Originally prepared for and published by PBSA in the July-August 2021 edition of the Journal. Read the full issue here: https://thepbsa.uberflip.com/i/1403122-pbsa-journal-july-august-2021/0?
When a consumer is denied credit due to an inaccuracy in their consumer report they can prevail on a claim against the CRA who issued the report under Section 1681e(b) of the Fair Credit Reporting Act (“FCRA”). This section requires CRAs to follow reasonable procedures to assure the maximum possible accuracy of the information in their reports. But what if nothing bad actually happened to the consumer as a result of the the inaccuracy? Do they still have an FCRA claim? Recent decisions by the U.S. Supreme Court in TransUnion v. Ramirez [1] and the Ninth Circuit Court of Appeals [2] in Leoni v. Experian Info. Solutions [3] have said no. These decisions show how CRAs can defeat “no injury” FCRA lawsuit.
TransUnion v. Ramirez
The issue in this case was whether Article III of the Constitution permits a class action where the vast majority of the class suffered no actual injury, let alone an injury anything like what the class representative suffered.
Background
In 2002, TransUnion introduced a product called OFAC Name Screen Alert. When a business used the product TransUnion would conduct its ordinary credit check of the consumer, and it would also use third-party software to compare the consumer’s name against the U. S. Treasury Department’s Office of Foreign Assets Control (OFAC) list of terrorists, drug traffickers, and other serious criminals. If the consumer’s first and last name matched the first and last name of an individual on OFAC’s list, TransUnion would place an alert on their report indicating that the consumer’s name was a “potential match” to a name on the OFAC list. TransUnion did not compare any data other than first and last names. Sergio Ramirez was unable to purchase a car after his report included such an alert.
Ramirez brought a FCRA class action on behalf of 8,185 individuals with OFAC alerts in their TransUnion credit files, claiming that TransUnion had failed to use reasonable procedures to ensure the maximum possible accuracy of their credit files. Only 1,853 of those class members had reports containing misleading OFAC alerts provided to third parties as had Ramirez.
Decision
The Supreme Court held that only 1,853 class members, including Ramirez, had Article III standing to sue TransUnion for failing to use reasonable procedures to assure the accuracy of each report under the FCRA: “Article III confides the federal judicial power to the resolution of ‘Cases’ and ‘Controversies.’” “For there to be a case or controversy under Article III, the plaintiff must have a ‘personal stake’ in the case—in other words, standing.” Sufficiently establishing standing requires that a plaintiff show “(i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief.”
Most Class Members Lacked “Concrete Injury”
The Supreme Court held that the 6,332 class members who did not have reports containing OFAC alerts provided to third parties lacked the “concrete injury” required for Article III standing: “The mere presence of an inaccuracy in an internal credit file, if it is not disclosed to a third party, causes no concrete harm.”
Leoni v. Experian Info. Solutions
The issue in this case was whether Experian had willfully or negligently violated the FCRA when it included the wrong date for a bankruptcy in the plaintiff’s report.
Background
David Leoni sued Experian regarding an error in his consumer report. Leoni alleged the report erroneously stated that he owed a debt to Military Star that had been previously discharged in bankruptcy. Leoni requested that Experian reinvestigate. The investigation report subsequently sent to Leoni stated that the Military Star debt was discharged, but incorrectly noted that the debt was “included in Chapter 13 Bankruptcy on November 08, 2016” when it actually had been discharged several months earlier. Leoni’s FCRA lawsuit was entirely based on this misdating issue.
Analysis of “Willful” and “Negligent” FCRA Claims
The Court first analyzed whether Experian committed a willful violation of the FCRA. To prevail on this claim, Leoni would have to demonstrate that Experian “knowingly violated the statute or recklessly disregarded its requirements.” The Court found that the record did not raise a material issue of fact that Experian knowingly or recklessly changed the “included in bankruptcy” date.
The Court next analyzed Leoni’s negligence claim, which it held required a showing of “actual damages”. Leoni claimed that (1) he “avoided applying for credit for fear of being denied”; (2) “the inaccurate information could serve as a factor in Experian credit scores”; (3) he “suffered sleepless nights,” i.e., emotional distress; (4) he incurred “transportation costs”; and (5) “lost time considering issues related to the inaccurate credit reporting.” The Court found that Leoni had failed to offer proof of some of his purported damages, and that some of the categories were not compensable.
Specifically, the Court found that (1) Leoni admitted that he feared credit denials not because of the “included in” bankruptcy date, but because of the bankruptcy on his record; (2) Leoni had no evidence that the “included in bankruptcy” date lowered his credit score, as opposed to the bankruptcy itself; (3) Leoni admitted that his sleeplessness was related “to the fact that there’s a bankruptcy on [his] credit report” and the fact that his wife was “not sleeping well, [so] I don’t sleep because I’m worried about her,” instead of “anything specific[] to Military Star”; (4) Leoni had no legal authority in support of his claim of damages for the cost of traveling to his attorneys’ office or the time he spent reviewing the credit reports; and (5) several district courts have declined to recognize such expenses as damages when they were incurred for the sole purpose of correcting inaccurate reporting.
How CRAs Can Benefit
The TransUnion v. Ramirez decision raises the bar for plaintiffs to establish standing in federal court for FCRA violations. Plaintiffs must be able to show concrete harm in the form of monetary, reputational or emotional injury, and cannot rely on the mere violation of a statutory right nor the risk of future harm created by such a violation. This test will often make class certification more difficult. The Leoni v. Experian decision demonstrates that the FCRA’s “actual damages” requirement for negligence claims is alive and well. Plaintiffs who cannot tie their claimed damages to specific inaccuracies in their reports should not prevail, and costs incurred to correct inaccurate reporting should be inadequate.
Feel free to contact Joseph Messer at (312) 334-3440 or jmesser@messerstrickler.com for assistance in determining whether these decisions can help you, or if you have questions regarding FCRA in general.
[1] TransUnion LLC v. Ramirez, 594 U.S.____ (2021) (decided June 25, 2021)
[2] The Ninth Circuit is the Federal Court of Appeals for the federal courts in Arizona, Alaska, California, Guam, Hawaii, Idaho, Montana, Nevada, Oregon and Washington state.
[3] 2021 U.S. App. LEXIS 17687 (9th Cir. June 14. 2021)