court for an order clarifying the Court’s summary judgment order with regard to Plaintiff’s invasion of privacy claims.

Invasion of Privacy. Defendant specifically asked the Court to find that Plaintiff was precluded from asserting at trial that Defendant’s communications with the CRAs can form a basis for her invasion of privacy claim. The Court clarified that only conduct alleged by Plaintiff falling outside of the FCRA can form the basis of her invasion of privacy claim. Thus, Plaintiff was permitted to proceed on her allegations that Defendant’s repeated contact with her in an attempt to collect her past due debts was substantially intrusive and highly offensive to a reasonable person. However, she was not allowed to proceed on any allegations regarding Defendant’s communications with the CRAs.

Resurrect Claims. Plaintiff sought clarification from the Court regarding its failure to address her claim that Defendant violated § 1681s-2(b) by failing to report Plaintiff’s direct disputes with Defendant to the appropriate CRA. The Court rejected Plaintiff’s attempt to untimely resurrect her FCRA claims and noted that she did not make any arguments related to this alleged claim at the time the parties submitted their motions and the Court, after review of the complaint, could not find that she had ever specifically alleged that type of FCRA claim.

Plaintiffs State Law Cause of Action Preempted by the FCRA

Marc F. Kirkland — Thu, 19 May 2011 00:00:00 -0500

Plaintiff’s State Law Cause of Action Preempted by the FCRA

Misel v. Green Tree Servicing, LLC., 2011 U.S. Dist. LEXIS 28982 (E.D.N.C. Mar. 21, 2011)

Facts: Plaintiff sued Green Tree alleging violations of the Fair Debt Collection Practices Act and the North Carolina Collection Agency Act (“NCCAA”) related to Green Tree’s efforts to collect a debt. Plaintiff’s claims relate to a secondary mortgage for which her ex-husband assumed responsibility after they divorced. After the ex-husband stopped making the mortgage payments the primary mortgage holder foreclosed on the home and the secondary mortgage was sent to collections. That collection agency brought a claim against Plaintiff in state court and the claims were later dismissed because they were time-barred. Later, the debt was sold to Green Tree who began collection efforts which included reporting the debt to the CRAs. Plaintiff then filed suit against Green Tree. Green Tree moved to dismiss Plaintiff’s NCCAA claim arguing it is preempted by the FCRA. Plaintiff filed a response arguing that § 1681h(e) allowed her to pursue her state law claims under the NCCAA. The Court determined that the FCRA preempted Plaintiff’s NCCAA claim.

Preemption. Section 1681t(b)(1)(F) provides, in pertinent part, that: “no 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 the responsibilities of persons who furnish information to consumer reporting agencies ….” The Court determined that Plaintiff’s NCCAA claim, to the extent it was based on Green Tree’s furnishing of inaccurate information to CRA’s, “runs into the teeth” of the FCRA’s preemption provision and accordingly is preempted.
Preemption. Section 1681h(e) provides that: “no consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence with respect to the reporting of any information against any consumer reporting agency, based on information disclosed pursuant to 1681g, 1681h, or 1681m of this title or based on information disclosed by a user of consumer report to or for a consumer against whom the user has taken adverse action based in whole or in part on the report, except as to false information furnished with malice or willful intent to injure such consumer.” Plaintiff argued that because she alleged that Green Tree had intentionally reported false information to the CRAs her allegations satisfied the malice or willful intent provision in § 1681h(e).

Preemption. When a party argues that a state law claim is permitted under § 1681h(e), a court, in the Fourth Circuit, must undertake two step analysis as outlined in Ross v. Federal Deposit Insurance Corp., to determine whether the state law claim is authorized by the FCRA. 625 F.3d 808, 814 (4th Cir. 2010). The first step requires a court to determine whether the claim falls within the scope of § 1681h(e), which includes only claims based on information disclosed pursuant to §§ 1681g, 1681h, or 1681m. The second step requires a determination of whether the Plaintiff has proffered sufficient evidence of malice. The Court determined that Plaintiff could not get past the first step because Green Tree’s actions did not fall with in the scope of § 1681h(e). Green Tree’s actions were not covered by § 1681h(e), and §§ 1681h and g apply only to CRAs and § 1681m applies to users of consumer reports. Since none of these provisions applied to Green Tree’s actions the Court therefore determined that Plaintiff’s NCCAA claim was preempted by the FCRA.

Newsletter: May 17, 2011

Paul L. Myers — Tue, 17 May 2011 00:00:00 -0500

Click here to view the full newsletter.

FACTA Lawsuit Against Business for Printing Complete Credit Numbers on Receipts is Certified as a Class Action

Martin Thornthwaite — Mon, 16 May 2011 00:00:00 -0500

Keller v. Macon County Greyhound Park, Inc., 2011 U.S. Dist. LEXIS 31777 (M.D. Ala. Mar. 24, 2011)

Facts: Plaintiffs filed a lawsuit against Defendant alleging a violation of the Fair and Accurate Credit Transactions Act (“FACTA”). After its credit and debit card software crashed and was later restored, Defendant allegedly began printing receipts with customers’ complete credit card numbers. The entire credit card numbers were apparently printed for less than two months until Defendant discovered the issue and corrected it. During this time period, Defendant printed 2,277 receipts displaying all sixteen card numbers. Plaintiffs filed a motion to certify a class against Defendant that excluded anyone who suffered actual damages. The Court determined the requirements for class certification were met and granted Defendant’s motion.

FACTA. Pursuant to § 1681c(g), “no person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number upon any receipt provided to the cardholder at the point of sale or transaction.”

State Common Law Claims For Misrepresentation and Fraud Are Not Preempted By The FCRA

Ryan Langston — Fri, 13 May 2011 00:00:00 -0500

Pitts v. Bank of Am. Corp., 2010 U.S. Dist. LEXIS 136825 (W.D. Pa. Dec. 28, 2010)

Facts: Plaintiff alleged that Bank of America (“Defendant”) tried to collect a corporation’s debt from him individually even though Plaintiff never executed any personal guaranty or other documents that would have made him personally liable for the payment of a corporate account. According to Plaintiff, Defendant reported the corporation’s debt to credit reporting agencies (“CRAs”) as if Plaintiff was personally liable on the debt. Plaintiff alleged state common law claims of misrepresentation and fraud, but did not allege any violations of the FCRA. Defendant filed a timely Notice of Removal and Motion to Dismiss.

Removal. The Court held that Plaintiff clearly and unambiguously grounded his complaint in misrepresentation and fraud, which are state law claims. Plaintiff argued that he was not asserting a claim under the FCRA because the CRAs removed the inappropriate information from his consumer report. Because Plaintiff did not attempt to assert a federal question claim under the FCRA, the Court remanded Plaintiff’s claims to state court.

Preemption. Further, the Court held that Defendant failed demonstrate that the Court could properly exercise jurisdiction over this case. Plaintiff’s only potentially viable claims arose under Pennsylvania common law, and the Eastern District of Pennsylvania has held that 15 U.S.C. § 1681t(b)(1)(F) only preempts state statutory claims.

Trial Court Abused its Discretion in its Denial of Class Certification Against Movie Theatre Chain

Paul W. Sheldon — Fri, 06 May 2011 00:00:00 -0500

Michael Bateman v. American Multi-Cinema, Inc., 623 F. 3d 708 (9th Cir. 2010)

Facts: Plaintiff-Appellant Michael Bateman sued American Multi-Cinema, Inc., ("AMC") on behalf of a class of similarly situated individuals, alleging that AMC violated§ 1681c(g) of the Fair and Accurate Credit Transactions Act (“FACTA”) by printing more than the last five digits of consumers' credit or debit card numbers on electronically printed receipts in December 2006 and January 2007. Specifically, the class to be certified was those individuals who had used a credit or debit card to purchase movie tickets from an automated box office at an AMC theater and who received a receipt that included the first four and last four digits of the person's credit/debit card number. An AMC internal review conducted after the lawsuit was filed revealed that more than 290,000 receipts had been printed in violation of FACTA during the relevant period. On behalf of these individuals, Plaintiff sought to recover statutory damages ranging from $100 to $1,000 for each willful violation. The trial court denied Plaintiff’s motion for class certification, concluding that Plaintiff had failed to demonstrate that a class action would be superior to other available methods of adjudicating his claim, as required under Rule 23(b)(3). In particular, the trial court denied certification because, in its opinion, class treatment could result in enormous liability completely out of proportion to any harm suffered by the Plaintiff ($29 million to $290 million). The trial court further concluded that class certification was not appropriate because AMC demonstrated good faith by modifying its machines to comply with FACTA within a few weeks of the filing of Plaintiff’s complaint. Plaintiff appealed, arguing that the district court abused its discretion in denying class certification. The appellate court agreed and found that none of the grounds made the basis of the trial court’s decision justified the denial of class certification and that the trial court abused its discretion in relying on them. The denial of class certification was reversed and the issue was remanded for further proceedings.

Class Action Requirements. Under Rule 23, a class action may be maintained if two conditions are met: The suit must satisfy the criteria set forth in subdivision (a) (i.e., numerosity, commonality, typicality, and adequacy of representation), and it also must fit into one of the three categories described in subdivision (b). Subdivision (b)(3), at issue in the appeal, is satisfied if "the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy."

Class Action Requirements. Rule 23 provides a non-exhaustive list of factors relevant to the superiority inquiry, including (1) the class members' interests in individually controlling the prosecution or defense of separate actions, (2) the extent and nature of any litigation concerning the controversy already begun by or against class members, (3) the desirability or undesirability of concentrating the litigation of the claims in the particular forum, and (4) the likely difficulties in managing a class action. The appellate court opined that none of these enumerated factors authorized a court to consider whether certifying a class would result in disproportionate damages.
Class Action Requirements. The trial court’s claim that class treatment would render the magnitude of the defendant's liability enormous is not an appropriate reason to deny class certification under Rule 23(b)(3), even in the face of the widely accepted view that class certification may force a defendant to settle rather than incur the costs of defending a class action and run the risk of potentially ruinous liability. Rather, whether the potential for enormous liability can justify a denial of class certification depends on congressional intent.

Class Action Requirements. The appellate court reasoned that damages that could become enormous under FACTA does not lie in an abuse of Rule 23, but rather lies in the legislative decision to authorize awards as high as $1,000 per person, combined with multiple violations of the statute. Nothing in the plain text of the statute or in its legislative history suggested that Congress intended to place a cap on potentially enormous statutory awards or to otherwise limit the ability of individuals to seek compensation. Accordingly, the appellate court assumed that Congress intended FACTA's remedial scheme to operate as it was written and felt that to limit class availability merely on the basis of "enormous" potential liability already provided by Congress would undermine congressional intent.

Class Action Requirements. The appellate court found that the trial court's consideration of AMC's post-complaint good faith compliance was inconsistent with congressional intent in enacting FACTA. The mere fact that AMC changed the content of its receipts to comply with FACTA after the lawsuit was filed did not suggest that certification of the class would have limited deterrent effect. Note: the appellate court emphasized that certification of a class would preserve, if not amplify, the deterrent effect of FACTA. Thus, the court stated, to deny class certification based on post-complaint good faith compliance would communicate to other potential violators that, as long as the defendant complies with FACTA after a complaint is filed, it may avoid liability for wide-spread violations.

Court Grants Experian’s Motion to Transfer Venue From California to Maine

Paul W. Sheldon — Fri, 29 Apr 2011 00:00:00 -0500

Robert Kierstead v. Experian Information Solutions, Inc., 2011 U.S. Dist. LEXIS 41344 (C.D. Ca. Apr. 11, 2011)

Facts: Plaintiff, a Maine resident, filed suit in the Central District of California alleging multiple FCRA violations as well as defamation against Experian. Experian moved to transfer venue to Maine pursuant to 28 U.S.C. § 1404(a) because Plaintiff was a Maine resident and his claims and credit denials all occurred in Maine and not California. After consideration of the briefings and evidence, the Court granted Experian’s motion and transferred the case to Maine. Note: in much of its venue analysis, the Court noted that Plaintiff failed to cite admissible evidence on some key factors used to reach its decision.

Motion to Transfer Venue. To determine whether an action should be transferred, a court performs a two-step analysis: (1) whether the action might have been brought in the potential transferee court; and (2) that an individualized, case-by-case determination of convenience and fairness be done, weighing the convenience of the parties and witnesses and the interests of justice.
Motion to Transfer Venue. In determining whether the case could have been brought in Maine, the Court found that the District of Maine would have had federal question jurisdiction given that Plaintiff brought the action under the FCRA. Additionally, it was found that Experian conducted business in the state and a substantial part of the lawsuit events occurred in Maine.
· Motion to Transfer Venue. To determine whether Maine was more convenient for the parties and witnesses, the court considered the following factors: (1) the location where the relevant agreements were negotiated and executed, (2) the forum that is most familiar with the governing law, (3) the plaintiff's choice of forum, (4) the respective parties' contact with the forum, (5) the contacts relating to the plaintiff's cause of action in the chosen forum, (6) the differences in the costs of litigation in the two forums, (7) the availability of compulsory process to compel attendance of unwilling non-party witnesses, and (8) the ease of access to sources of proof. Of all eight factors, only one, Plaintiff’s choice of forum, was found to favor Plaintiff. The other seven were either found in favor of Experian or were considered neutral between both parties.

Motion to Transfer Venue. The interests of justice and judicial economy are the most important factors of all and may be determinative to a particular transfer motion even if the convenience of the parties and witnesses might call for a different result. The Court found that the case had not progressed to the point where a transfer would disrupt judicial economy because no discovery had begun and the parties had not filed any substantive motions.

Credit Repair Company Found Liable On Summary Judgment For False and Deceptive Consumer Promises

Paul W. Sheldon — Wed, 20 Apr 2011 00:00:00 -0500

Federal Trade Commission v. RCA Credit Services, LLC. et al., 2010 U.S. Dist. LEXIS 73461 (M.D. Fla. Jul. 20, 2010)

Facts: The Federal Trade Commission (“FTC”) alleged that Defendant RCA Credit Services, LLC. (“RCA”) and its owner, pro se Defendant Rick Crosby (“Crosby”), engaged in violations of the Credit Repair Organization Act (“CROA”) and in unfair or deceptive acts or practices in violation of the Federal Trade Commission Act (“FTC Act”). Specifically, the FTC claimed that the defendants violated the CROA and FTC Act by representing to consumers that they could increase consumers' credit scores into the 700s in as little as 30 days by associating consumers with positive credit information belonging to unrelated individuals or entities and by removing all negative information from consumers' credit reports. RCA solicited consumers nationwide through two internet websites, which invited consumers, with RCA’s assistance, to “Boost Your Credit Score Into the 700s in as little as 30 days,” promised “100% Guaranteed Results,” and invited consumers, with RCA’s assistance, to “Remove ANY or ALL Negative Accounts From Your Credit Report”, often with promises of removal in 7 days with an instant raise in FICO scores. The FTC filed its motion for summary judgment as to all claims. The Court granted the motion as to all of the FTC’s CROA claims as well as one of two FTC Act claims.

FTC Act Violations. To establish that an act or practice is deceptive under the FTC Act, the FTC must show that (1) there was a representation or omission, (2) the representation or omission was likely to mislead consumers acting reasonably under the circumstances, and (3) the representation or omission was material. The FTC presented uncontroverted evidence that no credit repair company can legitimately remove or enable consumers to remove all negative entries from a consumer’s credit report, despite RCA’s representations to the contrary. Note: The FTC submitted a declaration from Experian’s Fraud and Security Manager who declared that accurate negative information which is not obsolete cannot be deleted. Accordingly, RCA’s representations that it could remove or help consumers remove ALL negative information from consumers’ credit reports were false.

FTC Act Violations. Individuals may be held personally liable for corporate FTC violations if the FTC shows that the individuals (1) participated directly in the deceptive acts or practices or (2) had authority to control them and had some knowledge of the practices. Authority to control a company's practices may be demonstrated by active participation in the corporate affairs, including assuming duties as a corporate officer. In response to the FTC’s argument and evidence that Crosby was individually liable due to being RCA’s owner and a managing member, Crosby claimed that he never personally sold anything to RCA’s clients and that he never had “full” control of RCA. The Court found that such evidence did not preclude summary judgment as to this claim.
Credit Repair Organizations Act Violations. The CROA prohibits a credit repair organization from charging or receiving “any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed." The Court granted the FTC’s motion based primarily on RCA’s admission that they collected money from consumers in advance of RCA’s purchase of trade lines for its third party sellers’ inventory.

Credit Repair Organizations Act Violations. Before executing a contract or agreement with a consumer, § 1679c of the CROA requires that a credit repair organization must provide the consumer a separate written statement of "Consumer Credit File Rights Under State and Federal Law" in a statutorily prescribed form. § 1679d further prohibits a credit repair organization from providing any services to a consumer until (1) the consumer has signed a written and dated contract for the purchase of such service and (2) three business days have passed since the date the contract was signed. The contract must contain "a conspicuous statement in bold face type, in immediate proximity to the space reserved for the consumer's signature on the contract," stating that the consumer may cancel the contract without penalty or obligation at any time before midnight of the third business day after the date on which the consumer signs the contract. Additionally, § 1679e also requires the credit repair organization to provide the consumer, together with the contract, a prescribed "Notice of Cancellation" that the consumer can use to cancel the contract. In granting the FTC’s motion on these claims, the Court found undisputed evidence that RCA failed to comply as to each of these statutory requirements.

Credit Repair Organizations Act Violations. The CROA prohibits under § 1679b any person from making or using any untrue or misleading representation of the services of the credit repair organization. All that need by shown by the FTC is an untrue or misleading statement regarding the services of the credit repair organization. The Court found that RCA falsely represented that they could, and for payment, would remove or help consumers remove any and all negative information from their credit reports. Accordingly, the Court granted the FTC’s motion on this claim.

FTC Act Available Remedies. In addition to injunctive relief, § 13(b) of the FTC Act permits redress in the form of restitution and disgorgement of unlawfully obtained funds.

Allegation Against Furnisher For Merely Reporting Negative Credit Information Does Not Survive Furnisher’s Motion To Dismiss

Paul W. Sheldon — Fri, 15 Apr 2011 00:00:00 -0500

Victor Woods v. Wells Fargo Financial Bank, et al., 2010 U.S. Dist. LEXIS 119429 (S. D. Ind. Nov. 4, 2010)

Facts: Plaintiff brought FCRA, FDCPA, and other common law claims against Defendants Wells Fargo Financial Bank (“Wells Fargo”) as well as Lloyd & McDaniel (“L&M”) for actions taken against him as a co-signor on an original loan with Ms. Tehrena Peoples (“Peoples”). Subsequent loans were made between Wells Fargo and Peoples without Plaintiff’s knowledge or signature. Subsequently, Wells Fargo began reporting negative credit information on Plaintiff’s credit file which resulted in an auto loan denial. Plaintiff’s Complaint merely stated that Wells Fargo reported negative information to a credit reporting agency that adversely affected his credit rating, resulting in a loan denial. Wells Fargo filed its §12(b)(6)Motion To Dismiss, claiming that Plaintiff’s use of such language in his Complaint does not amount to an FCRA claim. The Court agreed and dismissed the claim without prejudice, giving Plaintiff an additional 30 days in which to amend.

Pleading. Reporting negative information to a consumer reporting agency alone does not violate the FCRA; rather, a violation of § 1681s-2(a) requires reporting inaccurate information. Nowhere in the Complaint does Plaintiff allege that Wells Fargo supplied inaccurate information to a consumer reporting agency. Therefore, Plaintiff failed to plead a violation under the FCRA.

Pleading. Even if Plaintiff pled that Wells Fargo provided inaccurate information to a consumer reporting agency, Plaintiff cannot sue Wells Fargo under § 1681s-2(a) because§ 1681s-2(c) specifically exempts violations of § 1681s-2(a) from private civil liability. Only the Federal Trade Commission can initiate a suit under that section. Thus, even if Plaintiff amended his Complaint and asserted that Wells Fargo reported inaccurate information to credit reporting agencies in violation of FCRA § 1681s-2(a), he has no private right of action under this provision of the statute. Note: the court held that if Plaintiff intended to allege a violation of a provision of the FCRA that does allow for a private right of action, he may amend his Complaint within 30 days and specify the provision Wells Fargo allegedly violated and the conduct that led to the violation.

Plaintiff’s Reasonable Procedures and Reinvestigation Claims Against Experian Go To The Jury

Paul W. Sheldon — Fri, 15 Apr 2011 00:00:00 -0500

Bruce Burke v. Experian Information Solutions, Inc., 2011 U.S. Dist. LEXIS 28896 (E.D. Va. March 18, 2011)

Facts: Plaintiff brought Fair Credit Reporting Act (“FCRA”) claims against Experian for its alleged failure to use reasonable procedures to assure maximum possible accuracy of the information in his credit reports as well as its alleged failure to conduct a reasonable reinvestigation to determine whether disputed information is inaccurate. Specifically, Plaintiff sued Litton Loan Servicing LP ("Litton") in December 2008 for violations of the federal Truth in Lending Act in connection with a refinanced loan on his primary residence. Plaintiff later entered into a settlement agreement with Litton, which eliminated Plaintiff's debt in connection with the mortgage and required Litton to delete the adverse trade line associated with the mortgage on Plaintiff's credit reports. The settlement agreement also contained a confidentiality provision. Plaintiff later obtained a copy of his credit reports from the consumer reporting agencies (“CRAs”) and discovered that the adverse Litton mortgage account continued to remain on his credit report. Plaintiff sent a dispute letter to Experian in which he stated that the Litton entry "should not appear on my credit report" and requested that the entry be removed from his credit report. Plaintiff also invited Experian to call him "if [Experian] required any additional information…related to this dispute," and provided a phone number. In response, Experian did not contact the Plaintiff but rather sent an Automated Customer Dispute Verification ("ACDV") to Litton. Litton subsequently responded to Experian's ACDV and informed Experian that negative information (a past due amount and foreclosure) regarding Plaintiff's mortgage should remain. Plaintiff sent a second dispute letter to Experian, informing Experian that the debt should be deleted, that Litton knows that it should be deleted, and that Plaintiff would like to provide more information as to why it should be deleted, but that only Litton can do so. Experian considered this dispute to be duplicative of the original dispute and therefore, pursuant to Experian’s policies, did not send another ACDV to Litton, or engage in any further investigation efforts. Plaintiff filed his motion for partial summary judgment on the issue of whether Experian's refusal to conduct any additional investigation in response to Plaintiff's second dispute letter was appropriate pursuant to § 1681i(a)(3). Experian filed its motion for summary judgment as to Plaintiff’s § 1681e(b) and § 1681i(a)(3) claims on the grounds that Experian's response to Plaintiff's disputes was reasonable, that there were no triable issues of material fact as to damages nor were they caused by Experian. The Court denied all motions.

Reasonable Procedures vs. Reinvestigation. With respect to the initial collection of credit information, a CRA is not required under § 1681e(b) to go beyond its initial source of information to verify that information, unless it has reason to believe that such source is unreliable. However, once accuracy is challenged, the sufficiency of the CRAs conduct relative to its duty of care will be evaluated under a balancing test that weighs the cost of verifying the accuracy of the information against the possible harm of reporting inaccurate information.

Reasonable Procedures. The issue of whether the CRA failed to follow “reasonable procedures” will be a jury question in the overwhelming majority of cases. A plaintiff need only minimally present some evidence of unreasonableness to avoid summary judgment.
Reasonable Reinvestigation. In denying Experian’s motion for summary judgment, the Court reasoned that a fact finder could conclude that Experian had failed to conduct a reasonable reinvestigation because Experian’s use of an ACDV did little to focus Litton on the nature of the dispute. Because Plaintiff offered to provide additional information about the dispute, the Court felt that had Experian done so, it was certainly possible that Experian would have learned from Plaintiff that a settlement agreement existed between Litton and Plaintiff, a fact that could have then been brought to Litton’s attention during the reinvestigation. Additionally, the Court stated that Experian might have inquired about and therefore learned of the identity of a person at Litton who was familiar with Litton's settlement with Plaintiff and to whom it would have been most appropriate to address Experian's inquiry. Rather than engage in any of these activities, the Court stated that “Experian did nothing more than send out a pro forma inquiry to Litton.”

Reasonable Reinvestigation. As to Plaintiff, the Court concluded that a fact issue also existed as his obligations. Plaintiff had a duty to provide relevant information to Experian, and a fact finder could conclude that Plaintiff failed to provide any real information to Experian that described the nature of the dispute or why simply sending an ACDV would not be adequate.

Necessary Costs of Reasonable Reinvestigation. In fulfilling its reinvestigation duty under the FCRA to determine whether the disputed information it is receiving from a creditor is accurate or not, and to record accurately or delete the current status of the debt, this specific Virginia court felt that Experian’s costs in so doing would be “necessary.” Note: the Court specifically stated that “while the obligation to conduct a reasonable investigation may increase the cost and expense to a CRA, it is the necessary cost associated with discharging the congressionally mandated duties placed upon a company choosing to engage in a business that can have such a profound and lasting impact on consumers, and, in the majority of cases, such as this, it passes to the trier of fact to decide whether the CRA fulfilled its obligations.”

Emotional Distress Damages. The Fourth Circuit expressly recognized that "a plaintiff's testimony can provide sufficient evidence to support an emotional distress award," but emphasized that a plaintiff must "reasonably and sufficiently explain the circumstances of the injury and not resort to mere conclusory statements." Note: the Court specifically cited Plaintiff’s interrogatory response as sufficient articulation of emotional distress, which included “lost sleep, lost appetite, escalating stress and anger, inability to pay for a decent wedding and honeymoon, and a visit to the emergency room because of chest pains which required admission, not due to heart disease.”

Printing Only the Month of the Expiration Date is Not a FACTA Violation

Paul W. Sheldon — Thu, 14 Apr 2011 00:00:00 -0500

Randy Long v. Tommy Hilfiger U.S.A., Inc., 2011 U.S. Dist. LEXIS 13782 (W.D. Pa. Feb. 11 2011)

Facts: Plaintiff commenced a class action against Tommy Hilfiger U.S.A., Inc. (“Hilfiger”) alleging willful violations of § 1681c(g) of the Fair and Accurate Credit Transaction Act (“FACTA”). Specifically, Plaintiff allegedly purchased neckwear at the Hilfiger store in Grove City, Pennsylvania and used his credit card for the purchase. The receipt displayed the last four digits of the card number and "04/##" in place of the expiration date. Plaintiff contends that publishing the “04/##” on the receipt was, in fact, the expiration date in violation of the statute. Defendant Hilfiger filed a § 12(b)(6) motion to dismiss, arguing that it was in compliance with the statute because the receipt in question only displayed the month and not the year of the credit card’s expiration date. The Court agreed and granted Hilfiger’s motion in its entirety.

FACTA Requirements. Section 1681c(g)(1) provides: "[N]o person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder atthe point of the sale or transaction."

FACTA Requirements. FACTA does not define the term “expiration date.” Accordingly, the Court looked to the ordinary or natural meaning of the term by looking to dictionary definitions as well as the language of the statute itself along with some court analysis regarding credit card number truncation requirements. Such review found that “expiration date” should be defined as a date when a particular thing, offer, or option comes to an end. The Court found that an “expiration date” cannot be a single month, because a month printed on a receipt in isolation does not provide a cardholder or any other person or business with an ascertainable period in time when the card’s functionality ceases to exist. Therefore, the Court held that Defendant Hilfiger met the requirements of the statute…that the Plaintiff’s credit card number was truncated to the last four digits and the expiration date was not printed. Note: the Court highlighted that no court in the country has addressed the particular issue raised in this case -- whether a defendant can be held liable under FACTA for only printing the month of a plaintiff’s credit card expiration date on a receipt.

Willful Claim. Even if the Court had found Hilfiger had violated FACTA by printing the month of Plaintiff’s expiration date, the Court found that such violation would not be willful because Hilfiger’s reading of the statute (just printing the month and not the year of the card’s expiration date) could be construed as “objectively reasonable” because of the dearth of guidance from FACTA or the federal courts regarding the issue.

Newsletter: April 7, 2011

Ryan Langston — Thu, 07 Apr 2011 00:00:00 -0500

Click here to view the full newsletter.

Plaintiff’s State Law Claims Are Preempted By The FCRA Even Though Plaintiff Does Not Allege Defendant Violated The FCRA

Ryan Langston — Thu, 07 Apr 2011 00:00:00 -0500

Burrell v. DFS Servs., LLC, 2011 U.S. Dist. LEXIS 21408 (D.N.J. March 2, 2011)

Facts: In 2008, Plaintiff informed Defendant DFS Services, LLC, a credit card company, that he was the victim of identify theft. However, Defendant failed to investigate his claims and continued to allow allegedly fraudulent transactions to be charged to Plaintiff’s credit card. Plaintiff did not dispute the charges on his credit card to a CRA until almost two years later. Plaintiff brought claims against Defendant alleging violations of the FCRA, the Fair Credit Billing Act (“FCBA”), 15 U.S.C. § 1666 et seq., and various state law claims. Defendant moved to dismiss Plaintiff’s clams for failure to state a claim under Rule 12(b)(6). The Court held that Plaintiff: (1) failed to assert a private cause of action under the FCRA; (2) properly asserted a cause of action under the FCBA; and (3) could not assert claims for intentional infliction of emotional distress, defamation, and negligence in this case because they were preempted by the FCRA. Plaintiff then filed an amended complaint alleging the same causes of action except that he rescinded his claims under the FCRA and then argued that his state law claims were no longer preempted since he did not allege any violations of the FCRA. Defendant again moved to dismiss Plaintiff’s claims under Rule 12(b)(6).

Preemption. The Court originally dismissed Plaintiff’s state law claims because they were preempted under 1681t(b)(1)(F), which preempts all state law claims (1) regarding subject matter regulated under § 1681s-2, or (2) relating to the responsibilities of any persons who furnish information to consumer reporting agencies. Because Plaintiff’s various state law claims were related to Defendant’s responsibilities as an entity that furnishes information to CRAs, the Court held that those claims were preempted by the FCRA.

Preemption. The Court also dismissed Plaintiff’s state law claims in his amended petition holding that Plaintiffs claims were still preempted by the FCRA even if Plaintiff’s amended petition did not state a claim under the FCRA. Preemption is not limited to conflicts between federal and state law set forth in a pleading; it is rooted in Congress's ability to limit state authority to regulate areas of conduct in the first place. Thus, the Court dismissed Plaintiff’s claims with prejudice because they were preempted by the FCRA.

FACTA Class Denied Certification Despite Potential For Statutory Damages Because Actual Damages, If Any, Were Negligible

Ginny Webb — Wed, 06 Apr 2011 00:00:00 -0500

In re Toys "R" Us - Del., Inc. - Fair & Accurate Credit Transactions Act (FACTA) Litig., 2010 U.S. Dist. LEXIS 133583 (C.D. Cal. Aug. 17, 2010)

Facts: Plaintiffs, on behalf of themselves and potential class members, filed an action (the “Edwards Action”) alleging that Toys “R” Us had violated the FCRA. Specifically, they alleged Toys “R” Us violated the Fair and Accurate Credit Transactions Act (“FACTA”), which requires that anyone that accepts credit cards or debit cards for a business transaction is prohibited from printing more than the last five digits of the card number or the expiration date on any receipt provided to the cardholder at the point of sale or transaction. Almost two years after this action was filed, another plaintiff, Gregory Ellis, filed a similar action in the Northern District of Illinois (the “Ellis Action”) on behalf of a class of consumers alleging that Toys “R” Us did not comply with FACTA requirements. The United States Judicial Panel on Multidistrict Litigation transferred the Ellis Action to the Central District of California for consolidated pretrial proceedings with the Edwards Action. On March 8, 2010, the Ellis and Edwards plaintiffs filed separate motions for class certification. The Court conducted an extensive choice of law analysis as well as a certification analysis and ultimately decided that the precedent of the Ninth Circuit, the transferee forum, should apply to both motions. Based on the controlling precedent, the Court denied both motions holding they could not satisfy the superiority prong of Rule 23(b)(3).

Choice of Law. The Manual of Complex Litigation states that where a claim or defense arises under federal law, the transferee judge should consider whether to apply the law of the transferee or transferor circuit. In 1987, the D.C. Circuit held that the law of the transferee circuit should be applied to actions arising entirely under federal law. Following the D.C. Circuit’s opinion, the Ninth Circuit has uniformly applied the law of the transferee circuit in MDL proceedings involving questions of federal law. Based on this precedent, the Court decided the correct choice of law was the transferee circuit and thus followed Ninth Circuit law to decide both motions for class certification.

Class Certification.Rule 23(a) states that a district court may certify a class only if: (1) it is so numerous that joinder is impracticable; (2) it involves questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. Additionally, the district court must also find that at least one of the three conditions set forth by Rule 23(b) is satisfied. The party seeking certification bears the burden of showing that each of the four requirements of Rule 23(a) has been satisfied and at least one of the requirements of Rule 23(b) has been met.

Class Certification - Superiority. The Plaintiffs sought certification under Rule 23(b)(3), which states that a class is maintainable when both questions of law or fact common to the members of the class predominate over any questions affecting its individual members and that a class action is superior to other available methods for fair and efficient adjudication of the controversy. In determining superiority, the court considers four factors: (1) the interest class members have in individually controlling the prosecution or defense in separate actions; (2) the extent and nature of any litigation concerning the controversy that has already been commenced by or against class members; (3) the desirability or undesirability of concentrating litigation of the claims in the particular forum; and (4) the difficulties that will likely be encountered in managing the suit as a class action. Courts have discretion under Rule 23 to decline class certification on superiority grounds when it believes certification of a class would achieve undesirable results.
Class Certification – Superiority. The Ninth Circuit has denied certification to proposed classes under the superiority prong in class actions that sought outrageous amounts in statutory penalties based on the enormous number of alleged infractions. In denying class certification, the Court relied on a recent Supreme Court decision holding that it is proper for a court to exercise discretion in refusing to certify a class where the plaintiffs suffered negligible actual damages, but sought statutory damages of $13,000,000. Further, the Ninth Circuit has denied class certifications in prior FACTA cases, holding that the plaintiffs could not meet the requirements of the superiority prong based on the potential for enormous statutory liability in the complete absence of any actual injury.

FACTA. FACTA prohibits a person to print more than five digits of the consumer’s credit card on a receipt issued at a point of sale. However, FACTA does not prohibit the printing of the name of the credit or debit card issuer on a receipt. Toys “R” Us printed the first six digits of the customer’s credit card in addition to the last four. Its expert testified that the first six digits on a credit or debit card merely identify the issuing bank or other entity, and not an account number unique to the consumer. The Court accepted this testimony and held that Toys “R” Us was essentially in compliance because the printing of the first six digits could not have resulted in a risk of harm greater than that prohibited by Congress.

Creditor Does Not Violate the FCRA's Permissible Purpose Rule When It Inadvertently Obtains A Consumer Report for the Wrong Consumer

Ginny Webb — Wed, 06 Apr 2011 00:00:00 -0500

Novak v. Experian Info. Solutions, Inc., 2011 U.S. Dist. LEXIS 19790 (N.D. Ill. Feb. 25, 2011)

Facts: Plaintiff filed a lawsuit against Experian and American Electric Power Service Corporation (“AEP”) claiming they violated the FCRA by mixing Plaintiff’s Experian credit file with another consumer, James Smith. After Plaintiff contacted Experian in 2007, Mr. Smith’s information was deleted from his credit file. However, in 2009, Experian once again mixed Plaintiff’s and Mr. Smith’s credit files. Mr. Smith was a customer of AEP, an electric provider that did not even provide service in Plaintiff’s state of residence, Illinois. As part of Mr. Smith’s electric service, AEP requested and was permitted to access Plaintiff’s Experian credit file. As a result, Plaintiff requested AEP send him Mr. Smith’s account information and application, which AEP denied because Plaintiff was not a customer of AEP. After Plaintiff attempted to obtain the information several more times, Plaintiff filed suit alleging that AEP violated § 1681b by obtaining his credit report from Experian without a permissible purpose and § 1681g(e) by failing to provide Plaintiff with Mr. Smith’s account information. The Court granted AEP’s motion to dismiss Plaintiff’s claims against AEP.

Permissible Purpose. Section 1681b of the FCRA provides that a CRA may release consumer information for only specifically enumerated permissible purposes. The FCRA makes it punishable for any non-CRA to use or obtain a consumer report for impermissible purposes. Additionally, any person who used or accessed the report for an impermissible purpose may be liable for actual damages under § 1681n, if they did so negligently, and punitive damages under § 1681o, if they did so willfully. Plaintiff claimed that AEP accessed his report for an impermissible purpose because AEP knew or should have known that the information did not belong to Mr. Smith. As evidence, Plaintiff cited to a fraud alert received by AEP and the discrepancy in the address of Mr. Smith and the one listed on Plaintiff’s credit report.

Permissible Purpose. AEP argued that it could not be held liable under § 1681b because § 1681b(c) applies only to CRAs as defined by the statute and AEP is not a CRA. Plaintiff’s own pleadings identified AEP as a utility company, and the Court easily determined that AEP could not be held liable under § 1681b(c) because it was not a CRA. The Court also held that AEP’s access of Plaintiff’s information was largely due to Experian’s mistake and the allegations could not have resulted in a finding that AEP used or obtained Plaintiff’s consumer report. The mere passive receipt of a consumer report is not enough to satisfy the statutory element that AEP used or obtained the consumer report without a permissible purpose.

Consumer Report. AEP also argued that It could not be held liable under § 1681b because § 1681b(f) only applies when a consumer report is accessed or obtained. AEP argued that the report that contained Plaintiff’s information was not a consumer report because it was used for business, commercial, or professional purposes. The FCRA defines a consumer report as much by its function as it substance. A report containing consumer information that is used for business, commercial, or professional purposes, but not consumer purposes, is not a consumer report under the FCRA.

Damages. A plaintiff may recover any actual damages sustained as a result of a negligent violation under § 1681o and punitive damages as a result of a willful violation under § 1681n. The plaintiff bears the burden or establishing that he is entitled to damages. The Court found that Plaintiff’s complaint failed to satisfy even the minimal requirements to plausibly suggest he is entitled to recover damages for a violation of § 1681b. Plaintiff did not allege that he lost or was denied credit or subjected to a higher interest rate as a result of AEP’s improper use of his consumer report. Thus, the Court dismissed Plaintiff’s claim that AEP violated § 1681b.
Disclosures to Consumers. Section 1681g(e) provides that that upon request from a victim of identify theft, within 30 days, a business entity that has provided credit to or entered into a commercial transaction with a person who has allegedly made unauthorized use of the means of identification of the victim shall provide to the victim a copy of application and business transaction records in the control of the business entity. AEP argued that § 1681g(e) was inapplicable as Plaintiff had not alleged he had been the victim of identity theft or that Mr. Smith had used Plaintiff’s information to enter into a consumer transaction with AEP. The Court found that Plaintiff’s complaint failed to state a claim for violation of § 1681g(e) and dismissed Plaintiff’s second claim against AEP.

Injunctive Relief. Plaintiff also requested the Court to enter a permanent injunction requiring AEP to release Mr. Smith’s records to Plaintiff under § 1681g(e). The Court, like many courts have previously held, found that the FCRA does not entitle a private plaintiff to any form of injunctive, declaratory, or other equitable relief.

Creditor Does Not Violate the FCRA's Permissible Purpose Rule When It Inadvertently Obtains A Consumer Report for the Wrong Consumer

Ginny Webb — Wed, 06 Apr 2011 00:00:00 -0500

Use of ACDV Defeats Claim Alleging Willful Violation of FCRA

Paul W. Sheldon — Tue, 05 Apr 2011 00:00:00 -0500

Shannon v. Equifax Information Services, LLC. 2011 U.S. Dist. LEXIS 7644 (E. D. Pa. Jan. 26, 2011)

Facts: Plaintiff brought suit against Defendant Equifax Information Services, LLC (“Equifax”) for violations of the Fair Credit Reporting Act (“FCRA”), negligence, invasion of privacy/false light, and other claims surrounding disputed billing amounts charged to Plaintiff by his Verizon provider which led to derogatory credit reporting. A Verizon representative advised Plaintiff that he was entitled to a refund of $77, since he had previously paid $260 on his Verizon bill when only $183 was due. However, Plaintiff never received a refund check because Verizon never cashed Plaintiff's $260 check. Two months later, Equifax received notice of Plaintiff's dispute with Verizon and prepared an Automated Consumer Dispute Verification ("ACDV") and sent it to Verizon. The form included a box labeled "FCRA Relevant Information," in which Equifax wrote: "Consumer states that the outstanding balance write off noted on this account is derived from an error in Verizon’s billing and Verizon has indicated that he is overpaid on this account and will send him a refund check.” Verizon provided an automated response that an unpaid balance of $183 had been correctly reported as a loss. Accordingly, Equifax made no changes to Plaintiff's credit file. Equifax filed its motion for summary judgment (“motion”) which was denied as to Plaintiff’s FCRA claims, but was granted as to all other causes of action.

Accuracy. Accuracy has been held to be a defense to alleged violations of § 1681e(b) and § 1681i(a). The FCRA requires that a consumer present evidence tending to show that a credit reporting agency (“CRA”) prepared a report containing “inaccurate” information. The majority of Circuit Courts have adopted the “maximum possible accuracy” approach which holds that a credit entry can be incomplete or inaccurate within the meaning of the FCRA either because it is patently incorrect, or because it is misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions. Note: the Third Circuit has never stated its outright position on the issue of whether to adopt the “maximum possible accuracy” approach or the minority “technical accuracy” approach of defining “accuracy” for purposes of FCRA application.

Accuracy. In denying Equifax’s motion, the Court referred to the fact that Plaintiff sent a check for $260, but that Verizon never cashed it. Accordingly, the Court concluded that the Verizon tradeline may have been technically accurate, but may also have been misleading. In support of this conclusion, the Court believed that a trier of fact could find that the Verizon tradeline could leave the impression that Plaintiff never attempted to pay his bill, even though Plaintiff had in fact mailed a check to cover the debt. An appearance of a failure to attempt to pay could, in turn, adversely affect Plaintiff's ability to obtain credit. Thus, the Court found there was a genuine issue of material fact as to whether the credit report was so misleading as to be inaccurate, precluding Equifax from invoking the accuracy defense to defeat Plaintiff's FCRA claims on summary judgment.

Reasonable Procedures. Regarding “reasonableness” in the § 1681i(a) context, the Third Circuit has stated that the consumer must demonstrate the CRA would have discovered a discrepancy had it undertaken a reasonable investigation. In support of its denial of Equifax’s motion, the Court found that had Equifax performed a reasonable reinvestigation, such reinvestigation could have led to the discovery that Plaintiff had sent a check to cover his debt to Verizon, but that Verizon had not cashed that check. That discovery, the Court held, could have led to a more accurate credit report, one that noted Plaintiff's attempt to pay.

Wilfulness. To show willful noncompliance under the FCRA, a plaintiff must prove that the defendants acted knowingly, intentionally, or recklessly in disregarding the FCRA. In granting Equifax’s motion on Plaintiff’s allegations of willfulness, the Court found that Equifax only reproduces credit information from reliable sources and that the ACDV approach has been upheld as reasonable as a matter of law by other courts. Accordingly, the Court found that Equifax's actions did not constitute “a high risk of harm that was known or should have been known” by Equifax.

Preemption. Because negligence claims, by definition, are not premised upon Defendant's malice or willful intent to injure, negligence claims are preempted by § 1681h(e).

Preemption. Plaintiff alleged that Equifax "violated Plaintiff's right of privacy by impermissibly accessing Plaintiff's most private information and placing the Plaintiff in a false light before the eyes of others including potential credit grantors and creditors as well as family, friends and the general public. § 1681h(e) of the FCRA holds that "no consumer may bring any action or proceeding in the nature . . . invasion of privacy . . . except as to false information furnished with malice or willful intent to injure such consumer." Plaintiff did not produce evidence of "malice or willful intent to injure" nor did he specifically allege willful invasion of privacy.

Bankruptcy Court Lacks Standing to Hear Movant’s FCRA Claim

Marc F. Kirkland — Tue, 05 Apr 2011 00:00:00 -0500

In Re Stacker, 2011 Bankr. LEXIS 204 (Bankr. S.D. Ill. Jan. 20, 2011)

Facts: Pro se movant Renita Robinson-Stacker brought a contested matter before the Bankruptcy Court against Monco Law Offices (“Monco”) and Associated Bank (“Associated”) alleging that they violated the co-debtor stay of 11 U.S.C. § 1301 and the FCRA by reporting adverse information regarding her accounts to the CRAs. Ms. Stacker was not the debtor in the underlying bankruptcy, rather the debtor’s former spouse and a joint owner of a bank account and co-signer on a home equity account with Associated. The bank account was later sent to Monco for collection because it was overdrawn and the home equity account was reported as delinquent. Ms. Stacker claimed that both reportings were inaccurate. Plaintiff and Associated filed summary judgment motions with the Court. After review the Court determined that it could not grant the relief sought by Plaintiff.

Subject Matter Jurisdiction. The Court found that the bankruptcy court lacked subject matter jurisdiction to consider the FCRA claim because it was not a civil proceeding arising under title 11, or arising in or related to the case under title 11. Recovery in favor of Ms. Stacker would have no affect on the bankruptcy case of her former husband. While Ms. Stacker did not have a remedy in the bankruptcy court, the Court stated that nothing in its opinion would prevent her from pursuing her FCRA claims in a court with proper jurisdiction.

Remand of Lawsuit to State Court is Proper Regardless of Whether Plaintiff’s Claims are Preempted by the FCRA

Martin Thornthwaite — Mon, 04 Apr 2011 00:00:00 -0500

Pitts v. Bank of Am. Corp., 2010 U.S. Dist. LEXIS 137170 (W.D. Pa. Dec. 29, 2010)

Facts: Plaintiff claimed Defendant reported a delinquent corporate debt to CRAs as if it was Plaintiff’s personal debt. Plaintiff filed suit in state court and Defendant removed to federal court based on federal question jurisdiction. On Plaintiff’s motion to remand, Defendant argued that Plaintiff’s fraud and misrepresentation claims were preempted by the FCRA. The Court remanded the case back to state court but noted Defendant could argue for dismissal based on preemption there.

Removal. The Court concluded Plaintiff’s claims of fraud and misrepresentation under Pennsylvania common law should be remanded to the Pennsylvania state court. The Defendant failed to demonstrate that the Court may properly exercise removal jurisdiction. Plaintiff stipulated that he was not asserting FCRA claims, and since Plaintiff did not have a claim under federal law, remand was proper.

Remand of Lawsuit to State Court is Proper Regardless of Whether Plaintiff’s Claims are Preempted by the FCRA

Martin Thornthwaite — Mon, 04 Apr 2011 00:00:00 -0500

Plaintiff’s FCRA Claims Related to her Mixed Credit File Survive Summary Judgment

Martin Thornthwaite — Mon, 04 Apr 2011 00:00:00 -0500

Price v. Trans Union, LLC, 737 F. Supp. 2d 281 (E.D. Pa. 2010)

Facts: Plaintiff claimed that consumer reporting agency (“CRA”) willfully and/or negligently violated §§ 1681e(b) and 1681i of the FCRA. Specifically, Plaintiff alleged that the CRA failed to follow reasonable procedures to assure the maximum possible accuracy of information on Plaintiff’s consumer report and failed to permanently correct inaccuracies in Plaintiff’s credit file within thirty days after receiving Plaintiff’s disputes. Plaintiff asserted that her credit file was mixed with another person with the same name. The CRA filed a motion for summary judgment on the 1681i claims and all but one of Plaintiff’s 1681e(b) claims. The Court denied the motion in its entirety and concluded that Plaintiff had raised a genuine issue of material fact as to whether the CRA had willfully violated 1681e(b) and 1681i.

Damages. Under § 1681e(b), a plaintiff has the burden to prove that any inaccurate information in the consumer report caused the consumer’s injury. A plaintiff may claim damages for credit harm/lost credit opportunities. The Court reasoned that Plaintiff could establish credit harm “without pinpointing causal precision.” Further, the Court concluded that a jury could find that Plaintiff’s mixed file was a “substantial factor” in her inability to secure credit.

Willfulness. Plaintiff provided evidence that, if true, showed her file continually had inaccurate facts and that the CRA was notified of the inaccuracies on various occasions. The Court emphasized that the CRA did not use a "do not merge" procedure to prevent the mixing. The Court determined that a jury could find that the CRA acted in reckless disregard by not implementing the procedure and denied summary judgment.

Plaintiffs’ Permissible Purpose Claim Survives Motion to Dismiss

Marc F. Kirkland — Fri, 25 Mar 2011 00:00:00 -0500

Slack v. Suburban Propane Ptnrs., L.P., 2010 U.S. Dist. LEXIS 135530 (D.N.J. Dec. 22, 2010)

Facts: Plaintiffs, residential customers of Suburban Propane, sued Suburban Propane alleging various claim related to propane pricing. Plaintiffs also alleged that Suburban Propane violated § 1681b FCRA by obtaining their consumer reports for an impermissible purpose. The claim had previously been dismissed by the Court because Plaintiffs had failed to alleged facts sufficient to support the claim. Suburban Propane again moved to dismiss the claim alleging that Plaintiffs had failed to adequately plead an FCRA claim. The Court disagreed and denied Suburban Propane’s motion.

Permissible Purpose. Section 1681b(f) provides that: A person shall not use or obtain a consumer report for any purpose unless - (1) the consumer report is obtained for a purpose for which the consumer report is authorized to be furnished under this section; and (2) the purpose is certified in accordance with § 1681e. Thus the FCRA imposes liability for improperly obtaining a report, not simply for releasing or disseminating a report.

Permissible Purpose. To establish a claim of improper use or acquisition of a consumer report, a plaintiff must allege that: (1) there was a consumer report within the meaning of the FCRA; (2) the defendant used or obtained it; (3) the defendant did so without a permissible statutory purpose; and (4) plaintiff sustained actual damages as a result. Suburban Propane argued that Plaintiffs failed to show that the information allegedly obtained by Defendant constituted a consumer report. The Court disagreed and held that Plaintiffs allegation that Defendants requested and obtained consumer reports relating to Plaintiffs without their authorization or knowledge and for no purpose authorized by the FCRA was sufficient to establish a permissible purpose claim. The Court further stated that the arguments made in the motion to dismiss would be better addressed after the parties have had the benefit of discovery.

Investigative Report Prepared in Response to Employee’s Allegations of Discrimination Held not a “Consumer Report” Under the FCRA

Ginny Webb — Fri, 18 Mar 2011 00:00:00 -0500

Pearce v. Oral & Maxillofacial Assocs., LLC, 2010 U.S. Dist. LEXIS 133430 (W.D. Okla. Dec. 16, 2010)

Facts: Plaintiff claimed that an investigative report conducted and prepared by a third party non-employer constituted a consumer report and was preformed without the certification of her employer as required by the FCRA. Plaintiff further claimed that she requested a copy of the report and Defendants failed to provide her with a copy. Defendant moved to dismiss Plaintiff’s FCRA claims for failure to state a claim on the grounds that the investigative report was excluded from the definition of consumer report under § 1681a(d)(2). The Court found that the investigative report complained of was not a consumer report and therefore all of Plaintiff’s FCRA claims were dismissed except for her claim against her employer for its failure to provide a summary of the report.

Consumer Report. A consumer report is defined by § 1681a(d) as “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s … character, general reputation, personal characteristics … collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for … employment purposes.” Section 1681a(h) allows the use of a consumer report for employment purposes if used in connection with employment, promotion, reassignment, or retention as an employee.

Consumer Report. Section 1681a(d)(2) provides for the exclusion of certain defined communications from the definition of a consumer report. Specifically, § 1681a(x)(1)(B) excludes communications made to an employer in connection with the investigation into suspected employee misconduct or compliance with federal, state, or local laws and regulation. Plaintiff’s employer engaged the services of a third party to investigate Plaintiff in response to her allegations of discrimination and the Court found that the investigation results fell within the scope of the § 1681a(x) exclusion. The Court found further support in its interpretation of the report on the grounds that the investigation and accompanying report were in no way sought to determine Plaintiff’s credit worthiness or any other circumstance that might make § 1681a(x) inapplicable. The Court also noted that the applicability of the exclusion does not turn on the motive of the defendant, but rather on its actions.

Consumer Report. If a communication is found to fall within the § 1681a(x) exclusion to the definition of consumer report and an adverse employment action occurs based on the communication, § 1681a(x)(2) requires the employer to disclose a summary of the communication to the consumer. The Court found that the Plaintiff alleged facts sufficient to plead a claim for a violation of § 1681a(x)(2) as to her employer, but not against the non-employer third party that conducted the investigation and provided the report.

Affirmative Defense. Plaintiff argued that the § 1681a(x) exclusion is an affirmative defense that must be raised in Defendants’ answer. The Court found that since the defense was clear on the face of the complaint, it was properly raised in Defendants’ motion to dismiss for failure to state a claim.

Plaintiff’s State Law Negligence Claim Preempted by the FCRA

Marc F. Kirkland — Fri, 18 Mar 2011 00:00:00 -0500

Cosmas v. Am. Express Centurion Bank., 2010 U.S. Dist. LEXIS 126500 (D.N.J. Nov. 30, 2010)

Facts: Plaintiff sued American Express alleging violations of the FCRA and various state law claims including negligence. Plaintiff’s claims are related to a business American Express credit card account that Plaintiff was given by his work. The account was later sent to collections. The collection agency brought a claim against Plaintiff in state court and the claims were later dismissed because the collection agency could offer no evidence that Plaintiff ever assumed the debt. Later, Plaintiff discovered that the account was being reported by American Express to the CRAs. Plaintiff then filed this lawsuit against American Express. American Express moved for summary judgment and the Court requested additional briefing as to whether Plaintiff’s negligence claim was preempted by the FCRA. After review of the additional briefing, the Court determined that § 1681t(b)(1)(F) preempted Plaintiff’s state law negligence claim.

Preemption. Section 1681t(b)(1)(F) provides, in pertinent part, that: “no 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 the responsibilities of persons who furnish information to consumer reporting agencies ….

Preemption. Plaintiff argued that the Court should determine that § 1681t(b)(1)(F) only applies to statutory claims. Plaintiff cited a Middle District of Pennsylvania decision, which reasoned that the statutory structure surrounding § 1681t(b)(1)(F) compels a more circumscribed interpretation than the plain text of the section affords. Sites v. Nationstart Mortgage, 646 F. Supp. 2d 699,709 (M.D. Pa. 2009). However, the Court found that a Second Circuit decision was more persuasive than the decision in Sites. In Premium, the Second Circuit determined that the language of § 1681t applied to both common law as well as statutory claims. Premium Mortg. v. Equifax, Inc. 583 F.3d 103 (2nd Cir. 2009). Therefore, the Court concluded that interpreting § 1681t(b)(1)(F) to encompass both statutory and common law claims is consistent with how Congress intended the FCRA to affect furnishers of information and consumers.

Plaintiff’s Failure to Show that Debt Collector’s Investigation was Unreasonable Resulted in Summary Judgment for Defendant

Marc F. Kirkland — Thu, 17 Mar 2011 00:00:00 -0500

Anastasion v. Credit Serv. Of Logan, Inc., 2010 U.S. Dist. LEXIS 121714 (D. Utah. Nov. 16, 2010)

Facts: Plaintiff alleged that Defendant debt collector violated the FCRA and other statutes by attempting to collect a debt for an apartment Plaintiff had leased. Plaintiff failed to pay rent and the apartment complex brought eviction proceedings against her. The apartment complex brought a claim in state court and received a judgment for eviction and damages against Plaintiff. The apartment complex then assigned collection of the damages to Defendant. Plaintiff attempted to satisfy the judgment by submitting a copy of a check for the amount owed along with a bank statement indicating that there were sufficient funds to cover the check. The state court judge signed the order granting the satisfaction. Defendant subsequently separated the collection account into two accounts, one for the original collection and one for for post-judgment charges. Upon receipt of the check Defendant updated the collection account to reflect paid, however Plaintiff then stopped payment on the check. Once Defendant discovered the stop payment action it reopened the account. On three separate occasions Plaintiff disputed at least one of accounts with the CRAs and each time Defendant verified the accounts. Each Party brought summary judgment motions. Defendant argued and the Court agreed that Plaintiff failed to meet her burden to establish that Defendant’s investigations were unreasonable.

Reasonable Investigation. Section 1681s-2(b) requires a furnisher of credit information, upon receiving notice from a CRA that a consumer has disputed a debt, to investigate the dispute and to report the results of the investigation to the CRA. As a general rule, whether an investigation is “reasonable” under the FCRA is a question of fact for the jury. The burden of showing the investigation was unreasonable is on the plaintiff.

Reasonable Investigation. Plaintiff argued that Defendant’s investigation was unreasonable because it did nothing more than check its own records to investigate Plaintiff’s disputes. Plaintiff claimed that Defendant had a duty to verify the accuracy of the amounts provided by the apartment complex which required Defendant to look beyond its own records. Defendant claimed that its investigations were reasonable as upon receipt of each dispute, it verified that Plaintiff’s account had an outstanding balance and responded accordingly to the CRA. The Court found that Plaintiff failed to carry her burden to demonstrate that Defendant’s efforts were unreasonable and granted Defendant’s motion for summary judgment. In doing so, the Court noted that Plaintiff failed to present any case law to support her assertion of a creditor’s duty to look beyond its own records.

Newsletter: February 25, 2011

Ginny Webb — Fri, 25 Feb 2011 00:00:00 -0500

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Plaintiff’s FCRA Claims Dismissed with Prejudice as Defendants are Not CRAs

Marc F. Kirkland — Mon, 21 Feb 2011 00:00:00 -0500

Garnett v. Millennium Med. Mgmt. Res., 2010 U.S. Dist. Lexis 131035 (N.D. Ill. Dec. 9, 2010)

Facts: Plaintiffs, on behalf of themselves and potential class members, brought FCRA and state law claims against Defendants Emergency Healthcare Physicians (“EHP”) and Millennium Medical Management Resources (“Millennium”) related to Defendants’ alleged failure to protect Plaintiffs’ personal and financial information. Named Plaintiffs were emergency room patients who received medical treatment by EHP personnel. When receiving treatment, Plaintiffs, and other EHP patients, were required to provide identifiable personal health and financial information, including name, address, phone number, date of birth, social security number, driver’s license number, and health insurance information (collectively referred to as “Information”). That Information was given to Millennium, which provided medical coding and bill collection services for EHP. The Information was stored electronically on a portable hard drive that was not encrypted, which was later stolen. There was no evidence that Plaintiffs or any putative class member had suffered any identity theft consequences other than the expenses of credit monitoring. Defendants moved to dismiss the FCRA claims on grounds that each Defendant was not a consumer reporting agency (“CRA”), there had been no disclosure of a consumer report, and Plaintiffs had not alleged any actual damages. The Court granted Defendants’ motion to dismiss the FCRA claims with prejudice and dismissed the state law claims without prejudice for lack of subject matter jurisdiction.

CRA. Section 1681a(f) defines a CRA as: “any 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.”

Failure to State a Claim.In an attempt to allege that each Defendant was a CRA, Plaintiffs merely repeated the statutory language defining a CRA and offered no facts in support. However, the Court noted, that Plaintiffs also alleged that EHP provides physician services at emergency rooms and Millennium provides medical coding and collection service for medical providers. The Court held that the minimal allegations regarding the nature of the Defendants’ businesses do not plausibly support that either Defendant regularly engages 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. Therefore, because it was not adequately alleged that either Defendant is a CRA, Plaintiffs’ FCRA claims were dismissed with prejudice.

Creditor Granted Judgment At the Close of Evidence Because Plaintiff Failed to Produce Enough Evidence to Support His Claims

Ryan Langston — Wed, 16 Feb 2011 00:00:00 -0500

Okocha v. HSBC Bank USA, N.A., 2010 U.S. Dist. LEXIS 132152 (S.D.N.Y. Dec. 14, 2010)

Facts: Plaintiff brought suit against HSBC Bank USA, N.A. and other related entities (collectively, “Defendants”) regarding a decade-long dispute concerning an overdraft account. Plaintiff contended that he never used the overdraft account, never agreed to its terms, and repeatedly disputed charges on the account with Defendants. Plaintiff further claimed that he notified the CRAs of the issue on multiple occasions. The trial court summarily dismissed all claims except for Plaintiff’s: (1) Electronic Funds Transfer Act (“EFTA”), 15 U.S.C. § 1693, et seq. and Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1632, 1666, claims for conduct that occurred after October 9, 2007; (2) FCRA claim under § 1681s-2(b) for conduct that occurred after October 9, 2006; (3) negligence claim as to the overdraft account for conduct that occurred after October 9, 2005; (4) and negligence claim related to Plaintiff’s deposit account for conduct that occurred after October 9, 2007. At the close of evidence in the subsequent trial, Defendants moved for and the trial court granted judgment as a matter of law on all claims, and which was later affirmed on appeal.

EFTA. The EFTA provides a basic framework establishing the rights, liabilities and responsibilities of participants in electronic banking. Plaintiff argued that Defendants violated 15 U.S.C. §§ 1693e, 1693k, and 1693f by repeatedly debiting his deposit account in order to offset a disputed amount on his overdraft account. The Court held that Plaintiff’s EFTA claims failed for two reasons. First, the debits at issue were not designed to recur at substantially regular intervals. Second, the transfers were excepted from the EFTA’s regulations because they were made pursuant to the terms of Plaintiff’s deposit account agreement.

TILA. Plaintiff’s claims failed under the TILA because Plaintiff did not provide written notice to HSBC that would trigger its procedural obligations under the TILA. Further, Plaintiff did not provide any evidence that HSBC failed to investigate his dispute or otherwise comply with the requirements of the TILA.

FCRA. Plaintiff’s testimony was not enough to establish that HSBC knowingly and intentionally violated that FCRA or acted with reckless disregard for its duties under the statute. Plaintiff also failed to present legally sufficient evidence of actual damages. Plaintiff did not produce any evidence that a potential creditor even saw his report, let alone that he was denied credit on that basis. Further, Plaintiff failed to produce any evidence linking his emotional distress with the release of inaccurate information to creditors.

Negligence. Before a defendant may be held liable for negligence, a plaintiff must show that the defendant owes a duty to the plaintiff. Plaintiff failed to allege that Defendants owed him a duty of reasonable case under New York law. Even if Defendants owed a duty to Plaintiff, he did not present any testimony or evidence at trial indicating that Defendants failed to do something that a reasonable prudent person would have done when handling his debt.

Newsletter: February 2, 2011

Marc F. Kirkland — Wed, 02 Feb 2011 00:00:00 -0500

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Nevada Court Finds Plaintiff’s FCRA Allegations Against Furnisher Are Adequately Pled, but Finds Plaintiff’s Defamation Claim to be Preempted

Paul W. Sheldon — Wed, 02 Feb 2011 00:00:00 -0500

Karony v. Dollar Loan Center, LLC, et al., 2010 U.S. Dist. LEXIS 132884 (D. Nev. Dec. 13, 2010)

Facts: Plaintiff filed suit against Defendants Dollar Loan Center (“Dollar Loan”) and its collection agency, Clark County Collection Service, LLC (“Clark County”) alleging FCRA violations among other statutory and common law claims. Plaintiff alleges he never entered into a promissory note with Defendant Dollar Loan and therefore was never responsible for the debt owed to the defendants and therefore, he should not be the subject of collection efforts nor adverse credit reporting. Additionally, Defendant Clark County previously filed suit in state court against Plaintiff for the debt which was eventually dismissed with prejudice based on Plaintiff’s challenge that he was not personally responsible for the debt. Plaintiff claims that Defendant Clark County continued to verify the debt to Equifax after the state court’s dismissal, resulting in a drop in Plaintiff’s credit score. Defendants filed their motion to dismiss under 12(b)(6) or alternatively, for summary judgment. The Court granted the Motion in part.

Failure to State a Claim. Under § 1681s-2(a)(1)(A), a furnisher must not provide any information to a credit reporting agency (“CRA”) if the furnisher knows or has a reasonable cause to believe that the information is inaccurate. A furnisher has reasonable cause to believe that the information is inaccurate if the furnisher has specific knowledge, other than mere allegations by the consumer, that would cause a reasonable person to have substantial doubts about the inaccuracy of the information. Plaintiff alleged that Defendants reported the debt to the CRAs despite knowing that Plaintiff was dismissed from the underlying lawsuit and that Plaintiff did not personally sign the promissory note or agree to be responsible for the debt in any way (it was his wife who signed the note). Accordingly, these facts were sufficient to state a claim under § 1681s-2(a)(1)(A).

Failure to State a Claim. Under § 1681s-2(a)(3), a furnisher must inform a CRA that a consumer is disputing a reported debt. Plaintiff alleges that despite having knowledge that he disputed the debt, Defendants continued to verify the debt to the CRAs. Accepting these allegations as true, the Court found that it may reasonably infer that Defendants are liable for violating this duty. Accordingly, the Court found that Plaintiff stated a claim under 1681s-2(a)(3).
Preemption. Under the FCRA, no requirement or prohibition may be imposed under the laws of any state with respect to matters regulated by § 1681s-2. To the extent that Plaintiff’s common law claims relate to Defendants’ responsibilities under § 1681s-2, they are preempted, including Plaintiff’s defamation claim.

Louisiana Court Grants Consumer Reporting Agency’s Motion to Dismiss, Holding That Private Litigants Cannot Receive Injunctive Relief Under the FCRA

Paul W. Sheldon — Tue, 01 Feb 2011 00:00:00 -0500

Johnson v. Trans Union, LLC, 2010 U.S. Dist. LEXIS 135586 (W.D. La. Dec. 22, 2010)

Facts: Plaintiff filed suit against Trans Union alleging that Trans Union reported false and inaccurate information on her credit reports and failed to correct those inaccuracies, even after notification and reinvestigation of the disputes. As part of her claims for relief, Plaintiff sought injunctive relief under both the FCRA and Louisiana state law. Trans Union filed a Motion for Partial Dismissal under Fed. R. Civ. P. 12(b)(6), claiming that Plaintiff’s claims for injunctive relief were barred by the FCRA and should be dismissed with prejudice. The Court agreed.

Injunctive Relief. The Fifth Circuit has unequivocally stated that private litigants may not seek injunctive relief against consumer reporting agencies. Private litigants are limited to the remedies set out in §1681n and §1681o which include statutory, actual, and punitive damages as well as attorney’s fees.

Preemption. The FCRA also preempts state laws to the extent those laws are inconsistent with the FCRA. Accordingly, Plaintiff’s state law injunctive relief claim was also dismissed because the present case involved FCRA claims which prohibited private litigants from seeking injunctive relief.

Defendant Did Not Violate The FCRA Because The Information It Reported To The CRAs Was Accurate

Martin Thornthwaite — Fri, 28 Jan 2011 00:00:00 -0500

Eaton v. Citibank (South Dakota), N.A., 2010 U.S. Dist. LEXIS 113293 (M.D. Pa. Oct. 25, 2010)

Facts: Plaintiff alleged that she satisfied her payment obligation on her Citibank credit card when she submitted a check with the notation that by cashing her check, Defendant agreed to accept the amount as payment in full for monies owed on her account. Defendant contended that the payment did not satisfy the account, and in a counterclaim against Plaintiff, demanded payment of the full amount due. Plaintiff’s credit card was covered by written terms and conditions which allowed Defendant to report information about the account to consumer reporting agencies (“CRAs”). Plaintiff admitted using the credit card to purchase goods and services and that her balance exceeded the amount of the check she sent in purportedly to settle her account. Plaintiff further claimed that Defendant had agreed on the telephone that the check would settle the account. Plaintiff asserted two claims against Defendant including a claim under the FCRA for continuing to report Plaintiff’s debt to the CRAs after she allegedly satisfied it and a claim that Defendant engaged in unlawful debt collection practices. Defendant filed a motion for summary judgment on Plaintiff’s claims and on its counterclaim for money owed on the account. The Court agreed with Defendant’s motion and granted summary judgment.

Furnisher Duties. Plaintiff’s claim under § 1681s-2 failed because Defendant’s reporting was not improper. Specifically, the Court found that Defendant truthfully reported that Plaintiff had not paid the amount due on her account. Thus, Defendant’s reporting that the account was in default was accurate, and the Court granted summary judgment.

Plaintiff’s FCRA Claims Against His Creditors Failed Because He Sent His Disputes Directly To His Creditors Rather Than To The CRAs

Martin Thornthwaite — Wed, 26 Jan 2011 00:00:00 -0500

Burrell v. DFS Servs., LLC, 2010 U.S. Dist. LEXIS 128214 (D. N.J. Dec. 6, 2010)

Facts: Plaintiff’s Discover credit card was fraudulently used to purchase almost $10,000 in goods and services by an identity thief. The identity thief also used Plaintiff’s identity to incur approximately $1,000 in charges from Defendant Helio, LLC (“Helio”), a wireless telephone company. Plaintiff alleged that he repeatedly informed Defendant DFS Services, LLC (“Discover”) and Helio that his identity had been stolen, but they did nothing except transmit information to various consumer reporting agencies (“CRAs”) that Plaintiff was delinquent in paying his bills. Plaintiff asserted claims against Defendants under § 1681s-2(b) of the FCRA, § 1666 of the Fair Credit Billing Act (“FCBA”), and also alleged other state law claims. Defendants moved to dismiss for failure to state a claim upon which relief could be granted. The Court granted Defendants’ motion to dismiss on Plaintiff’s FCRA and state law claims but declined to dismiss his FCBA claim.

Furnisher Reinvestigation. The Court noted that the only portion of the FCRA that an individual consumer can enforce against his or her creditors is under § 1681s-2(b) and that such provision requires a consumer to file a complaint with a CRA before bringing an action against a creditor. Upon notice of a consumer’s dispute from a CRA, the furnisher or creditor has a duty to investigate the dispute. Thus, Plaintiff could only maintain FCRA claims against Defendants to the extent that he sent disputes to a CRA and not just to his creditors.

Preemption. The Court dismissed Plaintiff’s state law claims because they were preempted by the FCRA. Plaintiff’s state claims alleged that Defendants committed defamation, intentional infliction of emotional distress, and negligence by reporting false information to CRAs. Pursuant to § 1681t(b)(1)(F), the FCRA preempts state law claims against furnishers of credit information, regardless of whether those claims are couched in terms of common law or state statutory obligations.

FCBA. In order to trigger liability under the FCBA, a consumer must send notice to a creditor that contains three elements: (1) information that allows the creditor to ascertain the consumer’s name and account number, (2) an indication that the consumer believes the statement contains a billing error and the amount of that error, and (3) the reasons for the consumer’s belief. In this matter, Plaintiff completed an Affidavit of Fraud regarding the accounts that was provided by Discover. The Court determined that the fraud affidavit was sufficient to trigger Discover’s obligation to investigate and correct any billing errors under the FCBA.

Plaintiff’s FCRA Claim Regarding Her Fraud Alert Failed Because Defendant Never Opened An Account In Plaintiff’s Name

Martin Thornthwaite — Tue, 25 Jan 2011 00:00:00 -0500

Greene v. DirecTV, Inc., 2010 U.S. Dist. LEXIS 118270 (N.D. Ill.Nov. 8, 2010)

Facts: Plaintiff experienced significant problems on her credit report after another person used her social security number to open credit cards and make fraudulent charges. Plaintiff contacted a consumer reporting agency (“CRA”) to have a fraud alert put on her file, but the problems continued. The identity thief contacted Defendant DirecTV and provided her real name, address, telephone number, and Plaintiff’s social security number in order to sign up for satellite television service. DirecTV contacted a CRA and was provided with Plaintiff’s consumer report, which contained a fraud alert. DirecTV contracted with co-Defendant First Contact to investigate fraud alerts. Plaintiff immediately got in touch with First Contact and denied that she had anything to do with DirecTV. DirecTV was notified and put the account in “pending disconnect.” The account was never opened in Plaintiff’s name and Plaintiff was never billed anything on the account. Among other claims, Plaintiff claimed DirecTV violated the FCRA by failing to comply with § 1681c-1. DirecTV filed a motion for summary judgment on Plaintiff’s FCRA claim, and the Court granted the motion.

Fraud Alert. Pursuant to § 1681c-1, before establishing an account in the name of a consumer with an extended fraud alert on file, a creditor must contact the individual to confirm that the application for credit is not the result of identity theft. If the fraud alert contains a contact number, the creditor must either contact the consumer directly or take reasonable steps to verify the consumer’s identity before opening a credit account in the consumer’s name. DirecTV claimed it could not have violated this section because the account was opened in the name of the identity thief and not the Plaintiff. Rather, the account contained the Plaintiff’s social security number but not her name. The Court found that Congress elected to not to employ the term “identifying information” instead of “name” when designing rules for creditors confronted with fraud alerts. Thus, the Court found that there could be no violation of the FCRA if only Plaintiff’s social security number and not her name were used to open the account.

Texas Court Finds That “Mere Persistence” Not Enough To State A Claim For Unreasonable Debt Collection Tort

M. Kasey Ratliff — Tue, 25 Jan 2011 00:00:00 -0500

Valdez v. Capital Mgmt. Servs., L.P., et al., 2010 U.S. Dist. LEXIS 121483 (S.D. Tex. Nov. 16, 2010)

Facts: Plaintiff’s identity was stolen and the thief used Plaintiff’s identity to finance the purchase of a mobile home. The thief defaulted on payments, leaving a debt of nearly $40,000.00. Over a period of years, Plaintiff was contacted by various debt collection agencies regarding the debt. Plaintiff filed a lawsuit against various debt collection agencies alleging violations of the Fair Debt Collection Practices Act (“FDCPA”), the Fair Credit Reporting Act (“FCRA”) and various state law claims based on their collection activities. Defendants filed a Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)6. The Court granted the motion in part and denied it in part.

FDCPA. 15 U.S.C. § 1692d prohibits any conduct the natural occurrence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. It is clear that the statute intends to prohibit conduct that is abusive, regardless of the nature of the debt. Plaintiff has not pled any evidence to show this type of abusive or harassing conduct. Plaintiff’s § 1692d claim should be dismissed for failing to state a claim.

FDCPA. Plaintiff also alleges that Defendants violated 15 U.S.C. § 1692e which prohibits debt collectors from misrepresenting the status of the debt. Plaintiff’s allegation that defendant continued to attempt to collect the debt despite knowing that Plaintiff did not incur or owe the debt is sufficient to state a claim.

Unreasonable Debt Collection. The Texas common law tort of unreasonable debt collection requires actions by the debt collector that are “willful, wanton and malicious and intended to inflict mental anguish and result in bodily harm.” Even accepted as true, the actions pled by Plaintiff are insufficient to state a plausible claim for unreasonable debt collection. In essence, Plaintiff argues a theory of liability arising out of the Defendants’ persistence. Mere persistence, however, is insufficient to state a claim for unreasonable debt collection.

Permissible Purpose. Plaintiff alleges that defendants forwarded Plaintiff’s account to their agents knowing and intending that those agents would pull Plaintiff’s credit report. Assuming the truth of Plaintiff’s assertions, Plaintiff has alleged facts to show that defendants either willfully or negligently obtained his credit report without having a legitimate business purpose for doing so. Accordingly, the motion to dismiss this claim should be denied.

Newsletter: January 25, 2010

Paul L. Myers — Tue, 25 Jan 2011 00:00:00 -0500

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Furnisher’s Attempted Removal Based Upon Federal Preemption Defense Remanded as State Law Claims Were not Completely Preempted by Federal Law

Paul W. Sheldon — Thu, 13 Jan 2011 00:00:00 -0500

Bobritsky v. Limited Brand Stores, Inc., et al, 2010 U.S. Dist. LEXIS 125035 (C.D. Cal Nov. 9, 2010)

Facts: Plaintiff brought suit against Limited Brand Stores in small claims court in Los Angeles County, alleging damages for defamation of credit and for falsely reporting wrong information to the credit bureaus as a furnisher of credit information, specifically citing Cal. Civ. Code §§ 1785.25(a), (b), and (c). Defendant removed the action to Federal Court, arguing that Plaintiff’s allegations rose under the Fair Credit Reporting Act (“FCRA”) in that it preempted the cited provisions of § 1785.25. The Court found that Defendant’s preemption defense was not sufficient to create a federal question for removal purposes. Accordingly, the Court remanded the case back to small claims court.

Removal. A state-created cause of action can be deemed to arise under federal law (1) where federal law completely preempts state law; (2) where the claim is necessarily federal in character; or (3) where the right to relief depends on the resolution of a substantial, disputed federal question.

Removal. Although Defendant argued that Congress intended to preempt state law with respect to "furnishers of information", Defendant conceded that Congress did not preempt Cal. Civ. Code § 1785.25(a), an explicit part of Plaintiff's claim.

Removal. Although Defendant argued that Plaintiff's complaint was federal in character, the court found nothing in the complaint that suggested Plaintiff was alleging anything other than violations of Cal. Civ. Code §§ 1785.25(a)-(c). Note: Although the Court recognized that §§ 1785.25(b) and (c) may be preempted by federal law, Defendant's federal preemption defense did not create federal question jurisdiction, holding that a case may not be removed to federal court on the basis of a federal defense, including the defense of preemption, even if the defense is anticipated in the plaintiff's complaint, and even if both parties admit that the defense is the only question truly at issue in the case. The court further emphasized that the Plaintiff was "the master of her complaint" and can "avoid federal jurisdiction by relying exclusively on state law."

Court Grants Summary Judgment Because Plaintiff Lost Employment Opportunity Due to Bad Interview, Not Because of Inaccurate Consumer Report

Ryan Langston — Wed, 12 Jan 2011 00:00:00 -0500

Stewart v. Abso, Inc., 2010 U.S. Dist. LEXIS 101865 (W.D. Ky. Sept. 28, 2010).

Facts: Plaintiff applied and interviewed for an Associate Medical Director position at a hospital. He was not offered the job and asserts that he was wrongfully denied employment because of an error in a background report prepared for the hospital by an outside contractor, Abso, Inc. (“Defendant”). Defendant’s report incorrectly stated that Plaintiff had been convicted of a felony for possessing prescription controlled substances not stored in their original container. This was incorrect. While Plaintiff had originally been charged with a felony, his felony charge was later amended to a misdemeanor. Plaintiff seeks recovery of compensatory and punitive damages under the FCRA and for two state law torts: defamation and wrongful interference with a business expectation. The Court granted Defendant’s motion for summary judgment.

Summary Judgment. To sustain a claim for negligent violation of § 1681e(b), a consumer must show that he suffered an injury that was caused by the inclusion of inaccurate information in his consumer report. Plaintiff failed to provide any credible evidence that would suggest Defendant’s report was anything more than an additional, cumulative justification for the hospital’s decision not to offer Plaintiff the job. Before receiving the report, the hospital knew about Plaintiff’s prior issues with prescription drugs. While the hospital did not know exactly what crimes Plaintiff may have committed, Plaintiff admitted facts in prior conversations and interviews that could support any number of serious criminal charges against him. There was no evidence that any member of the hospital’s interview team had decided to hire Plaintiff before they received the report. In fact, the evidence suggested that the team had already decided to look elsewhere. Thus, the Court held that Plaintiff did not lose the employment opportunity with the hospital because of Defendant’s report, but rather because he did not interview well enough to suit the team that evaluated him.
Defamation. Defendant’s report was only provided to the interview team at the hospital, which already knew about Plaintiff’s history of prescription drug abuse. Because there was no evidence that the report was submitted to anyone other than the hospital’s interview team, the Court held that there was no evidence that Defendant’s report caused any injury to his reputation.

Wrongful Interference. Plaintiff’s claim of wrongful interference was denied because Plaintiff failed to establish a valid business expectancy. Plaintiff had not been offered the job either orally or in writing; he had merely interviewed for the position. In addition, Plaintiff failed to produce any credible evidence to suggest that he did not receive the job on the basis of Defendant’s report.

Court Dismisses Plaintiff’s Request for Injunctive Relief But Allows Plaintiff’s FCRA Claims to Remain

Martin Thornthwaite — Wed, 12 Jan 2011 00:00:00 -0500

Hintz v. Experian Info. Solutions, Inc., 2010 U.S. Dist. LEXIS 109202 (E.D. Va. October 13, 2010)

Facts: Plaintiff filed suit against Experian Information Solutions, Inc. (“Experian”) and Marauder Corporation (“Marauder”) alleging numerous violations of the FCRA. Specifically, Plaintiff claimed that Experian improperly allowed Marauder to access Plaintiff’s consumer report, that Marauder made an unauthorized collection inquiry for Plaintiff’s report regarding a debt Plaintiff disputed, and that as a result, Plaintiff’s credit score decreased. In addition to monetary damages, Plaintiff also sought injunctive relief. Experian filed a Motion for Judgment on the pleadings. The Court denied Experian’s Motion as to every claim except for Plaintiff’s claim for injunctive relief, which was dismissed. The Court found that Plaintiff had properly plead all of his other claims for relief.

Reasonable Procedures. With respect to Plaintiff’s claim under § 1681e, Plaintiff must allege that Experian had reasonable grounds to believe that Marauder would not use Plaintiff’s report for a permissible purpose and did not maintain reasonable procedures to prevent impermissible uses of Plaintiff’s report. The Court found that Plaintiff’s Complaint plead sufficient facts to survive Experian’s Motion. Plaintiff stated that Experian provided Marauder with Plaintiff’s report after Experian was notified that Marauder had been improperly threatening Plaintiff and that the alleged debt was invalid. Thus, viewing the Complaint in the light most favorable to Plaintiff, the allegations established that Experian had reasonable grounds for believing that Marauder was using its access to Plaintiff’s consumer report for an impermissible purpose. Further, despite knowledge of Marauder’s behavior, Experian continued to provide Marauder access to Plaintiff’s consumer report.

Permissible Purpose. Pursuant to § 1681b, a CRA may only provide a consumer report to a person if it has reason to believe that the person “intends to use the information in connection with a credit transaction … review or collection of an account of the consumer … or otherwise has a legitimate business need for the information.” For the same reasons noted above, the Court denied Experian’s Motion on this claim.

Reinvestigation. Plaintiff also claimed that Experian failed to conduct a reasonable reinvestigation on his dispute. Plaintiff alleged that his credit file contained inaccurate information. Specifically, Plaintiff alleged that the debt listed on his consumer report was invalid because he returned the product at issue pursuant to a free trial period. Plaintiff claimed that Experian failed and refused to take the time to review the information that it received about Marauder from numerous sources, including Plaintiff, and to recognize that the derogatory information that Marauder was posting about Plaintiff on his consumer report was false, invalid, and causing him harm. The Court found that Plaintiff’s allegations stated a claim and denied Plaintiff’s Motion.

Injunctive Relief. The Court found that injunctive relief was not available under the FCRA and granted Experian’s Motion with respect to this claim.

A Screenshot of an Online Booking Confirmation is Not an Electronically Printed Receipt

Ginny Webb — Thu, 06 Jan 2011 00:00:00 -0500

Kelleher v. Eaglerider, Inc., 2010 U.S. Dist. LEXIS 115279 (N.D. Ill. Oct. 28, 2010)

Facts: Plaintiffs Kelleher and Yaakoby sued Defendant claiming that it violated the Fair and Accurate Credit Transactions Act of 2003 (“FACTA”) by printing their credit card numbers and corresponding expiration dates on online booking confirmation screenshots, which Plaintiffs claimed were electronically printed receipts subject to truncation requirements under § 1681c(g)(1). Additionally, Plaintiff Yaakoby claimed that Defendant further violated the FACTA by providing him with a paper receipt showing 8 digits of his credit card number in addition to the expiration date. Defendant moved for summary judgment claiming the online confirmation screenshots were not electronically printed receipts within the meaning of § 1681c(g)(2) and that Plaintiff Yaakoby waived any potential FACTA claims in regard to the paper receipt when Plaintiff signed the rental contract, which contained a release of claims. The Court granted summary judgment regarding the claims arising out of the online confirmation screenshots, but denied Defendant’s motion in regard to the printed receipt.

Electronically Printed Receipt. The Seventh Circuit has interpreted the term “electronically printed” contained in § 1681c(g)(2) to include printed receipts in the form of a tangible document. The Seventh Circuit went on to find that the statute contemplated transactions where receipts are physically printed using electronic point of sale devices, like electronic cash registers or dial-up terminals. Relying on this earlier interpretation of this section, the court held that screenshot internet confirmations, such as those complained of in this lawsuit, do not fall within the intent and meaning of the FACTA. Therefore, those claims arising from the screenshots fail as a matter of law.

Electronically Printed Receipt. When Plaintiff Yaakoby visited Defendant’s location to pick up and return his rented motorcycle, he received and initialed several forms including, a “Rental Out” form and a “Rental In” form. The Rental Out form contained the expiration date of his credit card and the Rental In form contained the first four and last four digits and the expiration date of his credit card. Plaintiff Yaakoby was also issued a fully compliant credit card slip, which Defendant argues was the “receipt” in the transaction. The court held that the receipt, Rental Out, and Rental In forms all constituted receipts under § 1681c(g)(1) because they were provided to the cardholder at the point of the sale or transaction, and therefore, must comply with FACTA’s truncation requirements.

Release. Plaintiff Yaakoby also signed several forms including the “Motorcycle Rental Release of Liability” and “Terms and Conditions” (collectively referred to as “Release”). The Release contained a section entitled “Waiver of Liability” and “Motorcycle Rental Release of Liability,” to which Defendant claims Plaintiff Yaakoby waived and released any liability of Defendant, including waiving any future FACTA claims. The court analyzed Illinois contract law governing releases and noted that releases are to be strictly construed against the benefitting party, must spell out the intention of the parties with great particularity, and cannot be construed to include claims not within the contemplation of the parties or claims that might arise in the future. The court held that because the Release makes no reference to FACTA claims and, when reviewing the language of the Release and facts of the transaction, it is clear that the parties did not intend to cover potential FACTA claims, Defendant’s motion for summary judgment as to claims arising out of Plaintiff Yaakoby’s tangible receipts was denied.

Plaintiff’s FCRA Claims Dismissed Because Plaintiff Failed To Allege Defendant Was a CRA

Ryan Langston — Fri, 31 Dec 2010 00:00:00 -0500

Lamdin v. Aerotek Commer. Staffing, 2010 U.S. Dist. LEXIS 105306 (E.D. Tenn.Sept. 30, 2010)

Facts: Plaintiff filed suit against Aerotek Commercial Staffing (“Aerotek”) and American Background Information Services, Inc. (“ABI”) (collectively, “Defendants”) asserting claims arising out of Aerotek’s termination of Plaintiff’s employment following the results of a background check performed by ABI. Specifically, Plaintiff alleged tortious interference and/or intentional interference with present and prospective employment relationships, procurement of a breach of contract, false light invasion of privacy, and violations of FCRA §§ 1681e(b) and 1681k. Plaintiff was placed with a temporary employer by Aerotek for a probationary period. After the probationary period Plaintiff was to be offered a full-time job if she passed a background check. Plaintiff alleged that she was on track for an offer for full-time employment until ABI recklessly and falsely stated that Plaintiff had been convicted of a felony and a misdemeanor, had served jail time, was serving probation, and had made restitution for theft and an assault. Plaintiff alleges that she lost her full-time offer as well as her contract with Aerotek due to the false information in the ABI background report. Defendants filed a joint motion to dismiss, which the Court granted in part and denied in part.

CRA. Under § 1681a(f), a consumer reporting agency (“CRA”) is a person or entity that prepares consumer reports. Defendants argued that Plaintiff failed to allege sufficient facts to show that Aerotek was a CRA. Plaintiff alleged that Aerotek was a staffing company that entered into contractual arrangements with workers and then placed these workers into temporary positions. The Court agreed with Defendants and held that such allegations were not sufficient to raise the inference that Aerotek was a CRA. Thus, Plaintiff’s FCRA claims against Aerotek were dismissed.

Preemption. FCRA § 1681h(e) preempts state law claims of defamation, invasion of privacy, and negligence when only negligence, as opposed to malice or willful intent to injure, is at issue. Because Plaintiff alleged that Defendants willfully and recklessly violated the FCRA; alleged that Defendants knew that the information contained in the background report was false or acted with reckless disregard as to whether it was false or not; and alleged that Defendants maliciously and willfully intended to injure Plaintiff's rights and reputation, the Court held that Plaintiff’s state law claims were not preempted by the FCRA.

Court Holds That Third Party Contribution and Indemnity Claims Are Unavailable Under the FCRA or FACTA

Ryan Langston — Thu, 30 Dec 2010 00:00:00 -0500

Anderson v. Nelson, 2010 U.S. Dist. LEXIS 124769 (D. Minn.Nov. 4, 2010)

Facts: Plaintiffs filed a class-action lawsuit against Defendants Raymond, Nelson and Burrito Union (“Defendants”) alleging violations of the FCRA and the Fair and Accurate Credit Transaction Act (“FACTA”). Specifically, Plaintiffs alleged that Defendants violated the FCRA by printing credit-card receipts that displayed more than the last five digits of the class members' credit or debit cards. Raymond, Nelson, and the owner and operator of Burrito Union, Just Take Action, Inc., (collectively, the “Third Party Plaintiffs”) filed a complaint against Action Systems, Inc. (“ASI”) and Hospitality Solutions Duluth (“HSD”) alleging that the statutory violations, if any, were caused by ASI and HSD, from whom the Third-Party Plaintiffs purchased their point-of-sale system. According to the Third-Party Complaint, ASI distributes, sells, installs, configures, and maintains a “Restaurant Manager” system through a network of selected authorized agents and representatives, such as HSD. Third Party Plaintiffs alleged that the ASI Restaurant Manager system sold to them was installed, programmed, and maintained by ASI and HSD, was under the exclusive control and direction of authorized employees, agents, and representatives of ASI and HSD, and was configured and password protected so the settings could only be altered by ASI or HSD. The Third Party Plaintiffs also allege that at all times, HSD represented and warranted to them that its ASI software had been installed, configured, and maintained to insure strict compliance with all applicable laws, including FACTA. ASI moved to dismiss the Third-Party Complaint for failure to state a claim upon which relief can be granted. The Court recommended that ASI’s motion to dismiss be granted, but that Third-Party Plaintiffs be allowed an opportunity to amend their complaint to properly assert their common-law claims.

Contribution/Indemnification. ASI argued that federal law does not recognize a claim for contribution or indemnification from a third-party defendant for an alleged violation of FACTA or the FCRA. The Court agreed, holding that neither a contribution nor an indemnification claim from an alleged FACTA or FCRA violation is viable. The Supreme Court has recognized that a defendant may seek contribution for a statutory violation only if: (1) Congress has created an affirmative cause of action for contribution by statute; (2) federal common law has recognized such a right; or (3) the parties agreed, prior to litigation, that any liability would be shared. Neither FACTA nor the FCRA expressly create a cause of action for indemnity or contribution.

Contribution/Indemnification. The Third Party Plaintiffs assert that the parties had an oral contract whereby ASI and HSD essentially warranted or promised that the credit card processing system was configured and operating at all times in compliance with all applicable federal and state laws, including the FCRA and FACTA. The Court held that while these allegations could possibly support a breach of contract or breach of warranty claim, they do not support a tort remedy of contribution or indemnification. Thus, the Third-Party Plaintiffs failed to state a claim for contribution or indemnification.

Motion to Dismiss. The Court recommended that ASI's motion to dismiss the Third-Party Complaint should be granted. However, in view of the liberal pleading requirements of the Federal Rules of Civil Procedure, in the interests of justice, and because the date for amending pleadings had not passed, the Court also recommended that the Third-Party Plaintiffs be allowed an opportunity to amend their Complaint within thirty days to properly assert any common-law claims for breach of contract, negligence, and negligent and/or fraudulent misrepresentation. The Court reminded the Third-Party Plaintiffs that any fraud-based claims must meet the Rule 9(b) pleading requirements.

Obtaining a Consumer Report in Preparation for Litigation is Not a Permissible Purpose

Ginny Webb — Thu, 30 Dec 2010 00:00:00 -0500

Slantis v. Capozzi & Assocs., P.C., 2010 U.S. Dist. LEXIS 124198 (M.D. Pa. Aug. 10, 2010)

Facts: Plaintiff claimed that a credit check performed by Defendant was not performed for a permissible purpose in violation of the FCRA. Defendant counter-claimed against Plaintiff claiming the credit check was permissible and Plaintiff brought her claim in bad faith and for the purposes of harassment. The Court found that obtaining a consumer report in preparation for litigation is not a legitimate business need pursuant to § 1681b(a)(3)(F)(i). Because Defendant did not perform any research on what would constitute a permissible purpose for conducting the credit check and did not obtain the permission of Plaintiff to obtain her consumer report, the Court found that summary judgment was proper for Plaintiff and that Defendant violated the FCRA. The Court further held that Defendant’s counterclaim failed because Plaintiff’s claim had merit.

Willful Non-Compliance. Plaintiff moved for summary judgment on the issue of Defendant’s willfulness in violating the FCRA when conducting a credit check on her during the course of litigation. Pursuant to § 1681o, if a defendant is found to be negligent in its violation of the FCRA, a plaintiff can recover actual damages, litigation costs, and reasonable attorney’s fees. For a willful violation, § 1681n provides that a plaintiff can recover actual damages, or damages of at least $100 or as much as $1000; or the greater of $1000 and actual damages, as well as punitive damages, litigation costs, and reasonable attorney’s fees. Willful non-compliance will be applied if the defendant knowingly and intentionally committed an act in conscious disregard for the rights of others. The Court held that the little evidence on Defendant’s state of mind was highly fact-specific and best left to the jury. The Court further held that the summary judgment evidence was not conclusive enough to merit judgment as a matter of law for either party.

Permissible Purpose. In order to establish a violation of the FCRA for obtaining a credit report without a legitimate business need, Plaintiff must prove that (1) there was a consumer report, (2) Defendant used or obtained it, (3) Defendant did so without a permissible statutory purpose, and (4) Defendant was negligent or willful in doing so. Defendant contended that it obtained Plaintiff’s consumer report for a legitimate business need under § 1681b(a)(3)(F)(i), which allows a consumer report to be furnished “in connection with a business transaction that is initiated by the customer.” This case is an offshoot of a lawsuit between Plaintiff and a former employer in which Defendant represented Plaintiff’s former employer. Defendant admitted that it obtained Plaintiff’s consumer report without Plaintiff’s permission in order to ascertain if a counterclaim against Plaintiff would be financially viable. The Court found Defendant’s case law to be distinguishable and that the Third Circuit overwhelmingly supported the proposition that obtaining a consumer report in preparation for litigation is not a legitimate business need under the FCRA.

Plaintiff’s State Law DTPA Claims Are Preempted By the FCRA

Ryan Langston — Wed, 29 Dec 2010 00:00:00 -0500

Ross v. Fed. Deposit Ins. Corp., 625 F.3d 808 (4th Cir. 2010)

Facts: Plaintiff sued Defendant, as the receiver for Washington Mutual Bank (the “Bank”), alleging violations of the FCRA, the North Carolina Unfair and Deceptive Trade Practices Act (“NCUDTPA”), and common law defamation. The Bank mistakenly listed Plaintiff’s name on a loan that was the sole responsibility of her ex-husband. Her ex-husband subsequently defaulted on the loan, and the Bank reported the default under Plaintiff’s name to the credit reporting agencies (CRAs). The Bank began foreclosure proceedings in October of 2001, but Plaintiff made the payments necessary to reinstate the mortgage. Plaintiff later contacted the Bank to inquire why the mortgage was appearing on her credit reports. The Bank conducted an investigation, suspended credit reporting for the loan, and notified Plaintiff of these actions in a letter. One year later, the mortgage entered default a second time, and Plaintiff notified the Bank that one of the CRAs was still reporting the loan on her credit report. The Bank directed the CRAs to remove the loan from Plaintiff’s credit report. However, Plaintiff was allegedly denied credit on multiple occasions before the adverse loan was removed. The district court granted the Bank’s motion for summary judgment on Plaintiff’s claims based on the expiration of the two year statute of limitations under the FCRA and preemption of her state law claims. Plaintiff appealed the district court’s decision regarding her state law claims under the NCUDTPA. The Fourth Circuit affirmed the district court’s dismissal of Plaintiff’s claims.

Preemption. Plaintiff alleges that the Bank violated the two articles of the NCUDTPA. Article 1 contains a general ban on unfair or deceptive acts or practices in or affecting commerce. Article 2 prohibits various unfair debt collection practices. Plaintiff’s claims under Article 1 of the NCUDTPA concerned the Bank’s reporting of inaccurate credit information to CRAs, an area regulated in great detail under § 1681s-2. Thus, the Court held that all claims brought under Article 1 are preempted by the language of § 1681t(b)(1)(F), which states in part that “no 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 the responsibilities of persons who furnish information to [CRAs] ….”

Preemption. Despite the preemption language of § 1681t, Plaintiff argued that she could still bring could her state law claims under § 1681h(e)’s exception to preemption because the Bank acted with malice or willful intent to injure. Whether a claim is eligible under the § 1681h(e) exception involves a two-step inquiry. First, the Court must determine whether the claim falls within the scope of § 1681h(e). Second, the Court must determine whether the "malice or willful intent to injure" exception to the general bar against state law actions applies. The Court held that Plaintiff’s claims failed to pass the first step and fell outside the statutory language of § 1681h(e) because they were not based on information disclosed pursuant to §§ 1681g, 1681h, or 1681m, or “based on information disclosed by a user of a consumer report to or for a consumer against whom the user has taken adverse action, based in whole or in part on the report.”

Preemption. The Court further held that even assuming Plaintiff’s claims passed the first step, Plaintiff’s claims also failed the second step in showing the Bank acted with the “malice or willful intent to injure necessary” for Plaintiff to qualify for the § 1681h(e) exception. To show malice or willful intent to injure, the Plaintiff must show the Bank reported information that it knew was false. Plaintiff argued that because one CRA continued to report incorrect loan information even after the Bank knew of its error and took corrective action, the Bank must have knowingly continued to report incorrect loan information to at least one CRA. The Court disagreed with this inference and held that Plaintiff failed to present any specific evidence in support of her contention. Even if the Court accepted Plaintiff’s inference at true, it would only show that that the bank behaved negligently with respect to its reporting activities; it would not be enough to show malice. The Court held that the § 1681h(e) exception should be narrowly interpreted to authorize state law claims only for conduct that is truly malicious and not simply careless.

Preemption. Article 2 of the NCUDTPA prohibits debt collectors from engaging in unfair debt collection practices, including the use of threats, coercion, harassment, unreasonable publications of the consumer's debt, deceptive representations to the consumer, or other unconscionable means. In addition to proving conduct prohibited under the NCUDTPA, an NCUDTPA plaintiff must also meet the three generalized requirements for all NCUDTPA claims: (1) an unfair act; (2) in or affecting commerce; (3) proximately causing injury.

Preemption. The Court held that to the extent Plaintiff claims relied on the Bank’s reporting of false credit information, they were preempted by § 1681t(b)(1)(F). The only actions alleged to have been taken by the Bank that are not preempted by the FCRA are the debt collection phone calls. Plaintiff failed to provide any evidence that the phone calls were the proximate cause of any of her alleged damages. Thus, because Plaintiff failed to make any connection between the Bank’s debt collection efforts and her lost wages and lost profits, the Court held that no reasonable jury could find that the Bank’s debt collection phone calls were the proximate cause of Plaintiff's economic damages.

CRA Ordered to Pay $15,000,000 in Civil Fines and Penalties for Violations of the FCRA

Ryan Langston — Tue, 28 Dec 2010 00:00:00 -0500

U.S. v. Choicepoint Inc., 2006 U.S. Dist. LEXIS 98749 (N.D. Ga.Feb. 15, 2006)

Facts:The Federal Trade Commission “FTC” alleged that ChoicePoint Inc. (“Defendant”) engaged in violations of the FCRA and in unfair or deceptive acts or practices in violation of the Federal Trade Commission Act (“FTC Act”). The parties agreed to the entry of a Stipulated Final Judgment and Order for Civil Penalties, Permanent Injunction, and Other Equitable Relief (the “Order”) to resolve all matters without trial or adjudication. Defendant was a consumer reporting agency (“CRA”) that marketed products and services to businesses, governments, and other entities for use in identification and credential verification purposes, among other things. Defendant’s products and services drew upon billions of records collected and maintained by Defendant that contained personal information of consumers, including names, Social Security numbers, dates of birth, bank and credit card account numbers, and credit histories, much of which was sensitive and not publicly available. Defendant collected and sold this information without making any contact with the affected consumers and consumers could not remove their information from Defendant’s databases. Defendant used specific operating units to sell and disseminate this information to different industries. Defendant had over 50,000 subscribers, including insurance companies, landlords, banks, private investigators, debt collectors, and a variety of other businesses.

FCRA Violations. Defendant was charged with the following violations of the FCRA: (1) furnishing consumer reports to subscribers that did not have a permissible purpose to obtain a consumer report in violation of § 1681b; (2) failing to maintain reasonable procedures to limit the furnishing of consumer reports to the purposes listed under § 1681b in violation of § 1681e(a); and (3) furnishing a consumer report to any person if it has reasonable grounds for believing that the consumer report will not be used for a permissible purpose in violation of § 1681e(a). The FTC also asserted that Defendant’s alleged FCRA violations constituted unfair or deceptive acts or practices under § 1681s(a)(1) and was therefore subject to FTC enforcement under FTC Act § 45(a). Further, the FTC asserted that Defendant’s alleged FCRA violations constituted a pattern or practice of knowing violations for which Defendant could be liable for a civil penalty of up to $2,500 per violation under § 1681s(a)(2)(A).

FTC Act Violations. The FTC asserted that Defendant’s alleged failure to employ reasonable and appropriate security measures to protect consumers’ personal information caused substantial injury to consumers, which was not offset by countervailing benefits to consumers or competition and was not reasonably avoidable by consumers. Thus, the FTC alleged that this failure was an unfair act or practice in or affecting commerce in violation of FTC Act § 45.

Civil Penalties and Injunctions. Under the Order, Defendant was ordered to pay a civil penalty in the amount of ten million dollars ($10,000,000.00) to the United States and to pay five million dollars ($5,000,000.00) to the FTC to be used for consumer redress and equitable relief. Defendant was permanently enjoined from violating the FCRA and was required to implement, and thereafter maintain, a comprehensive information security program that is reasonably designed to protect the security, confidentiality, and integrity of personal information collected regarding consumers. Further, Defendant was enjoined from misrepresenting, expressly or by implication, the manner or extent to which Defendant maintained and protected the privacy, confidentiality, or security of any personal information collected regarding consumers.

Court Reduces Amount of Attorneys’ Fees and Costs Awarded In Part Because Plaintiff’s Counsel Used Block Billing Methods

Ryan Langston — Mon, 27 Dec 2010 00:00:00 -0500

Dixon-Rollins v. Experian Info. Solutions, Inc., 2010 U.S. Dist. LEXIS 100013 (E.D. Pa.Sept. 23, 2010)

Facts: After a jury verdict was awarded in her favor, Plaintiff sought attorneys’ fees and costs from Defendant, Trans Union, LLC, pursuant to the fee shifting provisions of the FCRA. Defendant did not object to the award of attorneys’ fees, but objected to the amount as unreasonable. Defendant argued that Plaintiff: (1) failed to provide adequate support for her attorneys’ hourly rate; (2) disproportionately allocated to Defendant attorneys’ fees that should be borne equally by all defendants; and (3) unjustifiably included a fee enhancement.

Attorneys’ Fees. A prevailing party under the FCRA is entitled to reasonable attorneys’ fees and costs under 15 U.S.C. §§ 1681n(a)(3) and 1681o(a)(2). To recover attorneys’ fees, the prevailing party bears the burden of demonstrating that the fee request is reasonable.

Attorneys’ Fees. The Court employed a two part analysis to determine whether Plaintiff’s alleged attorneys’ fees were reasonable. First, the Court reviewed the reasonableness of the number of hours expended. Defendant argued that Plaintiff’s fee petition disproportionately allocated to Defendant attorneys’ fees for work related to her claim against defendants. The Court found that proportionate allocation of fees was appropriate because all defendants were equally culpable. Additionally, because the burden of proving reasonableness rested with Plaintiff, the Court excluded disputed fee entries that were not detailed enough to determine whether a particular time entry was chargeable to Defendant. The Court held that while such “block billing” is a common time-saving practice that may be upheld if there is a reasonable correlation between the various activities listed in a block and the time spent completing those tasks, it is not the ideal time keeping method and lawyers who use it do so at their own peril.

Attorneys’ Fees. Second, the Court examined the reasonableness of the attorneys’ hourly rates. Plaintiff alleged that $340 an hour was a reasonable rate. Defendant argued that Plaintiff’s attorney had received $290 an hour in a consumer protection action one year ago and that the 17 percent increase over one year was unreasonable. The Court agreed and held that the increase was unreasonable, and should be adjusted to $315 in accordance with the Community Legal Service, Inc.’s schedule of hourly rates.

Attorneys’ Fees. Plaintiff also argued that she was entitled to a fee enhancement due to the quality of services provided and for delay. However, the Court held that Plaintiff failed to show that her attorneys’ work was so superior as to justify a quality multiplier, and further failed to demonstrate the need for a delay multiplier because the fees paid were generated by settlements with other defendants. Plaintiff also failed to demonstrate that her counsel incurred any specific costs as a result of the delay.

Costs. The Court held that costs must be reasonable, necessary and properly documented. Because Plaintiff’s counsel failed to properly document its copying and scanning activities, the Court reduced Plaintiff’s copying costs to reflect payments previously made by other defendants via their settlement agreements.. The court also held that travel and lodging expenses were not reimbursable, but should be considered part of the overhead allowance included in the attorneys’ hourly rate.

Texas Appellate Court Finds Check Verification Company And Collection Agency Not CRAs Under Texas Consumer Credit Reporting Act

M. Kasey Ratliff — Wed, 22 Dec 2010 00:00:00 -0500

Watson v. Telecheck Services, Inc., et al., 2010 Tex. App. LEXIS 8628 (Tex. App. – Texarkana, Oct. 21, 2010, no pet. h.)

Facts: Plaintiff cashed a personal check at a casino and subsequently stopped payment on the check following a dispute with casino employees. The casino called on Telecheck Services, Inc. (“Telecheck”), a check verification and warranty company, to purchase the check. Telecheck purchased the check, listed Plaintiff negatively in a database accessed by Telecheck’s customers and hired TRS Recovery Services, Inc. (“TRS”) to attempt to collect the check from Plaintiff. Plaintiff sued Telecheck and TRS for violations of the Texas Consumer Credit Reporting Act (“TCCRA”) and the Fair Debt Collection Practices Act (“FDCPA”) as well as various common law claims. Telecheck and TRS received summary judgment at the trial court level and Plaintiff appealed. The appellate court affirmed the summary judgment in part and reversed in part.

TCCRA. Chapter 20 of the Texas Business & Commerce Code governs the regulation of consumer credit reporting agencies. A consumer reporting agency that willfully or negligently violates the provisions of Chapter 20 is civilly liable to the consumer. The term consumer reporting agency, though, does not include a business entity that provides only check verification or check guarantee services. The court found that there was no dispute that Telecheck provides only check verification and guarantee services and therefore Telecheck is entitled to judgment as a matter of law in this cause of action. Further, nothing in Chapter 20 indicates that a collection and recovery entity, such as TRS, falls under its purview and authority.

Statute of Limitations. A claim for violation of the FDCPA must be brought within one year from the date on which the violation occurs. It is undisputed that on or about August 4, 2003, Telecheck put Plaintiff in its database as a person with unpaid, check related debt. Nothing in the summary judgment record, however, established how Plaintiff knew or should have known of the event at that time. The court found that a reasonable trier of fact could determine that Plaintiff could not have reasonably known of Telecheck’s listing until a later date within the applicable statute of limitations.

Bankruptcy Court Finds that Plaintiff’s Post-Discharge FCRA Claims Not Sufficiently Related to Bankruptcy Case to Convey Jurisdiction on Bankruptcy Court

M. Kasey Ratliff — Tue, 21 Dec 2010 00:00:00 -0500

In re: Johnson, et al. v. First S. Fin. Servs., 2010 Bankr. LEXIS 3559 (Bankr. N.D. Ala. Sept. 30, 2010)

Facts: Plaintiff and his wife filed a joint petition for relief under Ch. 13 of the Bankruptcy Code and subsequently received a discharge. Four years after receiving the discharge, Plaintiff obtained a copy of his credit report from Equifax and noticed negative entries on his credit file furnished by First Southern Financial Services (“First Southern”). Despite Plaintiff’s subsequent dispute with Equifax, First Southern continued to furnish the negative entry four years after the debt was discharged. Plaintiff alleged that the information furnished by First Southern violated the discharge injunction imposed by the bankruptcy court and was actionable for contempt pursuant to the Bankruptcy Code. Plaintiff also claimed that the same facts constituted a violation of the Fair Credit Reporting Act (“FCRA”) that was actionable in bankruptcy court. First Southern filed a Motion to Dismiss the bankruptcy adversary proceeding brought by Plaintiff. The court granted the motion in part and denied it in part.

Bankruptcy Jurisdiction. First Southern’s motion to dismiss challenged Plaintiffs’ Motion for Contempt because it did not allege bad faith. Bad faith is not a necessary element for recovery under the court’s statutory contempt powers. Thus, the court finds that the allegations seeking to hold First Southern in contempt for violating the discharge injunction are sufficient to survive a motion to dismiss although they do not allege First Southern acted in bad faith.

Bankruptcy Jurisdiction. The court determined whether a bankruptcy court, having limited statutory jurisdiction, may adjudicate a FCRA claim that arose after the Plaintiff received a discharge and after his Chapter 13 case was closed. Bankruptcy court jurisdiction must be found within the parameters of §§ 1334(b) and 157(a) of Title 28. The former provides that “the district court shall have original but not exclusive jurisdiction of all civil proceedings arising under Title 11, or arising in or related to cases under Title 11.” And the latter provides that the district courts may refer such Title 11 proceedings “to the bankruptcy judges for the district” – it does not authorize the referral of claims arising under Title 15, and therein lay the problem with the bankruptcy court exercising jurisdiction over the FCRA claim.

Bankruptcy Jurisdiction. The court concluded that regardless of whether or not the Plaintiff prevailed on his FCRA claims, his bankruptcy estate would not be affected as it no longer exists. All assets had been administered. The FCRA claim arose post-petition, it was not an asset of the estate and any recovery would not benefit creditors; thus, the FCRA was not sufficiently related to the bankruptcy case to convey jurisdiction pursuant to § 1334(b).

Defendant’s Motion to Decertify Class Denied in FACTA Truncation Case

Marc F. Kirkland — Thu, 16 Dec 2010 00:00:00 -0500

Shurland v. Bacci Café, et al., 2010 U.S. Dist. LEXIS 116718 (N.D. Ill. Nov. 2, 2010)

Facts: Plaintiff alleged that he received a cash register receipt at Defendant’s restaurant displaying his entire credit card number and expiration date in violation of § 1681c(g) of the FCRA. Plaintiff then filed suit seeking to represent a class of more than 6,000 consumers to whom Defendant allegedly issued receipts that violated the FCRA. The Court certified the class. Plaintiff then encountered difficulty indentifying the individual members of the class because Defendant’s records of the transactions were incomplete. Defendant then moved to decertify the class arguing that the absence of indentifying information precludes class certification and Plaintiff moved to approve class notice. The Court denied both motions but approved the content of Plaintiff’s notice and directed Plaintiff to propose a new plan for notifying the class pursuant to the Court’s recommendations.

Class Certification Standard. Class certification is inherently tentative. Rule 23 explicitly authorizes the court to alter or amend a class certification order. Because the court must decide whether to certify a class early in the proceedings, it remains under a continuing obligation to review whether proceeding as a class action is appropriate, and may modify the class or vacate class certification pursuant to evidentiary developments arising during the course of litigation.

Class Certification Standard. In this motion, as in deciding the original motion for class certification, a court considers whether the tests of Rule 23(a) numerosity, commonality, typicality, and adequacy of representation are met. If they are, a court considers whether the requirements of Rule 23(b)3 are met. Specifically, the court considers whether questions of law or fact common to members of the class predominate over questions affecting only individual members and whether a class action is superior to other methods of adjudicating the class claims.

Class Certification. Defendant focused on the manageability prong of Rule 23(b)(3)(A) urging that the difficulties in notifying class members required decertification. However, the Court determined that publication was an acceptable method of notification in this case, and managing a class of approximately 6,300 subject to notice by publication was well within its competency.

Class Certification. Defendant also argued that because individual class members cannot be identified, due Process for defendant and class members will be thwarted. Rule 23(c)(2) guarantees that class members certified under Rule 23(b)(3) in actions for money damages are entitled to personal notice, as a matter of due process, and an opportunity to opt out of the class action. In examining the due process assessment, the Court determined that notice by publication may be sufficient when individual class members cannot be identified.

Class Certification. Defendants contended that the absence of records identifying the class members by name required decertification of the class because the class itself cannot be ascertained and identified. The Court overruled Defendant’s objection on the basis that membership in the class can be ascertained by reference to objective criteria and defined by reference to Defendant’s conduct. Specifically, the class can be ascertained by whether the purported class member made a purchase from Bacci within a specified time period.

Class Certification. Finally, Defendant argued that the class should fail on the predominance prong, the requirement that questions of law or fact common to the class members predominate over any questions affecting only individual members. The Court determined that nothing had changed since it made its early determination that common issues of fact and law were evident on the face of Plaintiff’s Complaint and inherent in the proposed class definition. The conduct at issue, Defendant’s creation of computer-generated credit card receipts, is uniform across the class.

Notification. Plaintiff proposed notice by publication and asked the Court to approve a one-time publication of the class notice in the Chicago Sun-Times and publication on Class Counsel’s website. Rule 23(b)(3) provides that “the court must direct to class members the best notice that is practicable under the circumstances.” Here the Court found that in addition to a one-time publication in the Chicago Sun-Times, the Plaintiff should also look to local media outlets to publish the notice. For instance, the Court suggested that the notice be published in local publications around Bacci’s location, at Bacci, and a link to the class notice should be put on Bacci’s website.

11th Circuit Affirms District Court’s Holding And Dismisses Plaintiff’s Claims For Failure To Produce Any Evidence That His Consumer Report Was Inaccurate

Ryan Langston — Mon, 13 Dec 2010 00:00:00 -0500

Nelson v. Experian Info. Solutions, Inc., 2010 U.S. App. LEXIS 22982 (11th Cir. Ala. Nov. 3, 2010)

Facts: Plaintiff sued Experian for violating 15 U.S.C. §§ 1681e(b) and 1681i. Specifically, Plaintiff argued that Experian inaccurately reported that American Express (“AMEX”) charged off two accounts. Experian filed a motion for summary judgment, which the district court granted in its entirety because (1) Plaintiff failed to provide any evidence that Experian issued an inaccurate consumer report; and (2) Plaintiff admitted in his complaint that AMEX charged off the two accounts. The 11th Circuit affirmed the district court’s judgment.

No Evidence. The Court held that at best, Plaintiff’s evidence showed that AMEX should not have charged off the accounts. Plaintiff failed to produce any evidence that AMEX did not charge off the accounts. Thus, Plaintiff failed to produce any evidence that Experian issued an inaccurate credit report, and his claims under the FCRA were dismissed.

Admissions. Plaintiff argued that the admission in his complaint should not be binding because the totality of his complaint and his response to Experian’s summary judgment motion showed his true position was that AMEX did not charge off the accounts and then falsely reported that it did so. Plaintiff further argued that AMEX could not have charged off the accounts because doing so would have violated its own policies as well as federal law and regulations. The Court held that it was not error for the district court to hold Plaintiff to the admission he made through his pleadings.

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Martin Thornthwaite — Tue, 07 Dec 2010 00:00:00 -0500

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Illinois District Court Holds That Defendant’s Bad Check Data Consumer File Disclosure Report Is a “Consumer Report” Under the FCRA

Paul W. Sheldon — Fri, 03 Dec 2010 00:00:00 -0500

Searcy, et al. v. Efunds Corporation, et al., 2010 U.S. Dist. LEXIS 104557 (N.D. Ill. Sep. 30, 2010)

Facts: Plaintiff filed suit against Defendant Deposit Payment Protection Services, Inc. (“DPPS”) claiming that DPPS willfully violated § 1681g(a)(3)(A)(ii) of the FCRA by failing to include in her consumer file disclosure report the names of retailers who received the Shared Check Authorization Network (“SCAN”) data file containing her bank account number. Defendant DPPS is a consumer reporting agency (CRA) that provides the SCAN service to a number of retailers throughout the United States. SCAN is designed to assist retailers in deciding whether or not to accept a personal check from a customer. To provide this service, DPPS collects information about individuals who have presented bad checks (specifically driver’s license and bank account numbers), compiles the information into a data file, and then distributes that file electronically to each of its merchant-subscribers. Retailers could then run a search for a particular consumer's information in the file and accept or decline a check from that consumer based on the results of that search.

On February 6, 2006, DPPS first incorporated a bank account number associated with Plaintiff into the SCAN file sent to all of its retailer customers. Sometime in October 2006, Plaintiff requested that DPPS provide her with a report disclosing whether DPPS possessed any of her financial information and, if so, how the company used that information. Sometime after Plaintiff made her request, DPPS mailed her a consumer file disclosure report. The report did not include the names of retailers who had received the SCAN data file containing her bank account number. Defendant DPPS moved for summary judgment claiming that its disclosure report was not a “consumer report” as defined by the FCRA; or alternatively that it did not willfully violate the FCRA. The Court was not persuaded and denied DPPS’ motion.

Consumer Report. When an individual consumer requests a file disclosure report from a CRA, the report must include the names of all persons that "procured a consumer report" regarding the consumer during the one-year period before the request is made.

Consumer Report. The question of whether DPPS complied with the FCRA depends on whether the SCAN electronic data file is characterized as a “consumer report.” The FCRA defines a “consumer report” as “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for . . . any other purpose authorized under section § 1681b of this title.”

Consumer Report. Based on the FTC commentary and the FCRA, the Court held that the SCAN file fit comfortably within the confines of the FCRA's definition of a “consumer report.” Of particular note, the Court emphasized that the driver's license and checking account numbers contained in the SCAN file indicated that the individuals associated with the numbers have previously presented bad checks. This information is pertinent to both the character and general reputation of those consumers. Furthermore, the list was distributed to SCAN member retailers with the expectation that it would be used in the process of determining whether to complete a business transaction initiated by the consumer.

Willfulness. Whether a violation of the FCRA at issue occurred negligently or recklessly has long been held by many courts to be an issue for the jury and is not otherwise a question of law. The Court decided to follow this precedence and denied Defendant’s motion as to Plaintiff’s willfulness claim.

Court Certifies Plaintiff as Class Representative Due to Alleged Multiple FACTA Violations At Indiana Gas Station

Paul W. Sheldon — Thu, 02 Dec 2010 00:00:00 -0500

Rogers v. Khatra Petro, Inc., 2010 U.S. Dist. LEXIS 103599 (N.D. Ind. Sep. 29, 2010)

Facts: Plaintiff alleged that he made a purchase using a VISA card at a Citgo gas station store and received a receipt for the transaction on which his entire VISA card number was printed in violation of § 1681c(g) of FACTA. Plaintiff sought certification of a class comprised of all persons to whom Defendant provided an electronically printed receipt at the point of sale or transaction, in a transaction occurring after March 20, 2008, which receipt displayed more than the last five digits of the person's credit or debit card number. Plaintiff offered himself as the class representative, and his suitability for that role was the primary “bone of contention” between the parties. Defendant alleged that Plaintiff was not an adequate class representative. The Court disagreed and granted the class certification with the Plaintiff assigned as class representative.

Class Action Requirements. Fed. R. Civ. P. 23 establishes two hurdles for class certification. First, the action must satisfy all four elements of Rule 23(a): numerosity, commonality, typicality, and adequacy of representation. Second, the proposed class must satisfy at least one of the three provisions under Rule 23(b). Plaintiff seeks certification under Rule 23(b)(3), which requires him to demonstrate that "questions of law or fact common to class members predominate over any questions affecting only individual members," and that "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy."

Adequacy of Representation Requirement. In order to fulfill this element (which the Court pointed out was the only one Defendant contested), a plaintiff must demonstrate that "'(1) the representative did not have conflicting or antagonistic interests compared with the class as a whole; (2) the representative was sufficiently interested in the case outcome to ensure vigorous advocacy; and (3) class counsel was experienced, competent, qualified and able to conduct the litigation vigorously.'" The Court found that class counsel was sufficiently experienced, competent, qualified, and able to conduct the litigation vigorously, and that all members of the class were issued receipts by Defendant that allegedly did not comply with FACTA, and that Plaintiff’s interests would appear to be identical to the interests of other customers.
Sufficient Interest Requirement. To meet the "sufficient interest" requirement, the Seventh Circuit required that the "named plaintiff ... have some commitment to the case. The burden of showing sufficient interest is fairly modest in that all that is required is an understanding of the basic facts underlying the claims, some general knowledge, and a willingness and ability to participate in discovery.

Predominance Requirement. Pursuant to the requirements of Rule 23(b)(3), common questions of law or fact must predominate, but they need not be exclusive. In determining whether common questions predominate, the Court looks to whether there is a "common nucleus of operative facts." The Court found that there was a "common nucleus of operative facts" due to the following: Defendant's alleged practice of issuing receipts to customers with more than the last five digits of their credit or debit card, and whether the receipts printed by Defendant violated § 1681c(g). The issues of law and fact that flow from Defendant's alleged practice of printing non-compliant receipts predominate over any individual issue.

Superior to Other Available Methods Requirement. A class action must also be superior to other available methods for the fair and efficient adjudication of the controversy. The Court found this to be so due to the dispute containing a set of legal and factual issues that were shared by the members of the class, and class certification was more efficient than multiple individual suits dealing with the same issues.

Court Grants Trans Union’s Motion for Summary Judgment and Orders the Patent and Trademark Office to Cancel Plaintiff’s Trademark

Ryan Langston — Thu, 02 Dec 2010 00:00:00 -0500

Scandaglia v. TransUnion Interactive, Inc., 2010 U.S. Dist. LEXIS 91763 (N.D. Ill. Sept. 1, 2010)

Facts: Plaintiffs filed suit against Trans Union for infringing on their federally registered trademark. Trans Union filed a counterclaim asking the Court to order the Patent and Trademark Office to cancel the Plaintiffs’ trademark because it was descriptive and therefore not entitled to protection. Plaintiffs owned a federal trademark registration of the phrase “Always Know Where You Stand” for legal services. Despite this trademark, many other companies used this phrase in their advertising. Trans Union used the phrase in a television advertisement to promote its own trademark: “Truecredit.” Trans Union moved for summary judgment on Plaintiffs’ claim and its counterclaim.

Trademarks. The Court granted Trans Union’s motion for summary judgment on Plaintiffs’ claim because it found that Trans Union did not use the phrase to identify itself or to create awareness in the public as to the uniqueness of the service Trans Union offered. Instead, the Court held that Trans Union used the phrase to merely describe the services Trans Union offers. Trans Union used the phrase to describe a characteristic of its product, instead of trying to connect the phrase to Trans Union’s product or service. Additionally, the Court found that Trans Union did not use the phrase with any intent other than to promote its credit monitoring service. It did not have any intent to create confusion as to the source of the trademark.

Trademarks. The Court also granted Trans Union’s motion for summary judgment on its counterclaim, holding that Plaintiffs’ trademark was descriptive and lacked secondary meaning. Thus, Plaintiffs’ trademark was not protectable and the Court ordered the Director of the Patent and Trademark Office to cancel Plaintiffs’ registration of the trademark.

Illinois Court Finds Online Screenshot Receipt Containing Customer’s Credit Card Number and Expiration Date Does Not Satisfy “Printed Receipts” Requirements Under FACTA

Paul W. Sheldon — Wed, 01 Dec 2010 00:00:00 -0500

Kelleher, et al v. Eaglerider, Inc. 2010 U.S. Dist. LEXIS 115279 (N.D. Ill. Oct. 28, 2010)

Facts: Plaintiffs brought an action alleging violations of the FACTA provisions of the FCRA, claiming that the online booking confirmations they viewed on their computer screens after making rental reservations on Defendant Eaglerider's website (the screenshots) were "electronically printed" receipts subject to FACTA's truncation requirements. Defendant moved for summary judgment, arguing that FACTA did not apply to the screenshots presented by the Plaintiffs because "FACTA expressly limited the application of its truncation requirements to printed receipts that a vendor provides to a customer." Plaintiffs argued in response that there was no basis in FACTA for treating the screenshots differently from ordinary paper receipts. The Court agreed with Defendant and granted the motion, citing a recent 7th Circuit decision that was rendered after the parties submitted their briefs.

FACTA Requirements. Section 1681c(g)(1) provides: "[N]o person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction." The prohibition applies only to receipts that are "electronically printed."

FACTA Requirements. The statute contemplated only transactions where receipts are physically printed using electronic point of sale devices like electronic cash registers or dial-up terminals. Internet confirmations such as those Plaintiffs received do not fall within the ambit of FACTA. Accordingly, the Plaintiffs' screenshot claims failed as a matter of law. Note: See Romano v. Active Network, Inc. which held that the use of the word “print” in § 1681c(g) was merely used to convey the meaning of publishing information rather than imprinting ink on a piece of paper generated by a machine or electronic device.

Plaintiff’s Failure to Show Damages Suffered Due to Inaccurate Information Results in Summary Judgment for Defendant

Ginny Webb — Tue, 30 Nov 2010 00:00:00 -0500

Lancaster v. Trans Union, LLC, 2010 U.S. Dist. LEXIS 117677 (N.D. Ill. Nov. 4, 2010)

Facts: Plaintiff sued Trans Union alleging that Trans Union reported inaccurate information on her credit report, negligently failed to conduct a proper investigation of her dispute, and negligently failed to note her dispute on subsequent credit reports in violation of §§ 1681i(a) and 1681i(c) of the FCRA. Trans Union argued that Plaintiff never disputed the account made the subject of this lawsuit. The Court found that Plaintiff failed to produce any evidence of damages that could be attributed to Trans Union and granted Defendant summary judgment as to Plaintiff’s § 1681i(a) claim. Because Plaintiff admitted she did not add a consumer statement to her report and made no further attempts to prove her § 1681i(c) claim with evidence of a valid dispute, the Court granted summary judgment to Trans Union on this claim as well.

Damages. If a credit reporting agency (“CRA”) negligently violates § 1681i(a) and a plaintiff suffers damages as a result of inaccurate information, the CRA is potentially liable for actual damages, costs, and attorney’s fees pursuant to § 1681o. However, in order to obtain an award of actual damages, the plaintiff must show a causal relationship between the violation of the statute and her damages, such as a loss of credit or some other actual harm. Plaintiff admitted that she was never denied credit nor prohibited from making any purchases as a direct result of her Trans Union consumer report. The Court found that Plaintiff failed to show any damages that could be attributed to Trans Union and granted Trans Union’s motion for summary judgment.

Damages. Plaintiff also claimed she suffered damages in the form of out-of-pocket expenses associated with her alleged attempts to dispute the reporting of the inaccurate account. The Court found that expenses incurred in notifying a CRA of an error are not compensable as actual damages under the FCRA. The Court further found Plaintiff’s claim for emotional damages failed because Plaintiff did not explain her emotional damages in reasonable detail.

Section 1681i(c). Section 1681i(c) requires a consumer reporting agency to note that an account is disputed if a statement of dispute is filed by the consumer. However, because Plaintiff failed to file a dispute, Trans Union was under no obligation to note that Plaintiff disputed the account.

Second Circuit Affirms Dismissal of Plaintiff’s FCRA Claims Based on the Expiration of the Statute of Limitations

Martin Thornthwaite — Tue, 30 Nov 2010 00:00:00 -0500

Trans Union LLC v. Lindor, 2010 U.S. App. LEXIS 19682 (2d Cir. Sept. 22, 2010)

Facts: After the district court dismissed Plaintiff’sFCRA claims because they were barred by the statute of limitations, Trans Union appealed the district court’s decision declining to retain supplemental jurisdiction over Plaintiff’s related state law claims. Plaintiff also filed a cross appeal arguing that the dismissal of her FCRA claims was improper. The Court rejected both Trans Union’s and Plaintiff’s arguments and affirmed the judgment.

Statute of Limitations. Pursuant to § 1681p, an FCRA action must be brought no later than the earlier of (1) 2 years after the date of discovery by the plaintiff of the violation that is the basis for such liability; or (2) 5 years after the date on which the violation that is the basis for such liability occurs. In rejecting Plaintiff’s cross appeal, the Court noted that it was aware of no authority permitting a party to disclaim actual knowledge of a violation where that party possesses all of the material facts necessary to identify a violation. Plaintiff was aware for more than 2 years that (1) Trans Union had placed a judgment on her credit file related to a debt allegedly owed to AT&T Wireless; (2) she never had an AT&T account; (3) the spelling of the judgment debtor’s first name was different from Plaintiff’s; (4) the judgment debtor’s social security number did not match Plaintiff’s; and (5) Trans Union refused to remove the judgment from her credit file. Plaintiff’s attempt to claim equitable tolling of the expiration of the limitations period also failed because there were no extraordinary circumstances that justified tolling the limitations period.

State Law Claims. Trans Union argued that dismissal of Plaintiff’s state law claims was improper because the allegations in the complaint and a stipulation in the parties’ joint pretrial order established non-discretionary diversity jurisdiction over the claims. The Court held that Plaintiff did not plead diversity jurisdiction in the complaint, and Trans Union’s argument regarding the stipulation in the joint pre-trial order was untimely because it was not made until after the judgment had already been entered. Thus, the Court held the district court did not abuse its discretion in refusing to retain supplemental jurisdiction of Plaintiff’s state law claims.

Court Dismissed Plaintiff’s Claims with Prejudice Because They were Preempted by the FCRA

Martin Thornthwaite — Mon, 29 Nov 2010 00:00:00 -0500

Ahmed v. Bank of Am., 2010 U.S. Dist. LEXIS 100808 (E.D.N.Y. Sept. 24, 2010)

Facts: Plaintiff brought what appeared to be negligence and defamation claims related to alleged fraudulent charges made on a credit card Plaintiff carried with Defendant. Plaintiff notified Defendant of the alleged fraudulent charges and filed a report with the New York City Police Department. Plaintiff claimed that Defendant did not remove the fraudulent charges and reported the account as delinquent to various consumer reporting agencies (“CRAs”). Defendant moved to dismiss Plaintiff’s claims on the ground that they were preempted by the FCRA in addition to being improperly plead. The Court granted Defendant’s Motion and dismissed the case with prejudice.

Preemption. The Court followed the “temporal approach” in determining whether Plaintiff’s claims were preempted by the FCRA. Under the temporal approach, state law claims based on actions of a furnisher of information after the furnisher has received notice of inaccuracies are held preempted by § 1681t(b)(1)(F) of the FCRA. This is because once a furnisher of information provides inaccurate information after receiving notice of the inaccuracy from a CRA or the actual consumer, the furnisher’s conduct is regulated under § 1681s-2(b) (notice from CRA) or § 1681s-2(a)(1)(B) (notice from consumer). In the instant matter, the Court noted that Plaintiff’s Complaint was based on actions taken by Defendant after it received notice of the alleged fraudulent charges. Thus, the Court found that Plaintiff’s claims were preempted by the FCRA.

Preemption. Causes of action predicated on acts that occurred before a furnisher of information had notice of any inaccuracies are not necessarily preempted and are governed by § 1681h(e). In these cases, a consumer must allege that the furnisher of information provided inaccurate information with malice or willful intent to injure.

Court Dismissed Plaintiff’s Claims with Prejudice Because They were Preempted by the FCRA

Martin Thornthwaite — Mon, 29 Nov 2010 00:00:00 -0500

Court Dismisses Plaintiff’s FCRA Claims Because Plaintiff’s Consumer Report Was Technically Accurate and the CRA Followed Reasonable Procedures

Ryan Langston — Mon, 29 Nov 2010 00:00:00 -0500

Nelson v. Am. Express Travel Related Servs., 2009 U.S. Dist. LEXIS 129787 (N.D. Ala. June 17, 2009)

Facts: Plaintiff filed suit against Experian and other defendants alleging violations of the FCRA, defamation, slander, libel, negligence, wantonness, and willfulness. Plaintiff entered into a debt repayment plan on his two AMEX accounts. After AMEX received notice of the debt repayment plan, it cancelled both accounts and reported the charge-offs to Experian and the other CRAs. Plaintiff alleged that Experian violated the FCRA by issuing erroneous reports of his credit history and by knowingly and willfully refusing to correct his consumer report. Experian filed a motion for summary judgment asserting that there were no genuine issues of material fact regarding any of Plaintiff’s claims, which the Court granted in its entirety.

Accuracy. Plaintiff’s claims under 15 U.S.C. §§ 1681e(b) and 1681i failed because Plaintiff could not establish that the Experian report was inaccurate. There are two basic judicial perspectives of what constitute an accurate credit report. Some courts follow the “technically accurate” approach where a CRA satisfies its duty if it produces a report containing factually correct information about a consumer that might nonetheless be misleading or incomplete in some respect. Other courts follow the “maximum possible accuracy” approach where a CRA is unable to prevail on summary judgment if the agency reported factually correct information that could also be interpreted as being misleading or incomplete.

Accuracy. The Court held that Experian should be held to the technical accuracy standard as it best captures the balance Congress struck between consumers’ concern for fair and equitable treatment and the CRA’s goal of maintaining accurate and cost-effective credit reporting. Plaintiff admitted that AMEX did in fact charge off both accounts being reported by Experian. Thus, the Court held that Plaintiff’s Experian consumer report was accurate within the meaning of § 1681e(b).

Reasonable Procedures. Even if Plaintiff could establish that Experian had inaccurately reported the AMEX accounts, the Court held that his claim under § 1681i would still fail. The FCRA does not hold CRAs strictly liable for all reported inaccuracies. Rather, it recognizes the reality of unavoidable mistakes and imposes no liability for inaccuracies when a CRA has followed reasonable procedures. Thus, a CRA is liable under the FCRA only when it fails to conduct a reasonable investigation.

Reasonable Procedures. The Court held that Experian acted reasonably with respect to Plaintiff’s dispute of the AMEX accounts. In some instances, Plaintiff failed to provide sufficient account information in his disputes, which prevented Experian from identifying the correct accounts for purposes of conducting a reinvestigation. Once Experian was able to properly indentify the accounts being disputed, it contacted AMEX, notified AMEX of the nature of the dispute, and requested an investigation. AMEX then verified the accuracy of the reported information. If Experian was unable to properly identify the disputed accounts, it notified Plaintiff that the accounts could not be investigated. It then encouraged Plaintiff to submit new information to help identify the contested accounts and substantiate his dispute.

Causation. Plaintiff failed to produce any evidence of damage resulting from Experian’s alleged violation of the FCRA. While Plaintiff allegedly received less favorable financing terms on his credit card, he admitted that he did not actually know if he received less favorable rates because of Experian’s reporting. Additionally, Plaintiff had other negative accounts on his report that he never disputed. Thus, Plaintiff failed to produce any evidence that he was damaged as a result of an Experian consumer report.

Preemption. The Court held that Plaintiff’s remaining state law claims were preempted by § 1681h(e) because he had no evidence that Experian furnished false information with malice or willful intent to injure. Further, the Court held that Plaintiff’s claims would fail regardless of preemption because he had no evidence that Experian was negligent.

Court Strikes Advice of Counsel Evidence from Defendants’ Motion for Summary Judgment in FACTA Lawsuit Because Defendants Asserted the Attorney-Client Privilege During Discovery

Martin Thornthwaite — Fri, 26 Nov 2010 00:00:00 -0500

Van Straaten v. Shell Oil Prods. Co., 2010 U.S. Dist. LEXIS 98589 (N.D. Ill. Sept. 20, 2010)

Facts: Plaintiff filed suit against Defendants claiming that they provided credit card receipts to consumers with improperly truncated credit card numbers in willful violation of the Fair and Accurate Credit Transactions Act (“FACTA”). Defendants filed a motion for summary judgment and asserted an “advice-of-counsel” defense. Plaintiff argued that Defendants should be precluded from asserting such a defense because Defendants had refused to allow discovery regarding the attorney-client communications that supported the advice of counsel defense. Plaintiff filed a motion to strike all references to advice or consultation between Defendants and their counsel regarding compliance with FACTA. The Court agreed with Plaintiff and adopted the Magistrate Judge’s recommendation to strike those portions of Defendants’ motion.

Summary Judgment. In their motion for summary judgment, Defendants asserted an advice-of-counsel defense to Plaintiff’s claims that Defendants willfully violated FACTA. The advice-of-counsel defense requires a defendant to establish the following elements: (1) before taking action, (2) he in good faith sought the advice of an attorney whom he considered competent, (3) for the purpose of securing advice on the lawfulness of his possible future conduct, (4) and made a full and accurate report to his attorney of all material facts which the defendant knew, (5) and acted strictly in accordance with the advice of his attorney who had been given a full report. Plaintiff objected to the use of this defense because Defendants had asserted the attorney-client privilege during discovery regarding communications between Defendants and their counsel related to FACTA compliance. The Court determined that Defendants were using their communications with counsel as both a sword (to support a claim that their conduct was not willful because they acted on advice of counsel) and a shield (to prevent discovery of the actual communications). A defendant who wishes to use advice of counsel to show that it did not act willfully cannot point to unspecified advice from counsel and simultaneously claim that advice is privileged.

Plaintiff Properly Asserted an FCRA Claim Against Furnisher Because He Provided Details of His Dispute and Claimed Furnisher Received Notice of the Dispute from a CRA

Martin Thornthwaite — Thu, 25 Nov 2010 00:00:00 -0500

Waters v. Hollywood Tow Serv., 2010 U.S. Dist. LEXIS 93091 (C.D. Cal. July 27, 2010)

Facts: Plaintiff filed suit alleging thirty-three federal and state claims for damages and injunctive relief against a litany of defendants arising from the ticketing, towing, and impoundment of his car for alleged parking violations. With respect to the FCRA, Plaintiff alleged that one of the defendants, a furnisher under the FCRA, incorrectly reported to Experian that Plaintiff opened a credit account with Defendant Hollywood Tow and owed $183 on the account. The furnisher contended that Plaintiff did not adequately allege that Experian gave it notice of Plaintiff’s dispute or the nature of the information provided to it by Experian. The Court rejected the furnisher’s argument and denied the furnisher’s motion to dismiss.

Furnisher Reinvestigation. Upon notice of a consumer’s dispute from a consumer reporting agency (“CRA”), § 1681s-2(b) imposes a duty on the furnisher to investigate the dispute. The requirement that furnishers investigate consumer disputes is procedural. An investigation is not necessarily unreasonable because it results in a substantive conclusion unfavorable to the consumer, even if that conclusion turns out to be inaccurate.

Failure to State a Claim. The Court found that the furnisher’s motion to dismiss lacked merit because Plaintiff alleged (1) the dollar amount of the dispute; (2) the date of the dispute; (3) that he disputed the account in writing to Experian on the grounds that he never participated in a credit transaction with Hollywood Tow; (4) that Experian provided written notice of the existence and grounds for the dispute to the furnisher in or about February 2007; and (5) that the furnisher knowingly refused to conduct an investigation of the dispute, improperly to correct or remove the disputed information, and re-reported the information to Experian. The Court concluded that Plaintiff’s allegations properly asserted a claim for relief under § 1681s-2b.

Third Circuit Affirms District Court’s Reduction of Punitive Damage Award But Upholds Judgment Against CRA for FCRA Violations

Martin Thornthwaite — Tue, 23 Nov 2010 00:00:00 -0500

Cortez v. Trans Union, LLC, 2010 U.S. App. LEXIS 16772 (3d Cir. Aug. 13, 2010)

Facts: Plaintiff appealed the district court’s order remitting the jury’s punitive damage award on her FCRA claims relating to confusion of her identity. Plaintiff had been confused with someone else with a similar name who was on a government list compiled by the Treasury Department’s Office of Foreign Assets Control (“OFAC”). Specifically, in the “special messages” section of Plaintiff’s credit reports, Trans Union had reported that Plaintiff’s name matched a name on OFAC’s list. Trans Union argued that the OFAC information was not governed by the FCRA. The Court disagreed and the jury found that Trans Union did not follow reasonable procedures to assure maximum possible accuracy in producing Plaintiff’s credit report and that Trans Union willfully failed to reasonably reinvestigate Plaintiff’s disputes. In addition to the remittitur lowering punitive damages, Plaintiff also appealed the reduction of her attorney’s fees and costs award. Trans Union filed a cross-appeal regarding the district court’s order denying Trans Union’s motion for judgment as a matter of law and the district court’s rejection of Trans Union’s challenge to the jury’s compensatory damages award of $50,000. The Court rejected the appeals of both parties and affirmed the district court’s orders.

Reasonable Procedures. Pursuant to § 1681e(b), the FCRA requires consumer reporting agencies (“CRAs”) to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” A “consumer report” is defined in § 1681a(d)(1) and includes “any information” that is communicated by a CRA that bears on a “consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for – (A) credit or insurance to be used primarily for personal, family, or household purposes ….” The Court concluded that information related to the OFAC list was covered by the FCRA because businesses in the United States are generally prohibited from dealing with or extending credit to anyone listed on the OFAC list. The Court found that because discrepancies between Plaintiff’s name and birth and the individual on the OFAC List existed in Trans Union’s records, Trans Union should not have included the OFAC alert on Plaintiff’s consumer reports.

Disclosure to Consumer. In § 1681g, the FCRA requires, upon request by a consumer, that CRAs “clearly and accurately disclose … [a]ll information in the consumer’s file at the time of the request.” Trans Union argued that its failure to provide Plaintiff with the OFAC alert information was not a violation because such information was not part of Plaintiff’s credit file and was contained in a separately maintained database by a third party. The Court held that the OFAC alert information was part of Plaintiff’s file as defined in the FCRA.

Reinvestigation. Under § 1681i, CRAs must reinvestigate any information in a consumer’s file that is disputed by a consumer and either record the current status of the information in dispute or delete it. Again, the Court rejected Trans Union’s argument that it did not investigate Plaintiff’s disputes because it did not believe the OFAC information was part of Plaintiff’s credit file. The Court held that once Plaintiff disputed the accuracy of the information in her report, Defendant was obligated to reinvestigate the information.

Punitive Damages. Plaintiff’s challenge to the district court’s reduction of her punitive damage award was rejected by the Court because she accepted the district court’s conditional remittitur (even thought it was done under protest). The Court also rejected Trans Union’s appeal to invalidate the punitive damages award because the jury could have concluded that Trans Union acted willfully, and the award of punitive damages did not violate Defendant’s rights to due process.

Emotional Distress. The FCRA allows recovery for humiliation and embarrassment or mental distress “even if the plaintiff has suffered no out-of-pocket losses.” Further, time spent trying to resolve problems may also be taken into account. The Court rejected the Fifth Circuit’s standard requiring “a degree of specificity which may include corroborating witness testimony or medical or psychological evidence in support of the damage award” and reasoned that this corroboration goes to the weight of the evidence and not the existence of injury.

Court Grants Summary Judgment on Plaintiff’s FCRA Claims Against Furnisher Because Plaintiff’s Alleged Damages Occurred Prior to His Dispute

Martin Thornthwaite — Mon, 22 Nov 2010 00:00:00 -0500

Hariton v. Chase Auto Fin. Corp., 2010 U.S. Dist. LEXIS 88659 (C.D. Cal.Aug. 4, 2010)

Facts: Plaintiff asserted FCRA and other claims against Defendant concerning allegations that his credit report falsely stated that he failed to make payments on an automobile lease. Defendant filed a motion for summary judgment on Plaintiff’s claims, which the Court granted in its entirety.

Reinvestigation. Under § 1681i, CRAs must reinvestigate any information in a consumer’s file that is disputed by a consumer and either record the current status of the information in dispute or delete it. Although there was evidence that Chase incorrectly reported the account and took almost nine months to remove the account, the Court determined that Chase did not act willfully, and Plaintiff could not prove any damages against Chase. Plaintiff’s expert testified that Plaintiff received a higher interest rate on his car loan months before the dispute was made. However, damages must be incurred after the Defendant received notice of the dispute from a consumer reporting agency (“CRA”). Since damages are an essential element of recovery for a negligent violation, the Court granted summary judgment.

Actual Damages. Only damages for injuries personally incurred, not injuries to business entities, are available under the FCRA. Additionally, damages not identified in disclosures and discovery responses are only recoverable if the failure to initially disclose was substantially justified or harmless.

Negligence. Under the economic loss doctrine, recovery of lost profits and other monetary damages is limited to contract claims and cannot be recovered in tort. Further, because claims of negligence do not fall outside a lending institution’s conventional role as a lender, there is no duty of care between the lender and the borrower and a fiduciary duty exception to the economic loss rule does not apply.

Court Grants Consumer Reporting Agency’s Motion to Dismiss, Holding That Private Litigants Cannot Receive Injunctive Relief Under the FCRA

Ryan Langston — Wed, 17 Nov 2010 00:00:00 -0500

Parker v. Trans Union, LLC, 2010 U.S. Dist. LEXIS 72463 (E.D. Tex. June 23, 2010)

Facts: Plaintiff filed suit against Trans Union seeking injunctive relief under the FCRA. Specifically, Plaintiff requested the court to direct Trans Union to correct an alleged inaccuracy on his consumer report. Trans Union filed a Motion to Dismiss under Fed. R. Civ. P. 12(b)(6).

Injunctive Relief. The court held that private litigants are limited to the remedies set out in 15 U.S.C. §§ 1681n and 1681o. Because neither section includes injunctive or declaratory relief as a potential remedy, the court held that the FCRA does not authorize declaratory or injunctive relief for a private litigant. Thus, Plaintiff’s claim for injunctive relief against Trans Union was dismissed.

Court Denies CRA’s Motion to Compel Confidential Settlement Agreements Between Plaintiff and Co-Defendants

Ryan Langston — Wed, 17 Nov 2010 00:00:00 -0500

Jansen v. Equifax Info. Servs., LLC, 2010 U.S. Dist. LEXIS 79760 (D. Or. Aug. 5, 2010)

Facts: Plaintiff brought suit against Equifax and three co-defendants. Plaintiff reached separate confidential agreements with the three co-defendants. Pursuant to an attorney-fee agreement between Plaintiff and her counsel, her attorneys were compensated for their fees and costs from each settlement. As the last remaining defendant, Equifax entered into a settlement agreement that led to the entry of a stipulated judgment against Equifax for $275,000 plus reasonable attorneys’ fees. Plaintiff then filed a motion for award of attorneys’ Fees. Equifax responded with a motion to compel in which it argued that Plaintiff should be required to disclose: (1) the amounts of her settlements with each co-defendant; (2) the amounts that her counsel took from each settlement for attorneys’ fees and costs; (3) her attorneys’ billing records attributable to the other defendants; and (4) the total amount of attorneys’ fees and costs incurred against all defendants. Equifax then argued that Plaintiff’s requested attorneys’ fees should be offset or reduced in light of the attorneys’ fees and costs recovered in the other settlements to avoid double recovery.

Attorneys’ Fees. The Court held that it was appropriate for Equifax to have access to Plaintiff’s counsel’s records from which he contends he should be compensated for the prosecution of the claim against Equifax. The Court reasoned that access to these documents was necessary to avoid double recovery of attorneys’ fees.

Attorneys’ Fees. The Court denied Equifax’s motion to compel discovery of information of the amounts of the settlements between Plaintiff and the other co-defendants because Equifax failed to cite any authority supporting its contention that these agreements should be disclosed. Further, the Court found no authority for the proposition that the Court should offset Plaintiff’s demand for attorneys’ fees by the amount of attorneys’ fees paid to the co-defendants. However, the Court stated that Equifax may file an amended motion that identifies authority that the Court should take into account the amount of attorneys’ fees and costs that Plaintiff’s counsel has received as a consequence of the settlements. If this authority is produced, then the Court would take the new motion under advisement.

Newsletter: November 16, 2010

Paul W. Sheldon — Tue, 16 Nov 2010 00:00:00 -0500

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Court Grants Defendant’s Motion to Transfer Venue

Ginny Webb — Tue, 16 Nov 2010 00:00:00 -0500

Thomas v. Accounts Receivable Mgmt., Inc., 2010 U.S. Dist. LEXIS 112922 (E.D. Va. Oct. 22, 2010)

Facts: Plaintiff filed suit in the Eastern District of Virginia alleging multiple FCRA violations against Defendants. Plaintiff resided in Maryland and all issues relating to her claims originated in Maryland. Defendant Experian moved to transfer venue to Maryland under 28 U.S.C. § 1404(a). The Court granted Defendant’s motion.

Motion to Transfer Venue. Under § 1404(a), a court may transfer the case for the convenience of the parties and witnesses, in the interest of justice, and if the case is transferred to a district or division where it might have been brought. Experian established that the Maryland District Court had jurisdiction over the parties and that it was a proper venue. In determining whether to transfer venue in the interests of justice, a district court may consider other factors such as the ability to join other parties, docket conditions, judicial economy, and the court’s judgment that a party has tried to game the federal courts through forum manipulation. After considering all the relevant factors, the Court found that Plaintiff’s choice in forum selection had little influence because Plaintiff chose a forum with little relationship to the action. Plaintiff’s mere willingness to conduct the case in the Eastern District of Virginia and the fact that Experian admitted to conducting some of its business in Virginia did not make the Court a permissible venue under 28 U.S.C. § 1391(b). The Court transferred the case to the District of Maryland.

Plaintiff’s Failure to Show that Inaccurate Information was Reported and Verified by the Debt Collector Resulted in Summary Judgment for Defendant

Marc F. Kirkland — Mon, 15 Nov 2010 00:00:00 -0500

Edeh v. Midland Credit Mgmt., Inc., 2010 U.S. Dist. LEXIS 103888 (D. Minn. Sept. 29, 2010)

Facts: Plaintiff alleged that Midland violated the FCRA and other statutes by attempting to collect a debt for an HSBC credit card. Plaintiff disputed the debt directly with Midland and later with the CRAs. Each time Midland verified that the debt belonged to Plaintiff. Plaintiff later admitted that he owed the debt, but at the time of his disputes did not realize that Household Bank and HSBC were one and the same. The Parties brought cross-motions for summary judgment which were referred to the magistrate judge. The magistrate recommended granting in part and denying in part the parties’ motions, including denial of Midland’s motion regarding Plaintiff’s FCRA Claim. Midland appealed the magistrate’s recommendations and the Court agreed with Midland holding that Plaintiff could not recover under § 1681s-2(b) because the information he disputed was accurate.

Reasonable Investigation. Section 1681s-2(b) requires a furnisher of credit information on receiving notice from a CRA that a consumer has disputed a debt to investigate the dispute and to report the results of the investigation to the CRA. As a general rule, whether an investigation is “reasonable” under the FCRA is a question of fact for the jury. Therefore, the magistrate found that the general rule applied in this case. However, on appeal, Midland challenged the magistrate’s recommendation arguing that like consumers bringing claims against CRAs for failure to conduct a reasonable reinvestigation under § 1681i(a), consumers bringing claims against furnishers for failure to conduct a reasonable investigation under § 1681s-2(b) must show that the information being disputed was inaccurate. The Court agreed and granted Midland summary judgment because Plaintiff could not show that the information he disputed was inaccurate.

Newsletter: November 8, 2010

M. Kasey Ratliff — Mon, 08 Nov 2010 00:00:00 -0500

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Court Excludes Defendant Law Firm’s Evidence Because it had No Relevance as to Whether Defendant had a Permissible Purpose to Obtain Plaintiff’s Consumer Report

Martin Thornthwaite — Fri, 05 Nov 2010 00:00:00 -0500

Slantis v. Capozzi & Assocs., P.C., 2010 U.S. Dist. LEXIS 79866 (M.D. Pa. Aug. 9, 2010)

Facts: Plaintiff alleged that Defendant law firm’s access to Plaintiff’s consumer report was unauthorized and lacked a legitimate business need in violation of the Fair Credit Reporting Act (“FCRA”). Defendant asserted that its credit inquiry was made as part of preparation for litigation and was permissible. Defendant sought to introduce evidence for trial to support its position, and Plaintiff filed a motion in limine to exclude the information. Specifically, Defendant sought to introduce evidence that Plaintiff was a criminal, committed insurance fraud, engaged in misconduct during her employment, used drugs, violated a consent agreement, asserted frivolous claims against Defendant, owed her employer money, and other related information. The Court granted Plaintiff’s motion in limine in its entirety and prohibited Defendant from using the evidence because it had no probative value and was not relevant to whether Defendant had a permissible purpose to obtain Plaintiff’s consumer report.

Permissible Purpose. To establish a violation of the FCRA for obtaining a credit report without a legitimate business need, Plaintiff must prove: “(1) there was a consumer report; (2) defendant used or obtained it; (3) defendant did so without a permissible statutory purpose; and (4) defendant was negligent or willful in so doing.” Defendant offered two reasons for obtaining the Plaintiff’s report: (1) to determine whether a counterclaim against Plaintiff was worthwhile and (2) regarding obligations with respect to a consent order Plaintiff had entered into with her employer. The Court determined that these reasons were not permissible under § 1681b(a)(3)(F)(i) of the FCRA as they had no connection with any business transaction initiated by Plaintiff.

Court Holds that Consumer’s Discharged Bankruptcy did Not Terminate his Agreement to Arbitrate FCRA Claims with Creditor

Martin Thornthwaite — Fri, 05 Nov 2010 00:00:00 -0500

Green Tree Servicing, LLC. v. Brough, 930 N.E.2d 1238, 1240 (Ind. Ct. App. 2010)

Facts: Appellee Brough (“Brough”) executed a contract for a loan to purchase a mobile home through Appellant Green Tree Servicing, LLC’s (“Green Tree”) predecessor. The contract contained a mandatory arbitration provision. Brough defaulted on the contract and later filed for bankruptcy. After the bankruptcy was discharged, Green Tree filed suit against Brough. Brough filed a counterclaim alleging that Green Tree violated the Fair Credit Reporting Act (“FCRA”) by reporting the debt to the consumer reporting agencies (“CRAs”) even though it was discharged in bankruptcy. Green Tree asked the trial court to stay the case and compel the parties to arbitration pursuant to the contract. The trial court granted the request and Brough filed a request to vacate the arbitration order, which was granted, and Green Tree appealed. Green Tree contended that Brough’s FCRA claim was subject to the arbitration provision in the contract. The Court reversed the judgment of the trial court and remanded with instructions to order the parties to arbitrate Brough’s FCRA claim.

Arbitration. The Court noted that FCRA claims have been subject to arbitration clauses and concluded that if the contract was valid, the FCRA claim would be subject to arbitration. The Court also concluded that Brough’s bankruptcy discharge did not terminate the contract or the arbitration provision because arbitration of his FCRA claim would not affect Brough’s bankruptcy discharge in any way.

Court Grants Partial Summary Judgment to Furnisher Based on Plaintiff’s Failure to Demonstrate Actual Damages

M. Kasey Ratliff — Thu, 04 Nov 2010 00:00:00 -0500

Haddad v. Charles Riley & Associates, Inc., et al., 2010 U.S. Dist. LEXIS 103628 (E.D. Mich. Sept. 30, 2010)

Facts: Defendants Brighton Market (“Brighton”) and Blue Diamond Market (“Blue Diamond”) each cashed checks for customers on separate occasions that turned out to be bogus. Both checks were payable to “Tony Haddad” and the respective Defendants paid the presenter and then deposited the checks in their separate bank accounts. Each bank returned the checks to the respective Defendant stamped “No Account on File.” Both markets then hired the same collection agency, Charles Riley & Associates, Inc. (“Riley”). Riley subsequently located several individuals named “Tony Haddad” and then contacted Plaintiff by telephone and letter, demanded payment, threatened criminal prosecution, threatened litigation, and notified credit reporting agencies of open accounts allegedly owed by the Plaintiff as a result of the two bogus checks. Plaintiff submitted a dispute to a credit reporting agency (“CRA”), which notified Riley, who in turn reported the dispute to both Brighton and Blue Diamond Markets. Neither took any action, and Riley verified the charge to the CRA, although he admitted that he failed to perform a reinvestigation. Plaintiff filed suit against Brighton, Riley and Blue Diamond alleging violation of the Fair Debt Collection Practices Act (“FDCPA”), the Fair Credit Reporting Act (“FCRA”) as well as violations under the Michigan Collection Practices Act. Plaintiff moved for summary judgment while Brighton filed a cross motion for summary judgment. The magistrate recommended that Plaintiff’s motion for summary judgment against Brighton be denied and that Brighton’s cross motion for summary judgment be denied. Brighton filed objections to the report and recommendation of the magistrate. The district judge found the magistrate judge’s report and recommendation should be adopted in part and overruled in part.

Damages. Brighton objects to the recommendation to deny its summary judgment motion on the FCRA count because Plaintiff admitted in his deposition testimony that he suffered no damages. As far as the court could determine, there was no evidence in the record that tied Plaintiff’s alleged emotional distress damages to the false credit information on his credit file. For negligent violations of the FCRA, a plaintiff may recover only actual damages. Because of the failure to offer any evidence of actual damages, the Plaintiff is limited to his remedies for a willful violation of the FCRA. Thus, the court found that Defendant Brighton was entitled to summary judgment.

Court Finds That Restaurant Employee’s Inadvertent Provision of Merchant’s Credit Card Receipt to Consumer Not a Willful Violation of FACTA Truncation Requirements

M. Kasey Ratliff — Thu, 04 Nov 2010 00:00:00 -0500

Zaun v. J.S.H. Inc. of Faribault d/b/a Long John Silver’s – Mall of America, 2010 U.S. Dist. LEXIS 102062 (D. Minn. Sept. 28, 2010)

Facts: Plaintiff ate at a Long John Silver’s restaurant at the Mall of America food court and paid with a credit card. The receipt Plaintiff was provided was the merchant’s copy rather than the customer copy of the credit card transaction. Plaintiff contended that this receipt contained the expiration date of his credit card. Plaintiff filed suit claiming that the restaurant’s provision of a credit card receipt containing his credit card’s expiration date constituted a willful violation of the Fair Credit Reporting Act (“FCRA”) and the Fair and Accurate Credit Transactions Act (“FACTA”). Defendant filed a motion to dismiss and the court granted the motion.

FACTA Requirements. There is no dispute that the FCRA prohibits a merchant from including credit card expiration dates on customer receipts. Congress has clarified the requirements and provided a safe harbor against accusations of willfulness from merchants who continued to print expiration dates on customer receipts. The safe harbor expired at least six months before the transaction at issue in this case.

Willfulness. Defendant argues that Plaintiff has failed to state a claim for a willful violation of FACTA’s redaction requirements. The importance of a claim for willful non-compliance is that the consumer need not prove actual damages. The Supreme Court has made it clear that “willfulness” under the FCRA requires a knowing or reckless violation of the statute’s requirements. This case is different from the typical FACTA case because Plaintiff does not contend that Defendant’s practice was to print expiration dates on customer receipts. Rather, he contends that Defendant’s employee mistakenly handed him the merchant copy of the receipt rather than the customer copy. Only the customer copy is prohibited from containing the credit card’s expiration date. At best, Plaintiff’s allegations could state a claim for negligence, not willfulness. Plaintiff has acknowledged that he cannot succeed on a negligence claim because he cannot demonstrate actual damage. The allegations here establish only that an employee at a fast food restaurant gave a customer the wrong receipt. This does not rise to the level of a willful violation.

New Debt Settlement Protections Enacted by FTC Include Improved Disclosure Requirements and Stricter Rules on Fees

M. Kasey Ratliff — Thu, 04 Nov 2010 00:00:00 -0500

The Federal Trade Commission (“FTC”) recently adopted new rules designed to curb deceptive and abusive practices in debt relief services and ensure that consumers don’t pay large fees without getting relief.

Applicability. The new rules cover telemarketers of for-profit debt relief services, including credit counseling, debt settlement, and debt negotiation services. The rules do not cover non-profit firms, but do cover companies that falsely claim non-profit status.

New Disclosure Requirements. As of September 27, 2010, debt settlement firms are required to disclose to consumers the time it will take to reduce the debt, when the firm will negotiate a settlement with creditors, and how much money consumers must set aside before a settlement offer will be made. Debt settlement firms also must tell consumers about the negative consequences of not making payments to outstanding creditors, such as being subject to collections or lawsuits, decreased credit worthiness, and increased debt.

Limits on Fees. A new advanced fee ban also went into effect on October 27, 2010 and specifies that fees for debt relief services may not be collected until: (1) the debt relief service successfully settles or changes the terms of at least one of the consumer’s debts; (2) there is a settlement agreement, debt management plan or other agreement between the consumer and the creditor, that the consumer has agreed to; and (3) the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider. The advance fee ban applies only to consumers who enroll in a debt relief service after October 27, 2010.

Limits on Fees. There are also additional restrictions on debt relief companies that require consumers to set aside provider fees and savings used to pay creditors in a “dedicated account.” Providers may only require a dedicated account if five conditions are met: (1) the account is maintained at an insured financial institution; (2) the consumer owns the funds (including any interest accrued); (3) the consumer can withdraw from the debt relief service at any time without penalty and receive all unearned provider fees and savings within seven business days; (4) the provider does not own or control or have any affiliation with the company administering the account; and (5) the provider does not exchange any referral fees with the company administering the account.

Court Holds That Defendant Does Not Need To Fully Explain Its Credit Risk Guidelines And Grants Defendant’s Motion For Summary Judgment

Ryan Langston — Thu, 04 Nov 2010 00:00:00 -0500

Muskett v. Certegy Check Servs., Inc., 2010 U.S. Dist. LEXIS 67320 (D.N.J. July 6, 2010)

Facts: Plaintiffs filed suit against Defendant alleging defamation, violations of the New Jersey Consumer Fraud Act (“NJCFA”), and the FCRA. Defendant performed a series of risk management and fraud detection processes for Home Depot and Staples before authorizing a check as payment to one of their retail stores. Plaintiffs’ checks were refused at a Home Depot and a Staples store. Plaintiffs wrote letters to Defendant requesting free copies of their files. In response, Defendant provided both Plaintiffs copies of their consumer reports. Plaintiffs failed to show any economic loss and alleged embarrassment as their only injury. The Court granted Defendant’s Motion for Summary Judgment.

Summary Judgment. Defendant alleged that Plaintiffs’ FCRA claims were barred by the applicable statutes of limitations. The Court held that while Plaintiffs’ alleged damages were incurred outside the two year limitations period, limitations did not begin to run until Plaintiffs received copies of their consumer disclosures from Defendant eighteen months after their checks were refused.

Defamation. The Court dismissed Plaintiffs’ defamation claims concluding that no reasonable person of ordinary intelligence could find Defendant’s statement to be defamatory. When Plaintiffs’ checks were refused, Defendant provided to the consumer a wide range of innocuous explanations such as a limit of the number of checks any given customer can use as payment, a limit in the amount of those checks, and the express acknowledgment that no negative information appeared on Plaintiffs’ credit file. The Court held that no reasonable fact-finder could find that Defendant’s express statement was injurious to Plaintiffs.

NJCFA. A central element of a claim under the NJCFA is actionable loss. Such loss must be in the form of “moneys or property, real or personal.” Since Plaintiffs failed to show any economic loss, the Court held that Defendant was entitled to summary judgment on this claim.

FCRA. Plaintiffs claimed that Defendant submitted an inaccurate report in violation of § 1681e(b). The Court dismissed Plaintiffs’ § 1681e(b) claim because Plaintiffs failed to offer any evidence regarding the reasonableness of Defendant’s procedures or that Plaintiffs’ proposed check transactions fell outside the guidelines established by Defendant for authorization.

FCRA. In addition, Plaintiffs claimed that Defendant failed to provide proper disclosures under § 1681g regarding its decision to decline authorization. Section 1681g requires consumer reporting agencies to disclose to a consumer, upon request, the nature, substance, and sources of information in their files that pertain to the consumer. However, the FCRA expressly excludes from this disclosure requirement any information concerning credit scores or any other risk scores or predicators relating to the consumer. Thus, the Court held that Plaintiffs could not bring a claim against Defendant for failing to fully explain how the Plaintiffs’ check transactions fell outside Defendant’s guidelines for authorization.

Plaintiff’s Motion for Class Certification was Denied because an Offer of Judgment Would Not, By Itself, Prevent a Possible Class from Proceeding

Martin Thornthwaite — Tue, 02 Nov 2010 00:00:00 -0500

Beaudry v. Telecheck Servs., 2010 U.S. Dist. LEXIS 72850 (M.D. Tenn. July 20, 2010)

Facts: Plaintiff filed a renewed motion for class certification seeking to be the lead plaintiff in a class action against Defendants for alleged willful violations of the Fair Credit Reporting Act (“FCRA”). Specifically, Plaintiff claimed that when Tennessee began using nine-digit driver’s license numbers in 2002, Defendants failed to link Tennessee consumers’ new nine-digit numbers to account activity with their old eight-digit numbers. Plaintiff sought class certification because she was allegedly concerned that Defendants may make an offer of judgment to settle the lawsuit in order to prevent the class action from forming. Plaintiff cited cases The Court denied Plaintiff’s motion as premature and permitted her to re-file at a later date if she could support it with sufficient evidence.

Punitive Damages. The Court rejected Plaintiff’s argument that an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure would moot her individual claim because Plaintiff alleged that Defendants willfully violated the FCRA under § 1681n(a)(2). The court reasoned that since the parties could not say what, if any, the full measure of Plaintiff’s damages might eventually be, Defendants could not unilaterally make an offer of judgment that would moot Plaintiff’s claims. The Court distinguished cases cited by Plaintiff because those opinions were based on offers of judgment for the statutory damage limit under § 1692k of the Fair Debt Collection Practices Act (“FDCPA”) where punitive damages were unavailable.

Texas Appellate Court Finds Check Verification Company Not A CRA Under Texas Consumer Credit Reporting Act

M. Kasey Ratliff — Fri, 22 Oct 2010 00:00:00 -0500

Watson v. Telecheck Services, Inc., et al., 2010 Tex. App. LEXIS 7334 (Tex. App. -- Texarkana Sept. 3, 2010, no pet. h.)

Facts: Plaintiff cashed a personal check at a casino and subsequently stopped payment on the check following a dispute with casino employees. The casino called on Telecheck Services, Inc. (“Telecheck”), a check verification and warranty company, to purchase the check. Telecheck purchased the check, listed Plaintiff negatively in a database accessed by Telecheck’s customers and hired TRS Recovery Services, Inc. (“TRS”) to attempt to collect the check from Plaintiff. Plaintiff sued Telecheck and TRS for violations of the Texas Consumer Credit Reporting Act (“TCCRA”) and the Fair Debt Collection Practices Act (“FDCPA”) as well as various common law claims. Telecheck and TRS received summary judgment at the trial court level and Plaintiff appealed. The appellate court affirmed the summary judgment in part and reversed in part.

TCCRA. Chapter 20 of the Texas Business & Commerce Code governs the regulation of consumer credit reporting agencies. A consumer reporting agency that willfully or negligently violates the provisions of Chapter 20 is civilly liable to the consumer. The term consumer reporting agency, though, does not include a business entity that provides only check verification or check guarantee services. Here there is no dispute that Telecheck provides only check verification and guarantee services and therefore Telecheck is entitled to judgment as a matter of law in this cause of action.

Statute of Limitations. A claim for violation of the FDCPA must be brought within one year from the date on which the violation occurs. It is undisputed that on or about August 4, 2003, Telecheck put Plaintiff in its database as a person with unpaid, check related debt. Nothing in the summary judgment record, however, establishes how Plaintiff knew or should have known of the event at that time. We find that a reasonable trier of fact could determine that Plaintiff could not have reasonably known of Telecheck’s listing until a later date within the applicable statute of limitations.

10th Circuit Finds That the Aggregation of Statutory Damages Is Permissible in a Class Action Lawsuit for Violation of the Notice Requirement of § 1681m

Ginny Webb — Fri, 22 Oct 2010 00:00:00 -0500

In re: Farmers Ins. Co., 2010 U.S. Dist. LEXIS 99476 (W.D. Okla. Sept. 20, 2010)

Facts: Plaintiffs filed a putative class action against Defendants for alleged willful violations of the FCRA seeking statutory damages, costs, and attorneys fees. Plaintiffs specifically allege that Defendants willfully violated the FCRA when they used consumer information to decide whether to provide a discount for insurance premiums and did not provide adequate notice to consumers as required by § 1681m(a). Defendants filed a motion for summary judgment on ten different issues, and Plaintiffs filed a motion for summary judgment as to Defendants’ affirmative defenses. The Court granted the motions in part and denied them in part.

Adverse Action. Section 1681m(a) provides that if any person takes an adverse action with respect to a consumer that is based in whole or in part on any information contained in a consumer report, oral, written, or electronic notice must be given to the consumer. The notice must indentify the adverse action, explain how to contact the consumer reporting agency (“CRA”), and inform the consumer that he can obtain a free copy of the consumer report and dispute its accuracy. Section 1681a(k)(1)(B)(i) states that an insurer has taken an adverse action when it issues a “denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the term of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of insurance.”

Adverse Action. Defendants argued that the 2003 FACTA amendments to the FCRA amended § 1681m and barred Plaintiffs claims. Section 1681m(h)(8)(B) requires administrative enforcement under § 1681s and thus prohibits all civil actions. The Court held that FACTA’s 2003 Amendment of the FCRA preserved Plaintiffs’ claims and that § 1681m(h) was inapplicable because it was enacted after Plaintiffs filed suit.

Statute of Limitations. Defendants argued that they could not be liable for any FCRA claims because the claims were barred by the two year statute of limitations set forth in § 1681p. Defendants argued any alleged FCRA violation occurred when Defendants billed their insureds. Plaintiffs contended that the effect of the class action lawsuits served to toll the applicable statute of limitations for Plaintiffs and putative class action members relying on American Pipe & Constr. Co. v. Utah, which held that “commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” The Court held that even though the majority of circuit courts concluded that the statute of limitations should not be tolled in the successive class action context and the Tenth Circuit had not ruled on this issue, the statute of limitations should be tolled in this case.

Damages. Defendants argued that Plaintiffs’ claims should be dismissed because they only requested statutory damages and the aggregation of statutory damages should not be permitted under § 1681n(a)(1)(A) for a notice violation under § 1681m. Plaintiffs argued that § 1681n(a)(1)(A) allows for statutory damages for a willful violation of the FCRA and is silent as to recovery by a class of plaintiffs, leading to a clear and unambiguous interpretation that aggregation of statutory damages is permitted in a class action lawsuit. The Court agreed with Plaintiffs’ argument and denied Defendants’ motion. The Court held that since class relief is available for all claims, without a clear expression by Congress to exclude such damages, aggregation of damages is available to Plaintiffs in this action.

Damages. Defendants argued that § 1681n(a)(1)(A) violates due process because there is no criteria to determine the amount of statutory damages to be assessed between the range of $100.00 to $1,000.00 thus promoting arbitrary and discriminatory enforcement. The Court held that § 1681n(a)(1)(A) is not unconstitutionally vague on its face because it puts Defendants on notice as to what conduct is prohibited and the potential range of damages is relatively small.

Court Grants Defendant’s Motion To Transfer Venue In Class Action Even Though Named Plaintiff’s Original Choice of Forum Was Proper

Ryan Langston — Fri, 22 Oct 2010 00:00:00 -0500

Smith v. Hireright Solutions, Inc., 2010 U.S. Dist. LEXIS 55477 (E.D. Pa. 2010, June 7, 2010)

Facts: Hireright Solutions, Inc. (“Defendant”) filed a motion to transfer venue to the Northern District of Oklahoma pursuant to 28 U.S.C. § 1404. This litigation was initiated as a consumer class action based upon Defendant's alleged willful violation of the Fair Credit Reporting Act, 15 U.S.C. §§ 1681, et seq. ("FCRA"). The action was brought on behalf of thousands of employment applicants throughout the country who claimed to be the subject of prejudicial, misleading, and inaccurate background reports created by Defendant and sold to employers. Defendant is a consumer reporting agency ("CRA"), which maintains consumer files containing public record information, including the criminal record history of individuals. Defendant sold these consumer files to potential employers consisting of a customer base of more than 28,000 businesses across the country wishing to investigate the criminal history of various job applicants. Plaintiffs alleged that, as a matter of practice, Defendant, in violation of its obligations under the FCRA, neither notified the consumer of its reporting of adverse public record information, nor maintained strict procedures designed to ensure that such information was complete, up-to-date, and accurate. Moreover Defendant allegedly reported single incidents multiple times so that the consumer's criminal record history appeared much more serious than it actually was. By the time the consumer was made aware of the inaccurate and duplicative reporting, the report had already been sold to the requesting employer and become the basis of an employment decision.

Willful Noncompliance. Plaintiffs alleged that Defendant willfully violated the FCRA by: (1) failing to notify consumers contemporaneously of the fact that criminal record information was being provided to prospective employers; (2) failing to maintain strict procedures to assure that the information was complete and up to date; and (3) failing to utilize procedures designed to assure maximum possible accuracy of the information it sold to prospective employers.
Class Certification. Plaintiffs defined the prospective class as all natural persons residing in the United States who were the subject of a consumer report prepared by Defendant within two (2) years prior to the filing of the Complaint, who were the subjects of background reports in which criminal cases were duplicatively reported, and to whom Defendants did not provide notice that they were furnishing a consumer report on the persons prior to or contemporaneously with their provision of the report.

Venue. Pursuant to 28 U.S.C. § 1404(a), a district court may transfer an action to any other district "where it might have been brought" if this transfer is "for the convenience of parties and witnesses" and "in the interest of justice." Analysis of a request for a § 1404(a) transfer has two components. First, both the original venue and the requested venue must be proper. Second, because the purpose of allowing § 1404(a) transfers is to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense, the Court is required to undertake a balancing test between public and private interests in deciding whether the interests of justice would be better served by a transfer to a different forum. The burden falls on the moving defendant to show the desirability of transferring venue and to present evidence upon which the court may rely in justifying transfer.

Venue. The named Plaintiff in this case was a resident of Pennsylvania and filed suit in his home forum. However, all of the operative facts common to the defined class occurred in Oklahoma. Because the Oklahoma forum could conceivably be just as convenient to a large number of the putative members of the class, the named Plaintiff’s choice of forum was not entitled to considerable deference. Additionally, all of the challenged consumer reports originated from Defendant’s place of business in Oklahoma. After considering the factors listed above, the Court held that the Northern District of Oklahoma was the most appropriate venue for this case and granted Defendant’s Motion to Transfer Venue.

Court Finds Violation of FACTA Truncation Requirements

Ginny Webb — Thu, 21 Oct 2010 00:00:00 -0500

Hammer v. JP’s Southwestern Foods, L.L.C., 2010 U.S. Dist. LEXIS 99214 (W.D. Mo. Sept. 13, 2010)

Facts: Plaintiff filed a one-count class action suit against Defendant alleging willful violations of the Fair and Accurate Credit Transactions Act (“FACTA”) claiming Defendant failed to properly truncate credit and debit card numbers on its customers’ receipts. Defendant filed a motion for summary judgment claiming Plaintiff lacked standing and multiple damage issues. Plaintiff filed for partial summary judgment for Defendant’s alleged willfull violation of § 1681c(g). The Court granted Defendant’s motion in part and denied in part. The Court granted Plaintiff’s motion holding the Defendant violated § 1681c(g), but denied in respect to the automatic award of statutory damages for the violation and in respect to the claim of willful violation.

FACTA Requirements. § 1681c(g)(1) requires that no person that accepts credit or debit cards shall print more than the last five digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.

FACTA. The Court found that FACTA created a legally protected interest in a consumer receiving a receipt that omits certain information in order to protect the consumer and prevent identity theft. Violation of this legally protected interest is enough to provide injury-in-fact in order to confer standing.

FACTA Damages. Defendant claimed that damages sought pursuant to FACTA violated due process because they would act to drive it out of business for a violation in which it received no benefit. The Court found that Defendant failed to demonstrate a facial challenge to the constitutionality of the statutory damages as it cannot establish that “no set of circumstances exists under which FACTA’s damages provisions would be valid” and denied its motion as to this point (Not sure I understand this sentence). The Defendant also argued, and the Court agreed, that FACTA limited recovery to consumer card holders to the exclusion of business card holders because § 1681n applies only to consumers.

FACTA. The Court found that the single receipt produced by Plaintiff containing an untruncated credit card number violated FACTA and granted Plaintiff’s summary judgment as to that single violation. The Court went on to hold that “a mere technical violation of FACTA does not mean that plaintiff is entitled to statutory damages” and denied summary judgment in part. The Court further held that whether Defendant had willfully violated any provisions of FACTA was a question of material fact and denied Plaintiff’s summary judgment as to this issue.

Prior Settlement Agreement Language Bars Subsequent FCRA lawsuit

Paul W. Sheldon — Fri, 15 Oct 2010 00:00:00 -0500

Schweitzer v. Equifax Information Services LLC, 2010 U.S. Dist. LEXIS 99143 (W.D. Pa. Sept. 21, 2010)

Facts: Plaintiff brought suit against Equifax, claiming FCRA and common law negligence violations pertaining to alleged inaccuracies that existed on Plaintiff’s Equifax credit file. Plaintiff had previously sued Equifax in 2006 which contained similar FCRA claims over allegedly inaccurate items on her credit file. That prior suit settled and a settlement agreement and release was entered into between the parties on January 2, 2007. The settlement agreement released Equifax from all claims arising prior to the date of that agreement, and confirmed the accuracy of a November 7, 2006 credit report published by Equifax. In the current case at issue, Equifax filed its motion for summary judgment claiming that Plaintiff’s claims are barred by the prior settlement agreement and release, and in the alternative, that Plaintiff failed to provide any evidence sufficient enough to establish any claim asserted. The Court agreed and granted Equifax’s motion.

Contract Principals. The Court of Appeals for the Third Circuit has instructed that basic contract principals apply to settlement agreements and contract interpretation is a question of fact. By way of contrast, however, the Court has held that contract construction (i.e. the legal operation of the contract) is a question of law.

Contract Principals. The threshold issue in resolving contractual disputes is whether the provisions of the contract contain an ambiguity. If the language is determined to be ambiguous, the fact-finder resolves the matter. If the language is unambiguous, the court interprets the contract as a matter of law. The Court found that the phrase “prior to this date” clearly and unambiguously referred to the date of the Settlement Agreement (January 7, 2007) because it was the only date appearing within the four corners of the agreement. Accordingly, Plaintiff was barred from bringing her claims because such claims arose prior to the settlement agreement date of January 7, 2007.

Reasonable Procedures Requirements. The first element to establish a prima facie case of a violation of § 1681e(b) is that a consumer "must present evidence tending to show that a credit reporting agency prepared a report containing 'inaccurate' information." Plaintiff failed to do so.

Reasonable Procedures Burden of Proof. A § 1681e(b) claim also requires the consumer reporting agency to follow reasonable procedures to ensure accuracy in credit reports it prepares. Courts have generally held that the burden falls on the plaintiff to show the consumer reporting agency has not followed reasonable procedures. Therefore, a plaintiff must minimally present some evidence from which a trier of fact can infer that the consumer reporting agency failed to follow reasonable procedures in preparing a credit report. Plaintiff failed to do so.

11th Circuit Holds That Plaintiff’s Claim Alleging Violation Of The FCRA Was Objectively Frivolous

Ryan Langston — Thu, 14 Oct 2010 00:00:00 -0500

Peer v. Lewis, 606 F.3d 1306 (11th Cir. 2010)

Facts: Appellant Lewis (“Lewis”) appealed the district court's order denying sanctions against three attorneys who represented his political rival, Appellee Peer ("Peer"). Lewis originally filed a state court claim challenging Peer’s residency in an attempt to disqualify Peer as a mayoral candidate in Ft. Lauderdale, Florida. In his state court complaint, Lewis stated that Peer’s October 15, 2005, Trans Union consumer report showed a North Carolina address for Peer. The state court dismissed Lewis’ complaint for ineffective service of process. At the dismissal hearing, counsel for Lewis told counsel for Peer that Lewis’ complaint was inaccurate because Peer’s address was actually obtained from a Westlaw People Finder report and not a Trans Union consumer repot. Lewis amended his state court complaint to delete any reference to Peer’s consumer report and served the amended complaint on Peer. The next day, Peer filed suit against Lewis for violation of the FCRA for pulling Peer’s consumer reporting for an impermissible purpose. Lewis filed a counterclaim for abuse of process. Lewis then filed a motion for sanctions against Peer’s attorney for bringing a frivolous lawsuit, which is the subject of this appeal.

Sanctions. The 11th Circuit held that the claim filed by Peer was objectively frivolous at the time of filing because there were no facts to support Peer’s contention that Lewis accessed his Trans Union consumer report without a permissible purpose, nor was there any chance that discovery would uncover evidentiary support that Peer’s attorney already possessed Peer’s consumer report. However, despite the frivolous nature of Peer’s claim, the Court affirmed the trial court’s decision to deny Lewis’ motion for sanctions against Peer’s attorney because it was untimely and because Lewis did not follow the safe harbor procedures of Rule 11(c)(2). Under Rule 11(c)(2), a motion for sanctions must not be filed or be presented to the court until 21 days after it is served. This allows the respondent an opportunity to correct the alleged defect. Lewis failed to serve his motion for sanctions 21 days in advance of filing it with the court. Therefore, the Court affirmed the trial court’s holding as to Peer and his attorney. The case was remanded to the trial court for determination of other issues.

Pennsylvania Court Grants Motion for Summary Judgment as to the Issue of Willful Violation of §§ 1681e(a) and 1681e(b)

Ginny Webb — Thu, 14 Oct 2010 00:00:00 -0500

Sheldon v. Experian Info. Solutions, Inc., 2010 U.S. Dist. LEXIS 102737 (E.D. Pa. Sept. 28, 2010)

Facts: Plaintiffs filed a putative class action complaint against Experian Solutions, Inc. (“Experian”) alleging that Experian incorrectly classified certain individuals as “deceased” in violation of § 1681e(b) of the FCRA. Additionally, Plaintiffs alleged that Experian violated § 1681e(a) as the sale of reports of the “deceased” individuals did not come within a statutorily permitted purpose. Experian filed a motion for summary judgment, which the Court granted as to the willful violations and denied as to the negligent violations.

Reasonable Procedures. Plaintiffs alleged that Experian violated § 1681e(b) by failing to have reasonable procedures in place to assure the accurate notation of a “deceased” status of a consumer. Experian argued that its procedures were reasonable because conducts a thorough investigation of all potential subscribers, makes a special notation when furnished with information that a consumer is deceased, alerts creditors of the death notation to help prevent identity theft, and collects information pertaining to the deceased individuals which it keeps in a “Death Master File.” Further, it is Experian’s procedure when a deceased notation is disputed, to contact the furnisher to verify the information and request notarized documentation stating that the consumer is not deceased.

Permissible Purpose. Plaintiffs alleged that there is no permissible purpose under the FCRA for the sale of a credit report concerning a deceased person and that Experian lacks reasonable procedures to ensure that credit reports noting that a consumer is deceased are sold for permissible purposes. Experian pointed out that there are permissible purposes for selling the credit report of a deceased person under § 1681b(a)(3)(A) for account collection purposes from the estate of a consumer and credit extension purposes. Experian asserted that prior to selling any credit report, it obtains a blanket certification from any potential subscriber that includes the permissible purposes for which the credit reports will be used.

Negligent Violation. The Court found that the issue of whether Experian negligently violated § 1681e(b) must be submitted to the fact-finder and denied its request for summary judgment as to this issue. The Court found that whether the procedure was reasonable in Plaintiff’s claim of violation of § 1681e(a) was an issue for the fact-finder and denied its request for summary judgment as to this issue.

Willful Violation. In regard to the allegation of willful violation of §§ 1681e(b) and (a), Experian relied on Sarver v. Experian wherein the Court held that as a matter of law, Experian’s procedures were reasonable and the FCRA did not require that all furnisher information be examined for anomalous information when there is a lack of notice to the effect that the furnisher is supplying unreliable information. The Court found that there is no appellate authority contradicting this case and granted Defendant’s request for summary judgment as to allegation that Experian willfully violated §§ 1681e(b) and (a).

Court Dismisses Third Party Complaint Seeking Contribution for an FCRA Claim

Marc F. Kirkland — Wed, 13 Oct 2010 00:00:00 -0500

Bowman v. Selection Mgmt. Sys., 2010 U.S. Dist. LEXIS 103221 (W.D. Va. Sept. 28, 2010)

Facts: Third-party Plaintiff filed a second third-party complaint against Defendant Times-World Corporation (“Times-World”) asserting a right to contribution for an FCRAclaim. Times-World moved to dismiss the Complaint for failure to state a claim because neither the FCRA nor other federal law provides the third-party Plaintiff with a right of contrubution.The Court agreed and dismissed the third-party Plaintiff’s complaint.

Contribution. A right to contribution, for an alleged violation of a duty created by federal statute, such as the FCRA, may arise only through the affirmative creation of a right of action by Congress, either explicitly or by clear implication, or through the power of federal courts to fashion a common-law right of contribution. Courts across the nation have found that there is no right to contribution under the FCRA or federal common law. Therefore, the Court granted Times-World’s motion to dismiss.

First Circuit Affirms Decision That No Evidence Suggested Furnisher Duties Under § 1681s-2(b) Were Triggered By A Consumer Reporting Agency

Paul W. Sheldon — Wed, 13 Oct 2010 00:00:00 -0500

Chiang v. MBNA and FIA Card Services, N.A., 2010 U.S. App. LEXIS 18856 (1st Cir., Sept. 9, 2010)

Facts: Plaintiff Wen Chiang brought suit against FIA Card Services, N.A. (formerly known as MBNA America Bank, N.A. and hereinafter referred to as “FIA”), after it allegedly reported delinquent payments on his credit card. Plaintiff disputed the alleged delinquency report and claimed that FIA, as a furnisher of credit information, violated § 1681s-2(b) of the FCRA by failing to follow up on that dispute with a further investigation. The district court granted summary judgment to FIA after finding no evidence that a consumer reporting agency (“CRA”), rather than just Plaintiff himself, had ever contacted FIA concerning Plaintiff’s dispute. After its review of the record, the First Circuit affirmed the district court’s ruling.

Furnisher Duties. A furnisher has an obligation under § 1681s-2(b)(1) to investigate any disputes over the completeness or accuracy of the information furnished and then notify the CRA of any corrections -- but only if the CRA, acting as a gatekeeper, has previously notified the furnisher of the consumer's dispute. By contrast, a notice of disputed information provided directly by the consumer to a furnisher does not trigger a furnisher's duties under § 1681s-2(b). Note: the Court found no evidence in the record to suggest that a CRA ever contacted FIA concerning the disputed information.

“Reinvestigation”. Plaintiff argued that the Defendant’s and Equifax’s use of the word "reinvestigate” suggested that Equifax had notified FIA of a prior dispute under the FCRA. In response, the Court reminded Plaintiff of 15 U.S.C. § 1681i(a)(1)(A), that the term "reinvestigation" was a term of art in the FCRA and refers only to a CRA's reevaluation of a consumer's credit report in light of a consumer's dispute, not a second investigation.

Virginia Court Denies Plaintiff’s Punitive Damage Claim Under The FCRA

Paul W. Sheldon — Tue, 12 Oct 2010 00:00:00 -0500

Moreno v. DHI Mortgage Company GP, Inc., 2010 U.S. Dist. LEXIS 89443 (E.D. Va. Aug 27, 2010)

Facts: Plaintiff filed suit against Defendant DHI Mortgage Company GP, Inc. (“DHI”), alleging a violation of the FCRA under § 1681m(a) regarding DHI’s failure to provide Plaintiff with the required notice after DHI denied her credit application for the purchase of a townhouse. Plaintiff moved for summary judgment on this claim and it was granted. The remaining issue for the Court, in part, was the assessment of statutory and punitive damages under the FCRA. Pursuant to such claim, the court awarded statutory damages of $750 and denied Plaintiff’s request for punitive damages.

Furnisher Duties. 15 U.S.C. § 1681m(a) states in pertinent part that a business taking an adverse action against a consumer must provide notice to that consumer that includes (1) the name, address, and telephone number of the agency that furnished the credit report; (2) a statement that such agency did not make the decision to take the adverse action and therefore cannot provide the consumer with the reasons such action was taken; and (3) notice of the consumer's right to obtain a free credit report from the agency and to dispute the accuracy of any information on the report. DHI failed to provide Plaintiff with this notice after it had denied her credit application for the purchase of a townhouse.

Damages. To assess damages under the FCRA, a court must first determine whether the violation was willful. If it was not, the Plaintiff is only entitled to actual damages under 15 U.S.C. § 1681o. Under 15 U.S.C. § 1681n, if the violation was willful, the plaintiff is entitled to the greater of her actual damages or the statutory damages, which are capped at $1,000.00, and such punitive damages as the court finds are warranted by the facts.

Damages. For a willful violation of the FCRA, an award of the greater of either the actual or the statutory damages is appropriate. Statutory damages range from $100 to $1,000. Because Plaintiff suffered no actual damages, the Court found that there was sufficient evidence to justify a statutory damage assessment of $750.

Punitive Damages. In assessing punitive damages, a court should consider three factors in assessing punitive damages: (1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages and the civil penalties authorized or imposed in comparable cases.

Punitive Damages. In determining the degree of reprehensibility, courts consider whether: (1) the harm caused was physical as opposed to economic; (2) the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; (3) the target of the conduct had financial vulnerability; (4) the conduct involved repeated actions or was an isolated incident; and (5) the harm was the result of intentional malice, trickery, or deceit, or mere accident. Note: Plaintiff admitted that neither of the first two factors were present in this case. The court concluded that the evidence submitted for the remaining factors were so low that punitive damages were not appropriate.

Pro Se Plaintiff’s Vague Complaint Dismissed on the Court’s Own Motion for Failure to State a Claim

Marc F. Kirkland — Mon, 11 Oct 2010 00:00:00 -0500

Fisher v. Experian, 2010 U.S. Dist. Lexis 102145 (D. Neb. Sept. 24, 2010)

Facts: Pro Se Plaintiff, proceeding in forma pauperis, sued three CRAs and another group of Defendants identified by Plaintiff as “All for profit companies that furnishes [sic] background check reports on a fee basis.” Plaintiff alleged that she underwent “gender reassignment surgery” and afterward had trouble finding employment despite her training, clean employment records and lack of criminal background. Plaintiff believed that the appearance of her male name, Andreas Krieger, was the cause of her problem. Plaintiff requested that the Court issue a decree prohibiting any private company from releasing her male name. Plaintiff’s vague pleading alleged that her claims arose under the Constitution, laws or treaties of the United States and a violation of her civil rights. However, she did not name a single federal statute or constitutional provision that Defendants allegedly violated and her claims were so vague that it was unclear which of the Defendants actually took the actions complained of by Plaintiff. The Court, is required to review in forma pauperis complaints to determine whether summary dismissal is appropriate, could not determine the basis of Plaintiff’s claims. Therefore, on its own motion the Court dismissed the Complaint without prejudice and Plaintiff was give thirty days to amend.

Failure to State a Claim. A pro se plaintiff must set forth enough factual allegations to nudge his or her claims across the line from conceivable to plausible, or the complaint must be dismissed for failing to state a claim upon which relief can be granted.

Court Dismisses Plaintiffs’ Permissible Purpose Claim for Failure to Alleged Actual Damages

Marc F. Kirkland — Mon, 11 Oct 2010 00:00:00 -0500

Slack v. Suburban Propane Ptnrs., L.P., 2010 U.S. Dist. LEXIS 98602 (D.N.J. Sept. 21, 2010)

Facts: Plaintiffs, residential customers of Suburban Propane, sued Suburban Propane alleging various claims related to propane pricing. Plaintiffs also alleged that Suburban Propane violated § 1681b of the FCRAby obtaining a consumer report, for one of the Plaintiffs, for an impermissible purpose. Suburban Propane moved to dismiss the claim because Plaintiffs failed to adequately plead an FCRA claim. The Court agreed and dismissed the permissible purpose claim.

Permissible Purpose. Section 1681b(f) provides that: A person shall not use or obtain a consumer report for any purpose unless – (1) the consumer report is obtained for a purpose for which the consumer report is authorized to be furnished under this section; and (2) the purpose is certified in accordance with § 1681e. Thus the FCRA imposes liability for improperly obtaining a report, not simply for releasing or disseminating a report.

Permissible Purpose. To establish a claim of improper use or acquisition of a consumer report a plaintiff must allege that: (1) there was a consumer report within the meaning of the FCRA; (2) that the defendant used or obtained it; (3) the defendant did so without a permissible statutory purpose; and (4) plaintiff must allege that he sustained actual damages as a result. The Court found that Plaintiffs had properly alleged the first three elements, but failed to allege they had suffered actual damages as a result. Plaintiffs asserted that the improper acquisition resulted in a reduction in credit score. The Court held that such allegation without more, failed to raise the possibility of relief above the speculative level. For example, Plaintiffs failed to allege that the improper acquisition resulted in a credit denial, lost credit, lowering of credit limits, or higher interest rates.

Court Partially Denies CRA’s Motion for Summary Judgment Finding Factual Questions Exist About the Reasonableness of the CRA’s Procedures

Marc F. Kirkland — Fri, 08 Oct 2010 00:00:00 -0500

Lee v. Security Check, LLC, 2010 U.S. Dist. LEXIS 82630 (M.D. Fla. Aug. 5, 2010)

Facts: Plaintiff brought suit against Experian, bringing FCRAand state law defamation claimsalleging that it failed to investigate and properly update its reporting of Defendant Security Check‘s account. The account, reporting adversely as a returned check, was incorrectly reported on Plaintiff’s Experian consumer report and in fact was written to Pizza Hut by another consumer with a similar name. In December 2008, Plaintiff discovered that Experian was reporting the account on his consumer report. He subsequently disputed the account with Experian on three different occasions. Upon receipt of the first dispute, Experian initiated an investigation and asked Security Check to verify the information it was reporting. Security Check verified the information it had in its files from the returned check, which included a different address than Plaintiff provided. Experian determined that the returned check was attributable to Plaintiff because it matched the name and address on the check to Plaintiff’s consumer report, which had erroneously listed an incorrect address as a previous address for Plaintiff. When Experian received the two additional disputes from Plaintiff, it declined to investigate and informed Plaintiff of its decision because it had already investigated the matter, the account had been verified by Security Check, and it would only reinvestigate if Plaintiff provided new information. Unable to correct the error himself, Plaintiff contacted First Coast Credit Wizards (“FCCW”) to assist him. FCCW’s attempted to include Experian in a three-way call with Security Check to try and clear up the matter, but Experian declined to participate. Experian moved for summary judgment asserting that Plaintiff’s defamation claim was preempted by the FCRA, that it accurately reported the Security Check account, and had followed reasonable procedures in accordance with the FCRA. The Court agreed with Experian on Plaintiff’s defamation claim, but found that factual questions existed regarding his FCRA claim.

Malice. The Court determined that Plaintiff had not produced evidence sufficient to establish the malice or willfulness necessary under either an FCRA or common law defamation claim, and granted Defendants’ summary judgment on that claim. Specifically, the Court cited Plaintiff’s own admission that he had no evidence that either Defendant acted maliciously or with willful intent to injure him and further held that neither Defendant knew that any of the information was false or doubted its truth.

Reasonable Procedures. In evaluating the reasonableness of a CRA’s procedures, the Court concluded that a CRA cannot rely on the fact that it has established some procedures, but must prove by a preponderance of the evidence that such procedures are reasonable to address the specific dispute presented. Therefore, the Court found that questions of material fact exist as to whether or not it was reasonable: 1) for Experian to continue to rely on the data verified by Security Check in light of Plaintiff’s multiple communications that he was not the check writer; 2) to refuse a conference call with Security Check, FCCW, and Plaintiff to attempt to resolve the matter; 3) to report Plaintiff responsible for a returned check from a bank account that did not otherwise appear in Plaintiff’s consumer report; and 4) to use only Plaintiff’s relatively common name and alleged previous address to continue to report the inaccurate information after numerous complaints by Plaintiff.

Causation. A plaintiff must show that a CRA’s negligence proximately caused him injury. Experian did established that Plaintiff could offer no evidence that he suffered any damages resulting from denial of credit, lost credit opportunities, or adverse employment consequences and was granted summary judgment on those damages. Nevertheless, the Court found that the record did indicate that Plaintiff did suffer some actual damages in the process of correcting his consumer report. Specifically, Plaintiff hired FCCW to attempt to resolve the matter with Experian, as well as an attorney to litigate this mater, and lost time from work in the course of the dispute. As a result, summary judgment was denied with respect to these aspects of Plaintiff’s claim for actual damages.

Sovereign Immunity Protects United States from Civil Liability under the FCRA

Marc F. Kirkland — Fri, 08 Oct 2010 00:00:00 -0500

Gillert v. United States Dep’t of Educ., 2010 U.S. Dist. LEXIS 93035 (W.D. Ark. Sept. 7, 2010)

Facts: Plaintiff sued the United States Department of Education (“Department of Education”) alleging that it violated the FCRA, by inaccurately reporting information related to his student loans. The Department of Education moved to dismiss Plaintiff’s complaint for lack of subject matter jurisdiction based on sovereign immunity. The Court agreed and dismissed the complaint with prejudice.

Sovereign Immunity. It is a well-settled principle that the federal government, as sovereign, is immune from suit. A suit against the Department of Education, an agency of the federal government, is a suit against the United States; therefore, sovereign immunity is guaranteed the same.

Sovereign Immunity. Sovereign immunity protects the federal government from suit except where Congress has unequivocally expressed a waiver of immunity. A waiver of sovereign immunity is to be narrowly construed in favor of the federal government, and any ambiguities resolved in the federal government’s favor. Waiver must be done clearly and expressly through statutory text.

Sovereign Immunity. Section 1681o(a) provides that any “person” who is negligent in failing to comply with the FCRA with respect to any consumer is liable to that consumer. Plaintiff argued that § 1681a(a)’s definition of “person” which “means any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity,” is evidence of Congress’s waiver of sovereign immunity. The Court disagreed and found that the provision cited by Plaintiff was insufficient to meet the requirements of an unequivocal expression of waiver. Plaintiff could not cite to any provision in the FCRA that expressly waived the federal government’s sovereign immunity.

Virginia Court Determines that the FCRA Preempts Injunctive Relief Grounded Upon State Law Cause of Action

Marc F. Kirkland — Fri, 08 Oct 2010 00:00:00 -0500

Stockton v. TransUnion, LLC., 2010 Va. Cir. LEXIS 93 (Va. Cir. Ct. July 27, 2010)

Facts: Plaintiff sued Trans Union alleging violations of the FCRA and defamation, and requested injunctive relief pursuant to his state law defamation claim. Plaintiff’s claims related to inaccurate accounts that allegedly appeared on his Trans Union consumer report. Trans Union sought a demurrer regarding the legal sufficiency of Plaintiff’s injunctive relief claim, asserting that it failed to state a valid cause of action. The Court agreed and sustained the demurrer.

Injunctive and Declaratory Relief. Under the FCRA, a private litigant is not entitled to injunctive and declaratory relief.

Preemption. Section 1681t(b) preempts all state laws that address certain subject matters regulated by the FCRA.

Preemption.Section 1681h(e) expressly authorizes defamation actions, such as Plaintiff’s, where it is alleged that the false statement was made with malice. However, the ability to assert a state law claim such as libel does not mean that injunctive relief is also available. Plaintiff sought an injunction requiring Trans Union to delete and not reinsert inaccurate information to his consumer report. Those actions are specifically regulated by § 1681i(a)(5). Consequently, the Court held that pursuant to the plain language of § 1681t, Plaintiff’s common law claim was preempted to the extent that it provided for the requested injunctive relief.

Newsletter: October 7, 2010

Paul L. Myers — Thu, 07 Oct 2010 00:00:00 -0500

Click here to view the full newsletter.

Ninth Circuit Finds “Inaccuracy” a Requirement For a Claim Arising Under California’s CCRAA

M. Kasey Ratliff — Fri, 24 Sep 2010 00:00:00 -0500

Carvalho v. Equifax Information Services, LLC, et al., 2010 U.S. App. LEXIS 17191 (9th Cir. Aug. 18, 2010)

Facts: Plaintiff’s unpaid medical bill was assigned to Credit Consulting Services (“CCS”), a collection agency. CCS subsequently reported the debt to the consumer reporting agencies (“CRAs”) and the information appeared on Plaintiff’s credit reports. Plaintiff disputed the debt with the CRAs on four separate occasions. CCS repeatedly verified the information as accurate. Plaintiff filed a class action complaint against CCS and the three CRAs in California state court alleging violations of the California Consumer Credit Reporting Agencies Act (“CCRAA”). The Defendants removed the case to federal court, Plaintiff moved for class certification and the three CRAs each filed a motion for summary judgment. The federal district court granted the motions for summary judgment and denied as moot Plaintiff’s motion for class certification. Plaintiff appealed the ruling to the Ninth Circuit Court of Appeals.

Preemption. Plaintiff contends that the state court erred in concluding that the Fair Credit Reporting Act (“FCRA”) preempts all state law causes of action against furnishers of information such as CCS. Because the FCRA expressly saves from preemption § 1785.25(a) of the CCRAA, the Ninth Circuit had previously held that the private right of action to enforce this provision is not preempted by the FCRA. However, because Plaintiff failed to raise her § 1785.25(a) inaccuracy claim in response to CCS’s demurrer, Plaintiff has abandoned it and only Plaintiff’s claim of inadequate reinvestigation under § 1785.25(f) remains. That claim is preempted by the FCRA because § 1785.25(a) is the only substantive CCRAA furnisher provision specifically saved by the FCRA.

Reinvestigation. Plaintiff contends that inaccuracy is not a required element of a reinvestigation claim under the CCRAA. Because the CCRAA is substantially based on the FCRA, judicial interpretation of the federal provisions is persuasive authority and entitled to substantial weight when interpreting the California provisions. Although the FCRA’s reinvestigation provision does not on its face require that an actual inaccuracy exist for a plaintiff to state a claim, many courts have imposed such a requirement. Because the Ninth Circuit believed California courts would find these cases persuasive, and concluded that unless Plaintiff has raised a genuine issue as to whether the disputed item was inaccurate, her CCRAA § 1785.16 claims fail as a matter of law.
· Reinvestigation. Plaintiff argues that the item on her credit reports referencing the CCS collection account was inaccurate. In considering whether Plaintiff’s report was inaccurate within the meaning of the CCRAA, the Ninth Circuit was guided by a “patently incorrect or materially misleading” standard. Plaintiff contends that even if technically accurate, the CCS item was misleading because she was not legally obligated to pay the disputed bill.

Reinvestigation. Reinvestigation claims with CRAs are not the proper vehicle for collaterally attacking the legal validity of consumer debts. A consumer disputing the legal validity of a debt that appears on her credit report should first attempt to resolve the matter directly with the creditor or furnisher, which stands in a far better position to make a thorough investigation of a disputed debt than the CRA does on reinvestigation. Until a consumer has successfully resolved a legal dispute in her favor – for example, by means of a judgment, arbitration award, or settlement – the Ninth Circuit cannot say that a CRA reporting factually correct information about the disputed debt is misleading to potential creditors. Indeed, it would be misleading to potential creditors to delete such information because the very economic purpose for credit reporting companies would be significantly vitiated if they shaded every credit history in their files in the best possible light for the consumer. Because Plaintiff has failed to establish an element of a prima facie reinvestigation claim – inaccuracy – the Ninth Circuit concluded that the district court properly granted summary judgment to the CRAs.

Court Grants Furnisher’s Motion to Dismiss Consumer’s Lawsuit

M. Kasey Ratliff — Tue, 31 Aug 2010 00:00:00 -0500

Regus v. Citibank (South Dakota), N.A., 2010 U.S. Dist. LEXIS 71575 (D. R. I. June 22, 2010)

Facts: Pro se Plaintiff filed suit in state court against Home Depot and Citibank related to a disputed credit account. The state court action was dismissed after Plaintiff failed to appear at a hearing and the court granted Defendant’s motion to dismiss. Plaintiff subsequently filed a second lawsuit against Citibank and Citibank filed a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) arguing that Plaintiff’s complaint was barred by the doctrine of res judicata, that Plaintiff’s claims were time barred and that Plaintiff failed to state a claim to support a cause of action under the Fair Credit Reporting Act (“FCRA”). The court granted Defendant’s motion.

Res Judicata. Although Plaintiff has provided the court with little factual information, it appears that the causes of action pled in the instant complaint and in Plaintiff’s state court lawsuit derive from the same nucleus of operative facts. Further, although Home Depot is not named a defendant in Plaintiff’s current complaint, Citibank is named, as it was in Plaintiff’s prior action. Finally, the involuntary dismissal of Plaintiff’s earlier complaint in the state district court operated as a dismissal on the merits. Thus, Plaintiff’s current claims are barred by the doctrine of res judicata.

Statute of Limitations. By Plaintiff’s own admission, he discovered the violation on January 16, 2008. Thus, his complaint, filed on or about February 1, 2010, was filed more than two years after he discovered the alleged violation. It is time barred and should be dismissed on this basis.

Furnisher’s Duties. Construing Plaintiff’s pro se complaint liberally, the court finds that Plaintiff intended to allege claims against Citibank as a furnisher of information. Plaintiff’s complaint is problematic for several reasons. First, there is no evidence that any person or entity other than Plaintiff alleged that information reported was inaccurate. Second, § 1681s-2(a) provides no private right of enforcement for its provisions. Third, Plaintiff has not alleged that a credit reporting agency (“CRA”) notified Citibank of any dispute, thereby triggering Citibank’s duty to investigate and take corrective measures. Accordingly, the court finds that Plaintiff’s complaint fails to state a claim under either § 1681s-2(a) or § 1681s-2(b) and therefore should be dismissed.

Ninth Circuit Affirms That Right To Sue Under the Credit Repair Organization Act Cannot Be Waived By Arbitration Agreement

Paul W. Sheldon — Mon, 30 Aug 2010 00:00:00 -0500

Greenwood v. CompuCredit Corp., 2010 U.S. Dist. LEXIS 17128 (9th Cir. Aug. 17, 2010)

Facts: Defendant CompuCredit marketed a subprime credit card issued by Columbus Bank and Trust (“Columbus”) utilizing direct mail solicitations and the Internet. Promotional materials represented that the card could be used to rebuild credit and improve a consumer’s credit while specifying “no deposit required” and that consumers would immediately receive $300.00 in available credit. Once issued the credit card, consumers were charged a $29.00 finance charge, a monthly $6.50 account maintenance fee, and a $150.00 annual fee. These amounts were immediately assessed against the $300.00 credit limit before the consumer received the credit card. Plaintiffs brought this class action suit alleging several violations of the Credit Repair Organization Act (“CROA”). Defendants moved to compel arbitration of Plaintiffs’ claims based on arbitration language contained in documentation received and signed by Plaintiffs. Plaintiffs countered that the arbitration agreement was void under the CROA based on specific provisions in the CROA disallowing any waiver of a consumer’s right to sue in court for CROA violations. The trial court agreed and denied the Defendants’ motion to compel arbitration. The 9th Circuit affirmed.

Credit Repair Organizations Act. Section 1679c of the CROA contains detailed provisions requiring a credit repair organization to inform a consumer of his or her right to sue for violations of the CROA.

Credit Repair Organizations Act. Section 1679f of the CROA contains a non-waiver provision voiding any waiver by the consumer of any right of the consumer under the statute. The district court correctly read the statute and determined that the consumer’s statutory right to sue could not be waived.

Arbitrability. The CROA’s prohibition of a waiver of any protection provided by or any right of the consumer under this title, irrespective of the consumer’s knowledge or intent, combined with its proclamation of a consumer’s right to sue, manifest a Congressional intent that claims under the CROA are non-arbitrable.

Plaintiffs’ Common Law Claims of Defamation and Intentional Infliction of Emotional Distress Are Preempted by the FCRA

Paul W. Sheldon — Mon, 30 Aug 2010 00:00:00 -0500

Macpherson v. JP Morgan Chase Bank, N.A., 2010 U.S. Dist. LEXIS 79183 (D. Conn. Aug. 5, 2010)

Facts: Plaintiff maintained a credit card account with the Defendant. In August, 2009, the Plaintiff received notification from Equifax that his credit score had been reduced because the Plaintiff’s credit card account balance had doubled and that he had more than two payments past due. At the time Defendant notified Equifax of this information, it knew that the Plaintiff disputed the charges at issue. Plaintiff filed suit claiming common law defamation and intentional infliction of emotional distress. Defendant filed its motion to dismiss claiming that Plaintiff’s claims were preempted by the FCRA. Specifically, the Defendant contends that under § 1681t(b)(1)(F), federal law preempts state law claims against persons who furnish information to consumer reporting agencies with respect to subject matter regulated under § 1681s-2(b), which addresses the responsibilities of those persons when providing that information. The court agreed and granted the motion without leave to amend.

Preemption. Defendant moved to dismiss Plaintiffs’ common law claims for intentional infliction of emotional distress and defamation because § 1681t(b)(1)(F) preempted state common law claims. The court rejected Plaintiffs’ statutory approach and concluded that § 1681t(b)(1)(F) generally preempts both statutory and common law causes of action.

Failure to State a Claim. There is a private right of action under § 1681s-2(b). However, in order for this provision to apply, the person reporting information must have received notice of the dispute from a consumer reporting agency. Plaintiff failed to allege that Equifax notified the Defendant about his dispute and therefore did not allege facts sufficient to establish that he has a private right of action under this section.

FCRA Dispute Showing Mere Consistency With the Furnisher’s Own Records Is Not Enough To Excuse A Furnisher From Liability

Paul W. Sheldon — Mon, 30 Aug 2010 00:00:00 -0500

U.S. Bank, N.A. v. Donn K. Butkovic, et al., 2010 Pa. Dist. & Cnty. Dec. LEXIS 143 (Com. Pls. Ct. Al. Cty, Penn. May 7, 2010)

Facts: Plaintiff furnisher of credit information filed a Motion for Summary Judgment on Defendants’ Amended Counterclaim under the FCRA surrounding whether Plaintiff furnisher conducted a reasonable investigation of Defendants’ dispute pursuant to § 1681s-2(b)before Plaintiff responded to Trans Union’s notice of the dispute. Specifically, Defendants’ counterclaim is based on Plaintiff’s failure to note that there was a dispute regarding the status of Defendants’ loan with Plaintiff when Plaintiff responded to a dispute inquiry by Trans Union. Plaintiff merely reiterated without further investigation or clarification that the loan had been “charged off”. Plaintiff furnisher contends that all that is required under § 1681s-2(b)(1) is a “reasonable investigation” and “verification that the reported information is consistent with the information in its records.” The Court disagreed and denied Plaintiff’s motion.

Furnisher Investigation. Upon receiving notice of the disputed information, the furnisher of credit information must conduct an investigation with respect to the disputed information. Mere “consistency” with the furnisher’s records is not enough to excuse a furnisher from liability. Note: the court found that had a more detailed investigation been conducted, it would have revealed information inconsistent with the previous information held by the furnisher and therefore, would be an issue reasonable for a jury to consider.

Mississippi Court Denies Furnisher’s Motion to Dismiss, Finding Plaintiff Has A Private Right of Action Under § 1681s-2(b)

Paul W. Sheldon — Fri, 27 Aug 2010 00:00:00 -0500

Zimmerman v. Bank of America, 2008 U.S. Dist. LEXIS 117066 (N.D. Miss. July 10, 2008)

Facts: Plaintiff filed suit against Defendant, Bank of America alleging furnisher violations of the FCRA under § 1681s-2(b) regarding the adverse reporting of a Bank of America account as a “charge off”. Plaintiff specifically contends that Bank of America continued to incorrectly report the existence of the account following an investigation. Bank of America filed its motion to dismiss claiming that Plaintiff did not have a private right of action under the FCRA and failed to allege prerequisites required by the FCRA. Although the Court found deficiencies in Plaintiff’s complaint, the Court denied Bank of America’s motion and gave Plaintiff an opportunity to amend.

Furnisher Duties. Section 1681s-2(b) imposes duties on furnishers of credit information to investigate disputed information and report the results of any such investigation to a consumer reporting agency. Nothing in this section precludes a private right of action for violation of the investigation and reporting requirements of the FCRA.

Failure to State a Claim. Plaintiff failed to allege that Bank of America received notice from a consumer reporting agency of Plaintiff’s dispute, a required element under § 1681s-2(b). Plaintiff’s failure to do so caused his complaint to be deemed defective as a matter of law. Note: The court found that such deficiency could be cured with only a minimum of additional facts and therefore, the court allowed additional time for Plaintiff to amend his complaint.

August 17, 2010 FCRA Newsletter

Marc F. Kirkland — Tue, 17 Aug 2010 00:00:00 -0500

August 17, 2010 FCRA Newsletter

Court Grants Furnisher’s Motion to Dismiss Plaintiff’s Claims

M. Kasey Ratliff — Tue, 27 Jul 2010 00:00:00 -0500

Carruthers v. American Honda Finance Corp., 2010 U.S. Dist. LEXIS 67349 (N.D. Fla. June 3, 2010)

Facts: Plaintiff leased an automobile from Defendant. After surrendering the car at the end of the lease term, the Defendant found damage and sent the Plaintiff a bill for the cost of the repair. Plaintiff refused to pay, invoking a specific lease provision dealing with minor damage. While the dispute was ongoing, the Defendant reported the non-payment to a consumer reporting agency (“CRA”). Plaintiff filed suit asserting claims under the Fair Credit Reporting Act (“FCRA”) and state law. Defendant filed a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6) and the Court granted the motion.

Furnisher’s Duties. Plaintiff’s complaint fails to state a claim on which relief can be granted under either subsection (a) or (b) of Section 1681s-2 of the FCRA. Subsection (a) creates no private right of action; only certain state and federal officials may enforce the subsection. Subsection (b) creates a private right of action, but the subsection applies by its plain terms only when the furnisher receives notice of a dispute from a CRA. According to the complaint, Defendant received notice of Plaintiff’s dispute from Plaintiff himself, not from a CRA.

Preemption. Plaintiff’s state law claims are preempted under § 1681t(b)(1)(F). While breach of contract claims ordinarily are not preempted, Plaintiff does not allege that Defendant violated a specific term of the contract (the lease agreement). Instead, he alleges that Defendant violated the “covenant of good faith and fair dealing in every contract under Florida law.” The duty of good faith and fair dealing is implied by law, not voluntarily assumed. Thus, all of Plaintiff’s state law claims, including the claim that Defendant violated the duty of good faith and fair dealing, are preempted.

Preemption. Plaintiff asserts that Defendant acted with malice, thus saving his claim from preemption under § 1681h(e).

Preemption. The total-preemption approach to reconciling § 1681t(b)(1)(F) and § 1681h(e) is the correct reading of the statutes. This approach holds that 1681t(b)(1)(F) means what it says and thus preempts any state law claim against a furnisher arising from a requirement or prohibition imposed by state law, regardless of whether the claim is derived from statutory or common law, and regardless of when the claim arose. Plaintiff’s state law claims are preempted.

Plaintiffs’ Common Law Claims Survive Preemption Challenge Due to Allegations of Falsity and Malice

M. Kasey Ratliff — Mon, 19 Jul 2010 00:00:00 -0500

Home Care Servs., Inc., et al. v. Advanta Bank Corp., 2010 U.S. Dist. LEXIS 59227 (D. Ariz. June 15, 2010)

Facts: An employee of Home Care Services, Inc. d/b/a LJM Air Conditioning (“LJM”) obtained a credit card from Advanta Bank Corporation (“Advanta”) on behalf of LJM without LJM’s authorization or knowledge. The employee then made numerous fraudulent charges and falsified LJM company records to conceal the activity. Once discovered, an Advanta fraud investigator reported the fraud and indicated that Advanta would write off the credit card balance that remained on the card. Instead, Advanta’s legal department informed LJM that its President and CEO were liable for the amount of the unpaid balance. Advanta then began reporting the information to credit reporting agencies (“CRAs”). LJM eventually filed suit against Advanta alleging violations of the Fair Credit Reporting Act (“FCRA”) and various common law claims. Advanta filed a motion for partial dismissal of some of Plaintiffs’ claims. The court denied the motion.

Preemption. Defendant moves to dismiss Plaintiffs’ common law claims for intentional infliction of emotional distress and defamation because § 1681t(b)(1)(F) preempts state common law claims. The court rejects Plaintiffs’ statutory approach and concludes that § 1681t(b)(1)(F) generally preempts both statutory and common law causes of action.

Preemption. Although the court finds that § 1681t(b)(1)(F) applies to both statutory and common law claims generally, § 1681h(e) states that certain tort claims are barred except as to false information furnished with malice or willful intent to injure such consumer. Thus, § 1681h(e) provides somewhat of an exception from preemption if a Plaintiff can prove falsity and malice.

Preemption. Additionally, Congress evinced no intent to repeal § 1681h(e), as Congress added § 1681t(b) at the same time that it amended § 1681h(e) to clarify the types of state common law causes of action preempted by the FCRA. Therefore, under § 1681h(e), Plaintiffs may plead claims for defamation and intentional infliction of emotional distress based on the reporting of information because they have alleged falsity and malice. Whether discovery ultimately reveals facts indicating falsity and malice is a question for summary judgment.

Third Circuit Reverses District Court’s Vacation of Preliminary Approval of Class Action Settlement Related to Claims Covered by the Clarification Act

Marc F. Kirkland — Fri, 16 Jul 2010 00:00:00 -0500

Ehrheart v. Verizon Wireless, 2010 U.S. App. LEXIS 12174 (3d Cir. Pa. June 15, 2010)

Facts: Appellants, a class of consumers, claimed that Verizon violated § 1681c(g) of the FCRAby failing to properly truncate the credit card numbers and expiration dates on receipts. The Parties then participated in court-ordered mediation, starting in January of 2008. During this time, legislation was pending before Congress -- the Credit and debit Card Receipt Clarification Act of 2007 (“Clarification Act”), § 1681n(d) -- which would amend the FCRA, effectively eliminating the Appellants’ cause of action. On April 22, 2008, after completing mediation, the parties arrived at settlement which they submitted to the district court for approval pursuant to Federal Rule of Civil Procedure 23(e). The district court entered a preliminary order approving the settlement two days later. The Clarification Act was signed into law on June 3, 2008. Six days later Verizon filed a motion asking the district court to vacate its order granting preliminary approval of the settlement. The district court granted Verizon’s motion. On appeal, the Third Circuit reversed the district court’s order.

Class Action Settlement. Under Rule 23(e) a district court’s primary role is to determine whether settlement is fundamentally fair, reasonable and adequate. The purpose of Rule 23(e) is to protect the unnamed members of a class from unjust or unfair settlements.

Class Action Settlement. There are two steps in reaching settlement in a class action. First, the parties reach an agreed to settlement. Second, the district court evaluates the agreement as a fiduciary for absent class members. This fiduciary duty does not extend to defendants in a class action, who are in a position to protect their own interests during negotiation. The Third Circuit found that the parties entered into an enforceable settlement agreement and that the district court erred in vacating its preliminary approval of that agreement. Such action would render the settlement process meaningless since either party to a class action settlement could back out of an agreement anytime before court approval and avoid any legal repercussions for breaching the earlier offer and acceptance. In negotiating settlement, Verizon bet on the certainty of settlement instead of gambling on the uncertainties of future legislative action. Verizon lost and the district court erred by letting it replay its hand.

Class Action Settlement. There is a strong presumption in favor of voluntary settlement agreements. This presumption is especially strong in class actions and other complex cases where substantial judicial resources can be conserved by avoiding formal litigation. By vacating its preliminary approval of settlement, the Third Circuit found that the district court permitted Verizon to void its settlement agreement when it became unpalatable and digressed from the federal policy of encouraging class action settlement agreements.

Class Action Settlement. The Clarification Act eliminated the Appellants’ cause of action and retroactively encompassed Appellants’ claims. However, the Clarification Act does not moot the settlement agreement the parties executed while that legislation was pending before Congress. Changes in the law after settlement do not affect the validity of the agreement and do not provide a legitimate basis for rescinding settlement. Specifically, the Court found that Verizon could avoid its independent contractual obligations simply because a change in the law confers upon it a benefit that could have altered the settlement calculus.

Plaintiff’s State Law Claim Prohibiting False Credit Information Reporting Is Preempted by the FCRA

Paul W. Sheldon — Fri, 16 Jul 2010 00:00:00 -0500

Parent v. Citibank (South Dakota) N.A. and Home Depot, U.S.A., Inc., 2010 U.S. Dist. LEXIS 58371 (E.D. Wis. June 11, 2010)

Facts: Plaintiffs alleged that Defendants either disclosed or threatened to disclose information adversely affecting their reputation for credit worthiness knowing that the information was false in violation of Wisconsin’s Consumer Act. Defendants filed a motion to dismiss this claim based on § 1681t(b)(1)(F) of the FCRA. The Court agreed that such claim was preempted by the FCRA and granted Defendants’ motion.

Preemption. The plain language of § 1681t(b)(1)(F) clearly eliminates all state causes of action against furnishers of information, not just ones that stem from statutes that relate specifically to credit reporting. Under the statute, no requirement or prohibition under state law can be imposed regarding the subject matter regulated under § 1681s-2 which relates to the responsibilities of persons who furnish information to consumer reporting agencies.

Preemption. Plaintiff’s state law claim is founded on the allegation that the Defendants have disclosed or threatened to disclose the Plaintiff’s alleged debt to adversely affect their reputation and creditworthiness. This is tantamount to the prohibition set forth in § 1681s-2 and no matter how the Plaintiffs may style the claim, it is an allegation that the Defendants reported false information about Plaintiff’s credit and is therefore preempted by the FCRA.

Nevada Court Finds Accelerator Clause in Auto Loan Agreement Allowed Furnisher to Demand Full Payment and Report Adverse Information to the Credit Reporting Agencies

Paul W. Sheldon — Thu, 15 Jul 2010 00:00:00 -0500

Woodson v. Capital One Auto Finance, Inc., 2010 U.S. Dist. LEXIS 66218 (D. Nev. July 1, 2010)

Facts: Plaintiff brought suit against Defendant Capital One Auto Loans (“Capital One”) for allegedly reporting false and inaccurate information to the CRAs and failing to investigate a disputed claim brought to the CRAs regarding an adverse Capital One account. Specifically, Plaintiff’s automobile financed through Capital One became stolen and the amount owed on the vehicle was more than what the insurance proceeds paid out. After months of Capital One’s unsuccessful attempts at obtaining the remaining amount owed by Plaintiff, Capital One began reporting to the CRAs that Plaintiff was late on her payments and that Defendant had charged off the loan as bad debt. Plaintiff alleged violations of § 1681n and § 1681o under the FCRA. Capital One’s Motion for Summary Judgment was subsequently granted.

Willful Violation. Section 1681n imposes civil liability under the FCRA upon any person who “willfully fails to comply” with any requirement of section 1681 et seq. The Ninth Circuit has held that “a company is liable for a willful violation of FCRA if it ‘knowingly and intentionally committed an act in conscious disregard for the rights of others.”

Negligent Violation. Section 1681o imposes civil liability upon any person “who is negligent in failing to comply” with any requirement of 1681 et seq., but damages are limited to any actual damages as well as costs and fees.

Compliance Under Underlying Agreement. An accelerator clause between Plaintiff and Capital One allowed Capital One to demand immediate payment of the loan balance if Plaintiff breached any obligation in the auto loan agreement. Plaintiff breached that agreement when she could no longer provide a security interest in the vehicle due to it being stolen.

Furnisher Duties. Because Plaintiff did not pay on the remainder of the loan, Capital One did not act in conscious disregard for the rights of Plaintiff when it reported Plaintiff’s activities to creditors. Likewise, because Plaintiff failed to pay the balance on her loan, Capital One did not willfully or negligently fail to comply with the requirements of § 1681s-2(b) when it reported Plaintiff’s activities to credit agencies.

Michigan Court Agrees In Granting Experian’s Motion For Summary Judgment That Plaintiff Had No Evidence of Actual Damages and That Evidence of Emotional Distress Was Merely Conclusory

Paul W. Sheldon — Thu, 15 Jul 2010 00:00:00 -0500

Kaplan v. Experian et al., 2010 U.S. Dist. LEXIS 60098 (D. Mich. May 26, 2010)

Facts: Plaintiff brought suit against Experian under § 1681i for failing to respond to Plaintiff’s request for investigation within 30 days. Plaintiff sought damages and attorney fees for the alleged negligent violation under § 1681o. Specifically, Experian acknowledged that it was one day late in providing its report to Plaintiff of the results of its reinvestigation. Experian asserted that summary judgment must be granted because Plaintiff could not establish that he incurred actual damages as a result of the technical violation. Plaintiff denied he incurred no actual damages and claimed that he did not establish actual damages. Both parties brought cross-motions for summary judgment. The Court denied Plaintiff’s motion and granted Experian’s.

Damages. While a Plaintiff may establish a willful noncompliance claim without establishing any actual damages, a negligent noncompliance claim (which Plaintiff asserted) limits damages only to actual damages, not statutory damages. Accordingly, proof of actual damages is an essential element of a negligence claim.

Damages. While actual damages may include humiliation and mental distress, the sixth circuit has observed that such damages would likely be available only in “extreme cases.”

Emotional Distress Damages. Because emotional distress damages are so easy to manufacture, courts have imposed a strict standard to be applied for them to be recoverable. Where the injured party’s own testimony is the only proof of emotional distress damages, he must “reasonably and sufficiently” explain the circumstances surrounding the injury and cannot rely on mere conclusory statements. Note: Plaintiff’s evidence consisted of a statement that he lost sleep, experienced aggravation, anxiety, stress, appetite fluctuations, was on “pins and needles” throughout the entire summer and fall of 2008, and was constantly worrying about the status of his credit and ability to support his family. The Court agreed that such evidence did not reasonably explain how Experian’s one-day delay in providing its report to Plaintiff caused him to incur emotional distress.

Injunctive Relief. A private litigant cannot obtain injunctive relief under the FCRA.

Court Grants Defendant Summary Judgment, Finds that Creditor Conducted a Reasonable Investigation of Plaintiff’s Dispute

Marc F. Kirkland — Tue, 06 Jul 2010 00:00:00 -0500

Howard v. Pinnacle Credit Servs., LLC., 2010 U.S. Dist. LEXIS 62739 (N.D. Ga. June 24, 2010)

Facts: Plaintiff alleged that Pinnacle Credit Services (“Pinnacle”), a debt collector, failed to properly investigate her dispute in violation of § 1681s-2(b) of the FCRA. Plaintiff’s claims relate to a Bank of America credit card account that was opened by Plaintiff’s daughter. At some point after opening the account, Plaintiff claims that without her knowledge or permission, her daughter added her to the account. The daughter then filed for bankruptcy and the creditor looked to Plaintiff to satisfy the balance. The account was put into default and eventually sent to Pinnacle for collection. Plaintiff then retained counsel who then disputed the Pinnacle account with the consumer reporting agencies (“CRAs”). The dispute letter simply stated that the debt was disputed and that an investigation was necessary, with out providing any other information regarding the nature of the dispute to the CRAs. The CRAs then communicated Plaintiff’s dispute to Pinnacle as follows: “Consumer states inaccurate information. Provide or confirm completed ID and account information.” After Pinnacle reviewed its records regarding Plaintiff’s account, it verified that the information was accurate. Pinnacle moved for summary judgment claiming that its investigation was reasonable, the Court agreed and granted the motion.

Furnisher Investigation. Section 1681s-2(b) states: “After receiving notice…of a dispute with regard to the completeness or accuracy of any information provided by a person to a CRA, the person shall – (A) conduct an investigation with respect to the disputed information; (B) review all relevant information provided by the CRA…; (C) report the results of the investigation to the CRA; ….” Section 1681s-2(b) generally requires credit information furnishers to conduct a reasonable investigation upon receiving notice of a dispute.

Furnisher Investigation. Whether a defendant’s investigation is reasonable is a factual question normally reserved for trial; however, summary judgment is proper if the reasonableness of the defendant’s procedures is beyond question. Here the Court found that the evidence established that Defendant reviewed all of its information contained in its files (Plaintiff’s name, address, SSN, date of birth, and telephone number) along with the dispute from the CRAs. Based on Pinnacle’s action and considering the scant information Pinnacle received regarding the nature of Plaintiff’s dispute, the Court found that Pinnacle conducted a reasonable investigation.

Ninth Circuit Holds That The FCRA Allows A Prevailing Plaintiff To Recover Non-Taxable Costs

Martin Thornthwaite — Tue, 06 Jul 2010 00:00:00 -0500

Grove v. Wells Fargo Fin. Cal., Inc., 606 F.3d 577 (9th Cir. 2010)

Facts: Plaintiff sent letters to Defendant disputing Defendant’s reporting that Plaintiff was delinquent on his automobile loan to the consumer reporting agencies (“CRAs”). After Defendant failed to change the reported information, Plaintiff filed suit against Defendant under the FCRA. Just before trial, the parties settled, and Defendant agreed to notify the CRAs to delete the disputed information and also agreed to pay Plaintiff $20,000 plus costs and attorney’s fees. The district court denied Plaintiff’s request for taxable costs after reasoning that it lacked discretion to award non-taxable costs. Plaintiff appealed, and the Ninth Circuit reversed and held the district court had discretion to award non-taxable costs.

Attorneys’ Fees and Costs. The issue before the Court was whether the expense-shifting provision of the FCRA authorized district courts to award costs that otherwise would be non-taxable under 28 U.S.C. § 1920. Because the phrase “reasonable attorney’s fees” includes certain litigation expenses and the FCRA provides for “reasonable attorney’s fees,” the Court concluded that district courts “have discretion to award non-taxable costs to prevailing parties under the FCRA and that the district court erred in concluding otherwise.”

The Court Denied Plaintiff’s Motion For Summary Judgment Because The Reasonableness Of Defendant Furnisher’s Investigation Was A Question For The Jury

Martin Thornthwaite — Tue, 06 Jul 2010 00:00:00 -0500

Nykoriak v. GMAC LLC, 2010 U.S. Dist. LEXIS 46420 (E.D. Mich. May 12, 2010)

Facts: Plaintiff filed suit against Defendant GMAC LLC (“GMAC”) after GMAC repossessed and sold Plaintiff’s vehicle. Plaintiff alleged that GMAC incorrectly reported the “high balance” Plaintiff owed on the vehicle to the consumer reporting agencies (“CRAs”). Plaintiff filed a motion for summary judgment on his claims, including under §§ 1681s-2(a) & 2(b) of the FCRA and under Michigan’s Uniform Commercial Code § 440.9611. GMAC filed a motion to dismiss all of Plaintiff’s claims. The Court dismissed all but Plaintiff’s § 1681s-2(b) claim.

Failure to State a Claim. The Court dismissed Plaintiff’s claims under § 1681s-2(a) because this section of the FCRA does not create a private right of action for the consumer.

Furnisher Duty to Investigate. Pursuant to § 1681s-2(b), Plaintiff must prove that GMAC did not conduct a reasonable investigation and that the amount GMAC reported to the CRAs was inaccurate. Plaintiff produced a letter from GMAC which purportedly showed a different high balance than what GMAC reported to the CRAs. The Court determined that the reasonableness of GMAC’s investigation of Plaintiff’s dispute into the “high balance” reported by GMAC was a question for the trier of fact to resolve.

District Court Dismisses Employer’s Claims For Contribution And Indemnification Against CRA Because No Such Rights Exist Under the FCRA

Martin Thornthwaite — Tue, 06 Jul 2010 00:00:00 -0500

Boatner v. Choicepoint Workplace Solutions, Inc., 2010 U.S. Dist. LEXIS 44264 (D. Or. May 6, 2010)

Facts: Plaintiff’s job offer with Defendant Bowen Property Management (“Bowen”) was rescinded after Bowen received an investigatory consumer report that allegedly contained inaccurate information provided by Defendant ChoicePoint Workplace Solutions, Inc., a LexisNexis company (“Lexis”). Plaintiff sued Bowen and Lexis under the FCRA, and Bowen asserted cross-claims against Lexis for contribution and indemnification. Lexis moved to dismiss under Rule 12(b)(6), which the Court granted.

Failure to State a Claim. The Court found that the FCRA contained no implicit right to contribution or indemnification because there is no indication that Congress wanted to create such a right. The FCRA is not intended to benefit Bowen, a user of consumer credit information.

Failure to State a Claim. There is also no federal common law right to indemnification or contribution in this case because the FCRA “does not implicate a uniquely federal interest and does not delegate any rights to the courts to create remedies.”

June 30, 2010 FCRA Newsletter

Martin Thornthwaite — Wed, 30 Jun 2010 00:00:00 -0500

June 30, 2010 FCRA Newsletter

New Regulations Defining Creditors’ Accuracy and Investigation Duties Take Effect July 1, 2010

Paul L. Myers — Wed, 30 Jun 2010 00:00:00 -0500

Six federal agencies[1] have issued jointly-drafted regulations regarding the accuracy and integrity of credit data furnished to consumer reporting agencies (CRAs) by creditors and creditors’ investigation duties when data is disputed by a consumer. Combined, the agencies cover virtually every “furnisher” of credit information to CRAs. The Fair and Accurate Credit Transaction Act of 2003 (FACTA) amended § 1681s-2 of the Fair Credit Reporting Act (FCRA) by requiring the federal agencies to issue guidelines for furnishers regarding the accuracy and integrity of the information they furnish to CRAs and to issue regulations identifying the circumstances under which a furnisher must investigate disputes concerning the accuracy of information contained in a consumer report. The regulations become effective on July 1, 2010.

Furnishing Data

Accuracy. “Accuracy” requires that the information furnished to a CRA correctly reflect: (1) the terms of and liability for the account or other relationship; (2) the consumer's performance and other conduct with respect to the account or other relationship; and (3) identify the appropriate consumer.
Integrity. “Integrity” requires that the information furnished to a CRA: (1) is substantiated by the furnisher's records at the time furnished; (2) is furnished in a form designed to minimize the likelihood that the information may be incorrectly reflected in a consumer report; and (3) includes the information in the furnisher's possession about the account or other relationship that the agencies have determined that the absence of which would be materially misleading.
Policies and Procedures. Each furnisher must establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information it furnishes to CRAs. The policies and procedures must be appropriate for the nature, size, complexity, and scope of the furnisher's activities.
Guidelines. Each furnisher must consider the guidelines from the agencies set forth in the appendix to the regulations in developing its policies and procedures.
Updating Policies and Procedures. Each furnisher must review its policies and procedures periodically and update them, as necessary.

Investigating Disputes

General Rule. A furnisher must conduct a reasonable investigation of a dispute received from a consumer if it relates to: (1) the consumer's liability, such as whether there has been identity theft or fraud, whether there is individual or joint liability, or whether the consumer is an authorized user; (2) the terms of a credit account, such as the type of account, principal balance, scheduled payment, or the credit limit on an open-end account; (3) the consumer's performance or other conduct, such as the current payment status, high balance, date of a payment, amount of a payment, or the date an account was opened or closed; or (4) any other information contained in a consumer report regarding an account or other relationship with the furnisher that bears on the consumer's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.
Exceptions. A furnisher is not required to investigate a direct dispute if it relates to: (1) the consumer's identifying information such as name, date of birth, Social Security number, telephone number, or address; (2) the identity of past or present employers; (3) inquiries or requests for a consumer report; (4) information derived from public records, such as judgments, bankruptcies, liens, and other legal matters (unless provided by a furnisher); (5) information related to fraud alerts or active duty alerts; (6) information provided to a consumer reporting agency by another furnisher; or (7) the furnisher has a reasonable belief that the dispute is submitted by a credit repair organization (as defined in 15 U.S.C. 1679a(3)) or an entity that would be a credit repair organization but for its non-profit status.
Direct Dispute Address. A furnisher is required to investigate a direct dispute only if a consumer submits a dispute notice to the furnisher at: (1) the address of the furnisher set forth on a consumer report relating to the consumer; (2) an address clearly and conspicuously specified by the furnisher for submitting direct disputes that is provided to the consumer; or (3) any business address of the furnisher if the furnisher has not specified an address for submitting direct disputes.
Required Contents of a Direct Dispute. A direct dispute from a consumer must include: (1) sufficient information to identify the account or other relationship that is in dispute, such as an account number and the name, address, and telephone number of the consumer; (2) the specific information that the consumer is disputing and an explanation of the basis for the dispute; and (3) all supporting documentation or other information reasonably required by the furnisher to substantiate the basis of the dispute. This documentation may include, for example: a copy of the relevant portion of the consumer report that contains the allegedly inaccurate information; a police report; a fraud or identity theft affidavit; a court order; or account statements.
Duty After Receiving a Direct Dispute. After receiving a direct dispute, the furnisher must: (1) conduct a reasonable investigation with respect to the disputed information; (2) review all relevant information provided by the consumer with the dispute notice; (3) complete its investigation of the dispute and report the results of the investigation to the consumer within thirty days; and (4) if the investigation finds that the information was inaccurate, promptly notify each CRA to which the furnisher provided the information.
Frivolous or Irrelevant Disputes. A furnisher is not required to investigate a direct dispute if the furnisher has reasonably determined that the dispute is frivolous or irrelevant. A dispute is frivolous or irrelevant if: (1) the consumer did not provide sufficient information to investigate the disputed information; (2) the direct dispute is substantially the same as a dispute previously submitted by or on behalf of the consumer, either directly to the furnisher or through a consumer reporting agency, with respect to which the furnisher has already satisfied the applicable requirements (provided, however, that a direct dispute is not substantially the same as a dispute previously submitted if the dispute includes information that had not previously been provided to the furnisher); or (3) the furnisher is not required to investigate the dispute because one or more of the exceptions listed above applies. Upon making a determination that a dispute is frivolous or irrelevant, the furnisher must notify the consumer of the determination not later than five business days after making the determination, by mail or, if authorized by the consumer for that purpose, by any other means available to the furnisher. A notice of determination that a dispute is frivolous or irrelevant must include the reasons for such determination and identify any information required by the furnisher to investigate the disputed information.

No Private Enforcement

Finally, furnishers will be glad to know that the new regulations do not create a private cause of action for consumers. Under § 1681s–2(c) and (d) of the FCRA, regulations promulgated pursuant to § 1681s–2(a) cannot be enforced by consumers. Such regulations can only be enforced by certain federal and state agencies and officials identified in § 1681s.

[1]Office of the Comptroller of the Currency, U.S. Treasury; Board of Governors of the Federal Reserve System; Federal Deposit Insurance Corporation; Office of Thrift Supervision, U.S. Treasury; National Credit Union Administration; and Federal Trade Commission.

Court Grants Motion for Summary Judgment Because No Reasonable Investigation by CRAs Would Have Uncovered the Alleged Inaccuracy in the Consumer’s Credit Report

Ryan Langston — Tue, 29 Jun 2010 00:00:00 -0500

Nnebe v. Bank of America, 2010 U.S. Dist. LEXIS 32858 (D. N.J. Feb. 17, 2010)

Facts: Plaintiff filed suit against defendants Bank of America, FIA Card Services, Sovereign Bank, Trans Union, Experian Information Solutions, Equifax Information Services, ER Solutions and United Recovery Systems stemming from the treatment of an alleged overcharge on her credit card. Plaintiff's claims were based on violations of the federal Fair Credit Reporting Act (the “FCRA”), federal Fair Debt Collections Practice Act (the “FDCPA”) and New Jersey's Consumer Credit Reporting Act (the “NJCCRA”). Plaintiff also brought claims of defamation, invasion of privacy and negligence. Plaintiff’s claims originated from an online cell phone purchase. Plaintiff believed that the phone cost $630.01 even though her Bank of America credit card statement reflected a charge of $839.96. Plaintiff refused to pay the difference and the remaining balance was subsequently charged off as bad debt. Eventually, all of Plaintiff’s claims were dismissed except for her claims against Trans Union, Experian, and ER Solutions (a debt collection agency). Trans Union, Experian, and ER Solutions filed motions for summary judgment, which were granted by the Court.

FCRA. Specifically, Plaintiff alleged that Trans Union and Experian reported “unauthorized” Bank of America charges on her credit report. The Court held that as credit reporting agencies (“CRAs”), Experian and Trans Union were under no duty outside their regular investigatory procedures to research the accuracy and completeness of the information received from Bank of America. Even assuming that the Bank of America charges were unauthorized, the Court held that no reasonable investigation by the CRAs would have allowed them to discover the error. The Court further held that Experian and Trans Union could not be liable for defamation, invasion of privacy, or negligence as the information they disseminated was true and accurate to the extent of their knowledge.
FDCPA. Plaintiff failed to show that ER Solutions violated any provision of the FDCPA. ER Solutions provided detailed records of the entirety of their collection efforts. Plaintiff was unable to show that ER Solutions failed to follow the safeguards required in the FDCPA. Further, similarly to Experian and Trans Union, the Court held that ER Solutions could not be held liable for defamation, invasion of privacy or negligence as the information it disseminated was true and accurate.

Court Rules on Plaintiff’s Fee Petition Following Jury Verdict in Favor of Plaintiff in FCRA Lawsuit

M. Kasey Ratliff — Tue, 29 Jun 2010 00:00:00 -0500

Naill v. Lincoln Mortgage, LLC, et al., 2010 U.S. Dist. LEXIS 56464 (W.D. Va. June 7, 2010)

Facts: The jury returned a verdict in favor of Plaintiff and against the Defendant under the Fair Credit Reporting Act (“FCRA”) for $1,000 in compensatory damages and $25,000 in punitive damages. Plaintiff filed a motion seeking an award of costs and attorney’s fees and defendant filed an opposition to Plaintiff’s motion. The court granted Plaintiff’s motion in part and denied in part.

Attorney’s Fees. Defendant opposes Plaintiff’s motion because Defendant contends that the record fails to separate time spent on the prevailing claim from time spent on claims where Plaintiff did not prevail, that some of Plaintiff’s charges are duplicative and involved non-compensable travel time and that Plaintiff’s counsel’s $425 hourly rate is unreasonable.
Attorney’s Fees. In calculating an award of attorney’s fees under the FCRA, the court is to perform a lodestar calculation by multiplying the number of reasonable hours spent on the case by a reasonable hourly rate. The court is then to subtract fees for hours spent on unsuccessful, unrelated claims before awarding some percentage of the remaining amount based on the degree of success the Plaintiff enjoyed. According to the controlling authorities in this circuit, the burden rests with the fee applicant to establish the reasonableness of the attorney’s hourly compensation rate.
Attorney’s Fees. Fees are not unreasonably duplicative simply because the opposing party says so by some general assertion of unreasonableness or merely because two attorneys may be working on the case. The court overrules the Defendant’s objections based on duplication of counsel’s efforts.
Attorney’s Fees. The question is not what other attorneys in the market believe is reasonable, or what other lawyers believe the moving lawyer is worth, or what the lawyers believe they are worth to themselves. If the court were to adopt this approach, the market inflates with every application for an award of fees. The proverbial foxes then guard the chicken house. Affidavits submitted by Plaintiff indicate that the most recent fee awards in this geographic area have been $375 per hour. To this court, that rate was and remains at the top end of the scale charged by lawyers either in the Charlottesville or Harrisonburg Divisions. Plaintiff’s counsel’s rate of $425 per hour seems far above the prevailing market rate. Therefore, Plaintiff’s counsel will be compensated at a rate of $375 per hour.

Court Denies CRA’s Motion for Summary Judgment as Factual Disputes Exist Making Summary Judgment Inappropriate

Marc F. Kirkland — Mon, 28 Jun 2010 00:00:00 -0500

Reeves v. Equifax Info. Servs., LLC, 2010 U.S. Dist. Lexis 50241 (S.D. Miss. May 20, 2010)

Facts: Plaintiff filed suit against Equifax alleging that it had violated various sections of the FCRA in the handling of his credit information and providing his credit information to third parties. Specifically, Plaintiff’s allegations related to several medical collection accounts which had been removed and were then reinserted onto his consumer report. The accounts actually belonged to another consumer who had a similar name and social security number (“SSN”). Their SSNs were identical matches for seven of the nine numbers with the last two merely transposed. Plaintiff had previously filed and settled a lawsuit with Equifax related to those accounts and as part of settlement Equifax had agreed stop reporting the collection accounts on Plaintiff’s consumer report. Approximately two years after settlement, the collections accounts reappeared on Plaintiff’s Equifax report. Additionally, there were several inquiries on Plaintiff’s file for credit transactions of other consumers. Plaintiff and Equifax moved for summary judgments and the Court denied both motions.

Statute of Limitations. To establish a right of relief under § 1681i, a consumer must demonstrate that a consumer reporting agency (“CRA”) did not reinvestigate free of charge and either record the current status of the disputed information or delete the item from the file in a manner prescribed by § 1681i(a)(5) within the statutory period. To establish a claim under this section, the consumer must show that he notified the CRA directly of a dispute within the relevant time under the statute of limitations. Equifax offered testimony that it had not received a dispute from Plaintiff in more than five years and therefore any claim by Plaintiff for violation of § 1681i was barred by limitations. By contrast, Plaintiff testified that his attorney had disputed the accounts with Equifax within two years of filing the lawsuit. The Court found that whether or not the allegations of contact were credible was not for it to decide and denied Equifax’s motion for summary judgment.
Permissible Purpose. Plaintiff also claimed that Equifax violated § 1681e(a) by permitting several companies to obtain his consumer report without a permissible purpose as outlined in § 1681b. To establish a cause of action for violation of § 1681e(a) a plaintiff must show (1) that the CRA made the disclosure to a person it did not have reason to believe had a statutorily authorized purpose for obtaining the report; and (2) that the CRA failed to maintain reasonable procedures to prevent the improper disclosures. Section 1681b states that a CRA may furnish a consumer’s report to a person “whom it has reason to believe intends to use the information in connection with a credit transaction involving the consumer….” Equifax claimed that Plaintiff could not show that Equifax made the disclosure to a person it did not have reason to believe had a statutorily authorized purpose for obtaining the report, or that Equifax failed to maintain reasonable procedures to prevent improper disclosures. However, Plaintiff produced evidence of numerous incidents of Equifax providing credit information to companies with which Plaintiff, had any business relations with and could not likely have had any interest in having access to Plaintiff’s credit file. Therefore, at a minimum the Court found that there was a factual dispute about this claim, making summary judgment inappropriate.
Economic Damages. As a result of the inaccurate information included on his credit file Plaintiff claimed he was denied credit by American General Finance (“American General”) when his wife applied for credit in his name with Southern Wholesale Furniture (“Southern Wholesale”). To demonstrate that Plaintiff was not denied because of inaccurate information, Equifax’s representative testified that the report in question contained no derogatory information, and an American General representative testified that the denial was not related to information contained on Plaintiff report, but was a result of a fraud alert on Plaintiff’s file coupled with an inability to verify Plaintiff’s identity. That testimony was contradicted by testimony from Plaintiff, Plaintiff’s wife, and a representative from Southern Wholesale which indicated that Plaintiff was on the phone with his wife during the transaction and gave her permission to apply for credit in his name thereby verifying his identity to American General. Southern Wholesale’s representative also disputed American General’s representative’s recitation of the incidents leading up to the credit denial. Therefore, the Court found that whether Plaintiff suffered damages as a result of this transaction was fraught with factual disputes, and denied Equifax’s summary judgment on that issue.
Emotional Distress. To support an award for mental or emotional distress there must be evidence of genuine injury, such as the evidence of the injured parties’ conduct and the observations of others. Further, to establish intangible loss, the Court requires “a degree of specificity which may include corroborating testimony or medical or psychological evidence in support of the damage award.” Plaintiff claimed that evidence of his emotional distress could be derived from his alleged inability to concentrate at work. Equifax claimed that Plaintiff had offered no corroborating evidence to support this claim. However, the Court found that Plaintiff had specifically indentified at least three co-workers with knowledge of his problems at work and thus, a direct factual dispute existed as to this claim.
Willful Noncompliance. To show willful noncompliance under § 1681n the consumer must show that the defendant acted in reckless disregard of its FCRA obligations. Reckless is “conduct violating an objective standard action entailing an unjustifiably high risk of harm that is either known or so obvious that it should be known.” Thus to establish a reckless violation Plaintiff must prove that Equifax acted in a manner that make it highly probably that harm would follow. Equifax argued that a “single, inadvertent” mistake caused the problem which allowed Plaintiff’s information to be confused with another consumer and that this did not constitute a reckless violation. However, the Court found that this would be for a jury to decide because it found that a reasonable fact-finder could well conclude that such a mistake and the continued mingling and reporting of incorrect information in the two credit files was reckless.
Preemption. The Court found that Plaintiff’s state law claim for libel was preempted by the FCRA. Under § 1681h(e) no consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence with respect to the reporting information against any CRA... except as to false information furnished with malice or willful intent to injure such consumer.” Here the Court found that Plaintiff had not proffered evidence that Equifax acted willfully or maliciously to harm him. In fact, Plaintiff testified that he had no evidence that Equifax acted recklessly towards him or intentionally tried to harm him. Accordingly, Plaintiff’s claim for libel couldn’t survive summary judgment.

Ninth Circuit Upholds Liability against Attorney for Violations of the Credit Repair Organizations Act in a Class Action Suit

Marc F. Kirkland — Wed, 16 Jun 2010 00:00:00 -0500

Rannis v. Recchia, 2010 U.S. App. LEXIS 10858 (9th Cir. Cal. May 27, 2009)

Facts: Appellant attorney challenged the district court’s determination of liability under the Credit Repair Organizations Act (“CROA”), 15 U.S.C. §§ 1679-1679j, for accepting payment in advance of providing credit repair services to his clients and for failing to provide mandatory disclosures. Appellant also challenged the district court’s denial of his motion to decertify the class on numerosity grounds and the district court’s final approval of the settlement agreement. The Court rejected Appellant’s arguments and affirmed the district court’s findings.

Credit Repair Organizations Actfcra. Section 1679a(3)(A) defines a credit repair organization (“CRO”) as any person who uses any instrumentality of interstate commerce or the mail to sell, provide or perform…any service, in return for the payment of money…for the express or implied purposes of: (i) improving any consumer’s credit record, credit history, or credit rating; or (ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i).
Credit Repair Organizations Act. The Court rejected Appellant’s argument that he was not acting as a credit repair organization because the CROA exempts attorneys acting in the course and scope of the practice of law. The Court found that Appellant met the definition of a CRO as defined by the CROA. Specifically, Appellant admitted to using interstate commerce and the mail in providing credit resolution services and that he provided those services in exchange for valuable consideration.
Credit Repair Organizations Act. The CROA’s purpose, as outlined in § 1679(b) is: (1) to ensure that prospective buyers of the services of CROs are provided with the information necessary to make an informed decision regarding the purchase of such services; and (2) to protect the public from unfair or deceptive advertising and business practices by CROs.
Credit Repair Organizations Act. The Court found that the evidence established that as a CRO, Appellant violated certain provisions of the CROA, including § 1679b(b) prohibiting charging clients for disclosure before fully performing services and §§ 1679c-1679e for failing to provide mandatory disclosures prior to contracting with his clients.

Court Dismisses Plaintiff’s FCRA Claims Because Defendants Are Not Credit Reporting Agencies Nor Was Information Disseminated Using a Credit Report

Ryan Langston — Tue, 15 Jun 2010 00:00:00 -0500

Hoffart v. Wiggins, 2010 U.S. Dist. LEXIS 29010 (E.D. Tex. Jan. 30, 2010)

Facts: Pro se Plaintiff brought suit on behalf of himself, individually, and as the legal guardian of “the person and estate” of his wife against his son, his daughter-in-law, and their business. Plaintiff claimed Defendants opened bank accounts in his wife’s name without her knowledge or consent and asserted claims under the FCRA. Defendants filed a motion for summary judgment, which the Court treated as a motion to dismiss under Rule 12(b)(6) and granted.

FCRA. Plaintiff failed to state a claim under the FCRA because Defendants were not “consumer reporting agencies” and there were no allegations or evidence indicating that false credit information was disseminated through a “consumer report.” Therefore, the FCRA did not apply to Plaintiff’s claims, and dismissal was warranted.

Defendants’ Motion to Dismiss Found Premature as Plaintiff, Through Discovery, May be Able to Establish an FCRA Violation

Marc F. Kirkland — Wed, 09 Jun 2010 00:00:00 -0500

Adams v. LexisNexis Risk & Info. Analytics Group, Inc., 2010 U.S. Dist. Lexis 47123 (D.N.J. May 12, 2010)

Facts: Plaintiff claimed that Defendants LexisNexis (“Lexis”) and Seisint, Inc., violated the FCRA when they sold “Accurint” reports containing allegedly inaccurate information to debt collectors, credit insurers and other entities involved in debt collection. Plaintiff specifically alleged that Defendants are consumer reporting agencies (“CRAs”), that an Accurint report is a consumer report as defined by the FCRA, and that Defendants violated various sections of the FCRA by selling those reports to third parties. Defendants sought judgment as a matter of law as to Plaintiff’s claims because they claimed they were not a CRA, an Accurint report is not a consumer report and that Plaintiff failed to alleged the necessary facts to establish a claim under the FCRA. Defendant’s motion was granted in part, and denied in part.

Consumer Reporting Agency. Plaintiff alleged that Lexis sold “nationally…a product called an Accurint report to debt collectors, credit insurers and entities involved in the debt collection industry generally, to assist with the collection of delinquent credit accounts...” Plaintiff further alleged that she purchased the Accurint report from Lexis for $8.00. Therefore, Plaintiff claimed that Defendants qualified as CRA. Section 1681a(f) defines a CRA as “any person which, for monetary fees, dues or on a cooperative non-profit basis, regularly engage 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….” Taking Plaintiff’s allegations as true, the Court held that she had plead sufficient facts to establish that the actions taken by Lexis may make them a CRA, but that the critical question was whether an Accurint report qualified as a consumer report.
Consumer Report. Under § 1681a(d)(1), a consumer report “means any written, oral, or other communication of any information by a [CRA] bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used …for the purpose of serving as a factor in establishing a consumer’s eligibility for—(A) credit or insurance to be used primarily for personal, family, or household purposes; (B) employment purposes; or (C) any other purpose authorized under section 1681b of this title.”
Consumer Report. Plaintiff alleged that the Accurint report contained 1) consumer information as defined by § 1681a(d)(1); and that Lexis used or collected information for “permissible purpose” under § 1681b. Specifically, Plaintiff alleged that Lexis used or collected the information for the permissible purpose of collection of an account. At this early stage of discovery the Court found that Plaintiff could, through discovery, establish that Lexis produced consumer reports and that it qualified as a CRA. Therefore, because Defendants could not establish that there were no material issues of fact concerning whether the Accurint report qualified as a consumer report, the Court denied their motion.
Willful Violation. Section 1681n provides for civil liability against any person who willfully fails to comply with any requirement imposed under the FCRA. The Supreme Court recently held that “the standard civil usage…counsels reading the phrase ‘willfully fails to comply’ in § 1681n(a) as reaching reckless FCRA violations….” Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57 (2007). Lexis argued that they did not view Accurint reports as qualifying as consumer reports under the FCRA. However, the Court stated that if Plaintiff could prove that Defendants either knowingly or recklessly adopted policies that contravened the FCRA, assuming that she satisfied her burden of showing that the FCRA applied to Lexis, she could succeed in establishing a violation of the FCRA. The Court therefore denied the motion.

Court Denies Summary Judgment for Defendants on Some of Furnisher’s Claims Relating to a Dispute Over Plaintiff’s Overdraft Account

Martin Thornthwaite — Tue, 08 Jun 2010 00:00:00 -0500

Okocha v. HSBC Bank USA, N.A., 2010 U.S. Dist. LEXIS 33248 (S.D.N.Y. March 25, 2010)

Facts: Plaintiff brought suit against HSBC Bank USA, N.A. and other related entities (collectively, “Defendants”) regarding a decade-long dispute concerning whether Plaintiff ever used an overdraft account. Plaintiff contended that he never used the overdraft account, never agreed to the overdraft account’s terms, and repeatedly disputed charges on the account with Defendants. Plaintiff further claimed that he also notified the major consumer reporting agencies (“CRAs”) of the issue on multiple occasions. Plaintiff’s claims include violations of the Electronic Funds Transfer Act (“EFTA”), the Truth in Lending Act (“TILA”), and the FCRA, and state law claims including unfair and deceptive business practices, false statements, unjust enrichment, emotional distress, defamation and invasion of privacy, slander, negligence, fraud, conversion, civil conspiracy, and malicious prosecution and abuse of process. Defendants jointly filed a motion for summary judgment on all claims. The Court dismissed all claims except for Plaintiff’s: (1) EFTA and TILA claims for conduct that occurred after October 9, 2007; (2) FCRA claim under § 1681s-2(b) for conduct that occurred after October 9, 2006; (3) negligence claim as to the overdraft account for conduct that occurred after October 9, 2005; (4) and negligence claim related to Plaintiff’s deposit account for conduct that occurred after October 9, 2007.

Statute of Limitations. The statute of limitations for a § 1681s-2(b) claim is two years.
Summary Judgment. The Court found that material issues of fact remained as to whether the Defendants undertook reasonable (or any) investigations regarding disputes made to the CRAs at different times under § 1681s-2(b).
Preemption. While Plaintiff’s negligence claims based on Defendants’ system of investigation for purposes of reporting to the CRAs were preempted, the Court found that “to the extent that Plaintiff’s claim addresses Defendants’ general internal systems of review regarding account disputes – separate from investigations related to its role as a Furnisher – it survives subject to the applicable statutes of limitation.”