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Tag: 1681b

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.

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).”