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Category: FCRA

Ownership of a debt outside CRA’s “reasonable inquiry”

Steven Uhrich

Link: AMORAH v. EQUIFAX INFORMATION SERVICES, LLC, (N.D. Ill., Nov. 9 2020).

Judge Manish S. Shah joined a growing chorus of recent courts finding that under the 7th Circuit’s Denan case (and others), the question of a loan’s validity is not something a Consumer Reporting Agency needs to investigate once a furnisher verifies in response to an ACDV.

It remains to be seen how far this reasoning will be stretched by CRAs. Some attorneys believe that in such a circumstance the plain language of 15 U.S.C. § 1681i(a) requires deletion because the CRA admittedly can’t verify whether the information is accurate or inaccurate. To put it another way, without a judicial determination settling the interpretation of the reported information, why should a CRA verify information?

To state a claim under these sections, a plaintiff must show that an agency included “inaccurate” information in a report. Denan, 959 F.3d at 293. The statute does not define inaccurate or draw a line between factual and legal inaccuracy. Id. But consumer reporting agencies are not courts, and the ability to resolve legal issues around disputed debts “exceeds the competencies of consumer reporting agencies.” Id. at 295. Only a court “can fully and finally resolve the legal question of a loan’s validity.” Id. Put differently, a plaintiff states an FCRA claim only if she plausibly alleges that a consumer report contained a factual inaccuracy, because consumer reporting agencies “are neither qualified nor obligated to resolve legal issues.” Id. at 296. A consumer’s defense to a debt is a question for courts, not consumer reporting agencies. Id.

The Denan Court did not consider whether a dispute over ownership of a debt was factual or legal. But several district courts applying Denan have concluded that investigating the ownership of a debt “is best left to the courts.” Hoyos v. Experian Info. Sols., Inc., 20-cv-408, 2020 WL 4748142, at *3 (N.D. Ill. Aug. 17, 2020); see also Soyinka v. Equifax Info. Servs., LLC, 20-cv-1773, 2020 WL 5530133, at *3 (N.D. Ill. Sept. 15, 2020); Juarez v. Experian Info. Sols., Inc., 19-cv-7705, 2020 WL 5201798, at *4-5 (N.D. Ill. Aug. 31, 2020); Molina v. Experian Info. Sols., Inc., 19-cv-7538, 2020 WL 4748149, at *3 (N.D. Ill. Aug. 17, 2020); Rodas v. Experian Info. Sols., Inc., 19-cv-7706, 2020 WL 4226669, at *2 (N.D. Ill. July 23, 2020); Chuluunbat v. Cavalry Portfolio Servs., LLC, 20-cv-164, 2020 WL 4208106, at *3 (N.D. Ill. July 22, 2010).[2]

Labeling an issue as one of fact, one of law, or a mix of the two is not always simple. See Pullman-Standard v. Swint, 456 U.S. 273, 288 (1982) (noting the “vexing nature of the distinction” between questions of fact and law). Sometimes the distinction turns on a determination that “as a matter of the sound administration of justice, one judicial actor is better positioned than another to decide the issue in question.” Merck Sharp & Dohme Corp. v. Albrecht, 139 S. Ct. 1668, 1680 (2019) (quoting Markman v. Westview Instruments, Inc. 517 U.S. 370, 388 (1996)). And a question that has “both factual and legal elements” is typically a mixed question. Guerrero-Lasprilla v. Barr, 140 S. Ct. 1062, 1069 (2020).[3]

Here, Amorah insists that Midland did not own the debt. And because ownership is a question of fact, she says, her credit report contained a factual inaccuracy. But labeling debt ownership in the abstract as an issue of fact, a mixed question, or a question of law is beside the point. The operative inquiry under the FCRA is whether ownership of the debt was plausibly within the scope of a consumer reporting agency’s ability to check for accuracy, or whether it implicated a legal issue better left to the courts.

Determining if Midland owned the debt was beyond the scope of what a credit agency might reasonably be expected to investigate. That Midland withdrew its small-claims lawsuit doesn’t mean that Midland didn’t own the debt, and Amorah does not plead that a court adjudicated the matter. She argues that Midland offered insufficient evidence to show ownership. But a credit agency is not qualified to assess whether a furnisher provided sufficient evidence of ownership. Amorah’s arguments about Midland’s ownership belong in a lawsuit against Midland, not in an FCRA complaint against the defendants. The better-positioned actor, see Albrecht, 139 S. Ct. at 1680, to resolve the disputed ownership issue is a court, not a credit agency.

7th Cir.: CRAs need not resolve legal disputes under the FCRA

Steven Uhrich

Link: Denan v. Trans Union LLC, No. 19-1519 (May 11, 2020). The N.D. Ill. decision is available via RECAP here.

The U.S. Court of Appeals for the Seventh Circuit has joined the First, Ninth, and Tenth Circuits in holding that a consumer’s defense to a debt “is a question for a court to resolve in a suit against the [creditor,] not a job imposed upon consumer reporting agencies by the [Fair Credit Reporting Act].” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 891–92 (9th Cir. 2010). This decision closely follows the reasoning laid out in the court’s non-precedential decision in Humphrey v. Trans Union, LLC, 759 F. App’x 484 (7th Cir. 2019).

In Denan, the Plaintiff took loans out from two tribal lending enterprises that charged over 300% interest. The loan agreements claimed that by virtue of sovereign immunity, they were governed by tribal law and not the law of the states—New Jersey and Florida in this case—which render any agreements with such high interest rates void ab initio.

Denan disputed the accuracy of his credit report with Trans Union because he believed the loan was invalid and there was no legal obligation for him to repay it. After receiving Denan’s correspondence, Trans Union investigated the matter and concluded its process by informing Denan that it verified that the information was accurate.

Denan sued Trans Union under two theories: § 1681e(b), for failing to maintain reasonable procedures to ensure maximum possible accuracy, and § 1681i which requires consumer reporting agencies like Trans Union to “conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate.”

The panel (Wood, Bauer, and Brennan) rejected both theories. As to the e(b) claim, the court honed in on the notion that CRAs are not in the position of courts to resolve “non-adjudicated” legal defenses to the debt:

“The collectability of plaintiffs’ loans here requires resolution of three legal issues: whether the choice‐of‐law provisions in plaintiffs’ loan agreements are enforceable; whether New Jersey and Florida lending laws render plaintiffs’ loans void; and whether tribal sovereign immunity shields Plain Green and Great Plains from the application of New Jersey and Florida laws. The power to resolve these legal issues exceeds the competencies of consumer reporting agencies.”

As to the i claim, the court distinguished Henson v. CSC Credit Servs., 29 F.3d 280 (7th Cir. 1994), where the CRA reported information from a court record that the clerk had entered erroneously:

“Henson never addressed the issue before us: whether §§ 1681e(b) and 1681i compel consumer reporting agencies to adjudicate a consumer’s legal defenses to a debt . . . the inaccuracy challenged in Henson (whether a judgment was issued against the consumer) was straightforward, fact based, and could be resolved through a reasonable investigation. But plaintiffs here insist Trans Union should settle legal issues involving choice-of‐law clauses, state usury laws, and sovereign immunity doctrines—all issues only a court can resolve.”

The panel does recognize numerous times in its opinion that companies such as lenders that furnish information are tasked with accurately reporting liability. See 12 C.F.R. § 1022.41(a): “Accuracy” for furnishers means information that “correctly [r]eflects … liability for the account.”

7th Circuit: Spokeo Dooms FCRA 1681b Claim

Steven Uhrich

Link: Crabtree v. EXPERIAN INFORMATION SOLUTIONS, INC., Court of Appeals (7th Cir. 2020).

The 7th Circuit, in a decision by Judge Scudder, affirmed an opinion by District Court Judge Norgle dismissing a consumer’s FCRA claim—and, interestingly, a counterclaim by Experian—for lack of Article III standing and thus subject matter jurisdiction.

The claim was simple: Experian, through an agent, sold a copy of his consumer report for a purpose not allowed under the Fair Credit Reporting Act, 15 U.S.C. 1681b(a). The Complaint is available here.

The Complaint notes that Western Sierra (the company Experian sold the data to) is a debt settlement company and thus can’t make a firm offer of credit, but the 7th Circuit decision doesn’t mention that.

Instead, the decision focuses in on the fact that the Plaintiff couldn’t testify that he had not received a firm offer of credit from Western Sierra, and that the disclosure was made five years prior to filing the lawsuit.

After reviewing the 7th Circuit progeny of Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016): Gubala v. Time Warner Cable, Inc., 846 F. 3d 909, Robertson v. Allied Solutions, LLC, 902 F. 3d 690, and Casillas v. Madison Avenue Associates, 926 F.3d 329 (7th Cir. 2019) (Discussed on this blog here), the panel concluded that the injuries were not sufficient to meet the Article III standard:

Crabtree has identified no harm of any kind. Like the plaintiff in Casillas who never attempted to respond to the debt collector and therefore was not affected by the incomplete instructions, Crabtree admitted in sworn testimony that he would have thrown any firm offer from Western Sierra in the trash. Indeed, he only learned about these events after being contacted by his lawyer nearly five years later. If this communication had not occurred, Crabtree would have gone on completely unaware of and unaffected by any prescreen list. This all falls well short of the concreteness mandated by Article III. Crabtree had to come forward with something showing that he did not receive a firm offer, that Western Sierra would not have honored a firm offer, that he was affected by the lack of a firm offer, or that he suffered any actual emotional damages. He failed on each possible ground, leaving him without the concrete injury necessary for Article III standing.

However, the panel clearly left the door open to similar claims on different facts:

Do not overread our conclusion to mean that a claim like Crabtree’s fails as a matter of course. Based on Spokeo‘s principles, there is no question that a consumer reporting agency’s unauthorized disclosure of consumer credit information can be a concrete injury. The common law recognized some right to privacy that “encompass[es] the individual’s control of information concerning his or her person.” U.S. Dep’t of Justice v. Reporters Comm. for Freedom of Press, 489 U.S. 749, 763 (1989). And FCRA specifically articulates a statutory right to privacy in consumer credit reports. See 15 U.S.C. § 1681(a). We have previously recognized this right to privacy in such information. See Cole v. U.S. Capital, Inc., 389 F.3d 719, 728 (7th Cir. 2004) (holding that a plaintiff stated a claim when a lender obtained her credit data without giving her the benefit of a firm offer, one of the permissible purposes under FCRA).

The disclosure of consumer credit information, absent any exchanged-for consumer benefit contemplated by FCRA, can constitute an injury-in-fact for the purpose of Article III standing. (emphasis added).

Experian’s counterclaim alleged that the Plaintiff also obtained consumer reports for an unlawful purpose: for the purpose of initiating the lawsuit at issue. The panel mostly agreed with the District Court judge that Experian could not rely on its costs incurred in defending the case under Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (1998), but found on independent grounds that Experian did not sufficiently allege how its reputation was injured by Plaintiff’s suit. The panel also said that attorney fees were not enough by themselves to sustain a counterclaim:

Put more simply, a party injured only by incurring defense costs—while injured for constitutional purposes—must find some statutory or common law hook for its motion or claim to recover those costs.

and the FCRA provided no such “hook”:

These statutory provisions make clear that Congress passed FCRA to protect consumers’ right to privacy in their credit data. The statutory objective was to confer protections on consumers, not to arm consumer reporting agencies with rights against consumers.

Mortgage Still “Valid Debt” Despite Being Unenforceable

Steven Uhrich

Link: Bauer v. RoundPOINT MORTGAGE SERVICING CORPORATION (N.D.Ill Oct. 29 2018).

In seeking to foreclose on Plaintiff’s home, the mortgagee violated the single refiling rule in Illinois that says you can’t re-file the same lawsuit twice. As a result, the mortgage loan became unenforceable as a matter of law. (A recent Illinois Supreme Court Decision, First Midwest v. Cobo, also found this would apply to an action on the promissory note).

The mortgage companies continued to send statements, some demanding payments. Plaintiff, represented by Rusty Payton and Marc Dann of DannLaw, filed suit to quiet title and actions under the Fair Debt Collection Practices Act, the Truth in Lending Act, the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act, and the Illinois Consumer Fraud Act against the mortgage servicer (Roundpoint), the investor, and the foreclosure mill law firm Wirbicki Law Group, LLC.

Judge Virginia M. Kendall found that the debt was still “valid” even though it was legally unenforceable—meaning that many of the claims do not survive.

Although the single refiling rule prevents the defendants from pursuing another foreclosure action, extinguishing their legal remedy, the rule does not extinguish the right to the underlying debt—that remains. See Midland Funding, LLC v. Johnson, 137 S. Ct. 1407, 1411-12 (2017); Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d 679, 684 (7th Cir. 2017), cert. denied, 138 S. Ct. 736 (2018)(explaining that Illinois treats a “debt as a debt” because “[t]he creditor retains the legal right to appeal to the debtor to honor the debt out of a sense of moral obligation even if the legal obligation can no longer be enforced in court”); Owens v. LVNV Funding, LLC, 832 F.3d 726, 731 (7th Cir. 2016) (citing Fleming v. Yeazel,40 N.E.2d 507, 508 (1942) (“[T]he statute of limitations controls the remedy for recovery of the debt, but the debt remains the same as before, excepting that the remedy for enforcement is gone.”)).
Indeed, a creditor retains some right to payment, even if its remedy is no longer a legal one but a moral one. See Buchanan v. Northland Grp., Inc., 776 F.3d 393, 396-97 (6th Cir. 2015) (recognizing that a time-barred “debt remains a debt even after the statute of limitations has run on enforcing” and “[t]here thus is nothing wrong with informing debtors that a debt remains unpaid” and “to let the debtor know what the debt is and to ask her to pay it”); HBLC, Inc. v. Egan, 2016 IL App (1st) 143922 (2016) (citing Huertas v. Galaxy Asset Management, 641 F.3d 28, 32-33 (3d Cir.2011) (noting that “the FDCPA permits a debt collector to seek voluntary repayment of the time-barred debt so long as the debt collector does not initiate or threaten legal action in connection with its debt collection efforts”).
Moreover, a debt once-unenforceable can become enforceable again under certain circumstances. 

However, the Court allowed one claim under the Fair Debt Collection Practices Act and two claims under the Illinois Consumer Fraud Act concerning Roundpoint’s threats to foreclose or legally enforce the mortgage debt.

Mistaken ID FDCPA Claim Survives Summary Judgment

Steven Uhrich

Link 1: (SHA Opinion) Ali v. Portfolio Recovery Associates, LLC, Case No. 15-cv-06178 (N.D. Ill. Sept. 30, 2018);
Link 2: (SAA Opinion) Ali v. Portfolio Recovery Associates, LLC, Case No. 15-cv-06178 (N.D. Ill. Sept. 30, 2018).

These two consolidated cases derive from PRA’s attempt to collect different debts from the wrong Syed H. Ali and from his father Syed A. Ali. The suit alleges that PRA unsuccessfully sought to collect a debt from a person named SHA located in Texas, and then went after a different SHA—one of the plaintiffs here. PRA sent collection letters and then filed a lawsuit through the defendant attorneys. The underlying error here is defendants sought collection against the Debtor and served the collections complaint at an address where another person bearing the same name (including middle initial) lived.

Plaintiff, represented by  Bryan Thompson and Robert Harrer of the Chicago Consumer Law Center, P.C., Daniel Brown, of Main Street Attorney, LLC, Blaise & Nitschke, P.C. & The Law Office of M. Kris Kasalo, Ltd., filed a 9-count complaint.

Opinion 1

The court (Judge Sharon Johnson Coleman) issued two opinions: one for the minor SHA and one for the father SAA. As to SHA, the court found that factual issues abound as to whether this was a consumer debt (thus falling within the FDCPA) and also regarding the Bona Fide Error defense that Defendants asserted. However the court granted summary judgment as to the 1692d and 1692f claims finding that there wasn’t harassing or unfair or unconscionable means used in the attempted debt collections.

The claim under the Illinois Collection Agency Act (“ICAA”), 225 ILCS 425/1 et seq. failed because the court found that the ICAA did not intend to give consumers a private right of action and dismissed it sua sponte under Rule 12(h)(3):

SHA cites Sherman as authority for his implied right of private action. Sherman v. Field Clinic, 74 Ill. App. 3d 21, 392 N.E. 2d 154 (1st Dist. 1979). Since Sherman was decided nearly 40 years ago this district and even Illinois state courts have been split on whether to follow it . . .  If the legislature intended for there to be an implied right of action, it would have written it into the law itself, especially considering the lapse in time since Sherman was decided, implying this right.

Opinion 2

The second (SAA) opinion  addressed additional claims by SAA against Blitt & Gaines, P.C. and Freedman Anselmo Lindberg Oliver, LLC (which have since merged). The additional counts were brought under the Fair Credit Reporting Act and Fair Debt Collection Practices Act. The court dismissed the 1692d claim on the basis that there was no evidence that the collection attorneys knew they had they wrong man, but allwed the 1692e claim against PRA to survive despite the Bona Fide Error defense:

The Section 1692e FDCPA violations against Portfolio stem from its alleged failure to confirm the account Debtor’s personal information and recognize that it differed from SAA’s information before pursuing collections and the lawsuit. This Court finds that there is a question of fact whether a reasonable, unsophisticated consumer would be misled by Portfolio’s actions. SAA was upset and confused by the letters and the lawsuit against “Syed Ali.” Indeed, mistakenly being sent a demand letter or being served with a lawsuit in one’s name, taken in isolation, could be confusing[. . .]

This Court [. . .] finds an issue of fact as to the sufficiency of Portfolio’s controls and procedures since Portfolio was on notice from the August 29, 2014 TransUnion report, prior to its filing of the lawsuit against Syed Ali, that another Syed Ali lived at the address associated with the Debtor.

The court granted summary judgment in favor of the debt collector attorneys based on their bona fide error defense, noting that they don’t have to apply “most comprehensive approach to avoid errors. Courts have found it sufficient for defendants to take reasonable efforts to avoid violations if FDCPA.”

As to the impermissible pull claim under the FCRA, the court sided with PRA in that the CRA was the entity responsible for the pull on the incorrect address and the subsequent pulls were related to accounts that the correct SAA had with Portfolio.

 

No Standing for Claims Not Disclosed on Bankruptcy Petition

Steven Uhrich

Link: Kitchner v. FIERGOLA, Case No. 18-CV-133-JPS (E.D. Wisc., Sept. 18, 2018).

Judge J.P. Stadtmueller found that because the Plaintiff did not disclose her Fair Credit Reporting Act and Fair Debt Collection Practices Act claims on her Chapter 7 Bankruptcy petition, and because they arose prior to the filing of her bankruptcy, they were still property of the estate and the bankrtupcy trustee is the true party in interest for standing purposes. The court allowed the claim to be stayed under Rule 17:

Rule 17 instructs that “[t]he court may not dismiss an action for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action. After ratification, joinder, or substitution, the action proceeds as if it had been originally commenced by the real party in interest.” Fed. R. Civ. P. 17(a)(3). Thus, Defendants having put Kitchner on notice of the standing issue, the Court is obliged to give Kitchner a reasonable period of time in which to ratify her commencement of the action by convincing the trustee to abandon these claims, or to substitute the trustee as the sole party plaintiff.

The court also rejected the defendant’s judicial estoppel defense, stating that the only person who could take inconsistent positions that would jeopardize the claims for purposes of judicial estoppel would be the trustee.

Summary Judgment Awarded Against Comcast for Impermissible Pull Claim

Steven Uhrich

Link: Santangelo v. Comcast Corporation, Case No. 15-cv-0293 (N.D. Ill., Sept. 17, 2018).

Plaintiff, represented by Keith Keogh of Keogh Law, Ltd., sued Comcast under the Fair Credit Reporting Act and the Illinois Consumer Fraud Act alleging they impermissibly pulled a credit check on him despite the fact he paid a $50 deposit to forgo a credit check when applying for internet services. As a result, his credit score dropped by six points. Comcast refunded Plaintiff the money he paid with interest and caused the hard pull to be masked. The parties filed cross motions for summary judgment which were both granted and denied in part.

FCRA Claim

Comcast argued that Plaintiff’s lowered credit score could not satisfy Article III’s injury-in-fact requirement with respect to his FCRA claim, because he has not shown that he was denied a loan, a purchase, or a credit application. Judge John Z. Lee disagreed, citing Evans v. Portfolio Recovery Assocs., LLC, 889 F.3d 337, 344-46 (7th Cir. 2018) for the proposition that “it is ‘very easy’ to envision a lowered credit score creating a real risk of financial or other harm that satisfies the injury-in-fact requirement.” The court also rejected the challenge to causation since the score dropped the same day as Comcast’s pull and that the case was not moot due to the refund or subsequent masking.

As to the merits, the parties disputed whether Comcast had a “legitimate business need” under § 1681b(a)(3)(F)(i), and the court found in favor of Plaintff:

There is no dispute that Comcast offered to provide Santangelo internet service without obtaining his TELCO information, if he paid a $50 deposit. And no reasonable jury could conclude that Comcast needed Santangelo’s credit score to determine his eligibility for service when Comcast’s own policies and representations to Santangelo indicated otherwise.

The court also ruled in favor of Plaintiff in regards to Comcast’s argument that Plaintiff agreed to the credit pull under § 1681b(a)(2), finding that it’s a strained argument and that Comcast failed to develop the record to support it. So liability as to the the FCRA claim was decided in favor of Plaintiff.

Whether Comcast violated the FCRA willingly or negligently (and thus whether Plaintiff may be awarded punitive damages or not) under § 1681n will be a fact for the jury:

There is evidence in the record from which a jury could reasonably conclude that the Comcast representative who initiated the credit check did so in error. But, there is other evidence from which a reasonable jury could conclude that Comcast knew or should have known that it would likely happen based upon prior experiences with similar incidents.

State Law Claims

The court found that as to the state law claims under the Illinois Consumer Fraud Act, breach of contract, and unjust enrichment, Plaintiff failed to adduce sufficient evidence of actual damages. As a result Comcast was awarded summary judgment on those counts. The court noted, however, that for purposes of Article III standing analysis, “actual damages and injury in fact ‘are not the same thing.’ Abbott v. Lockheed Martin Corp., 725 F.3d 803, 808 (7th Cir. 2013).”

U.S. Public Interest Research Group Releases Report: One Year Post Equifax Breach

Steven Uhrich

Link: EQUIFAX BREACH: ONE YEAR LATER How to Protect Yourself Against ID Theft & Hold Equifax Accountable

“Ultimately, we are not the customers of Equifax or the other credit bureaus; we are their product. We did not ask or give them permission to collect or sell our personal information. Congressional action, state and federal agency enforcement and private rights of action are needed to provide both the necessary financial consequences and oversight that will help prevent anything like last year’s Equifax breach from happening again. Additionally, breached companies should be required to provide consumers with clear, complete, and concise information about what can be done to prevent, detect, and resolve most kinds of identity theft and fraud.”

 

Third Circuit Follows Seventh to Uphold FCRA b(b)(3) Claim

Steven Uhrich

Link: Long et al. v. Septa (3d. Cir. 2018)

I recently posted about the Seventh Circuit’s opinion in Robertson v. Allied Solutions, LLC.

In Long, The Third Circuit issued a similar opinion on standing where the plaintiff alleged that the Southeastern Pennsylvania Transportation Authority failed to (1) give job applicants a copy of the credit report they relied upon in taking an adverse action against them and (2) send them the appropriate notices required under § 1681b(b)(3) of the Fair Credit Reporting Act. The case was argued by Deepak Gupta and an amicus brief was filed by Francis & Mailman.

The court found that plaintiffs met Article III standing requirements espoused in Spokeo in regards to the credit reports, but not for the notices. The court applied the two-part test from Spokeo, asking whether Congress intended to grant redress for the particular injury alleged and whether the injury in question has a close relationship to a harm traditionally recognized under common law.

As to the claim for failing to give a copy of the report, the court pointed out the unambiguous language in the FCRA creating a right of action and said this about the historical analysis:

Common-law privacy rights were historically understood as being invaded by “(a) unreasonable intrusion upon the seclusion of another, . . . (b) appropriation of the other’s name or likeness, . . . (c) unreasonable publicity given to the other’s private life, . . . or (d) publicity that unreasonably places the other in a false light before the public . . . .” Restatement (Second) of Torts § 652A(2)(a)-(d) (1977). These latter three types of privacy torts represent interference with an individual’s ability to control his personal information. That is analogous to the injury here, which is the use of Plaintiffs’ personal information—their consumer reports—without Plaintiffs being able to see or respond to it.

The Third Circuit called out the Robertson case, saying “[t]he Seventh Circuit concluded, as do we, that a plaintiff has standing to sue based on allegations that she did not receive the pre-adverse action notice required by § 1681b(b)(3).”

As to the claim regarding the notice requirements, the court found it was a bare procedural violation, divorced from any concrete harm, that cannot satisfy the injury-in-fact requirement of Article III. “Plaintiffs became aware of their FCRA rights and were able to file this lawsuit within the prescribed limitations period, so they were not injured … Plaintiffs are similar to Groshek, and like him, they lack standing, because although they did not receive FCRA rights disclosures, they understood their rights sufficiently to be able to bring this lawsuit.”

7th Circuit Upholds FCRA Adverse Action Claim Under Spokeo

Steven Uhrich

Link: Robertson v. Allied Solutions, LLC, (7th. Cir. 2018)

Plaintiff Shameca Robertson, through Matthew A. Dooley, filed a putative class action lawsuit against Allied Solutions, LLC for its failure to provide an adverse-action notice as required under § 1681b(b)(3)(A) of the Fair Credit Reporting Act.  Robertson applied for a job with Allied and was rejected based on adverse criminal history information. Allied allegedly failed to give Robertson the notice required in the statute or a copy of the background check it relied on in making its decision. Plaintiff filed an unopposed motion to approve a settlement, but the court raised the issue of Article III standing sua sponte and demanded briefing on whether the case of Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) required dismissal. The district court (William T. Lawrence of the S.D. Ind) found that the claim failed to allege a concrete injury and dismissed the case.

The Seventh Circuit reversed, finding that given the language and purpose of the Act, an employer’s duty to disclose is not linked with the inaccuracy of the underlying report. Instead, the section regulating users of reports (like prospective employers) deal primarily with disclosures.

The substantive interest behind a user’s disclosure obligation is the one at issue here: allow the consumer to review the reason for any adverse decision and to respond. These rights are independent of any underlying factual disputes. A consumer might, for example, wish to concede the facts presented in the report but to bring additional facts to the employer’s attention that put matters in a better light for the consumer. In other words, the consumer might wish to use the “confession and avoidance” option that existed at common law … Providing context may be more valuable than contesting accuracy. Some consumers may collect supporting documents quickly enough to corroborate an accuracy challenge before the employer makes its decision.

The Court relied on precedent that finds that Article III standing is met where a plaintiff alleges they were deprived of a chance to obtain a benefit; so it doesn’t matter whether they were actually deprived of that benefit. Czyzewski v. Jevic Holding Corp.,137 S. Ct. 973, 983 (2017). The Court also noted that an informational injury can be concrete when the plaintiff is entitled to receive and review substantive information. In sum:

What matters is that Robertson was denied information that could have helped her craft a response to Allied’s concerns.