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From Banking and Finance Law Daily, August 28, 2017

Including authorized user information in consumer report not objectively unreasonable

By Richard A. Roth, J.D.

A credit reporting agency that chose to include in a consumer’s credit report that she was an authorized user of a credit card account that was in default had not interpreted the Fair Credit Reporting Act in an objectively unreasonable manner, the U.S. Court of Appeals for the Eleventh Circuit has decided. While noting that it disagreed with consumer reporting agency TransUnion’s interpretation, the court said that including the information was a reasonable interpretation of the FCRA obligation to "follow reasonable procedures to assure the maximum possible accuracy" of the reported information. Preliminarily, the court also decided that the consumer had standing to sue TransUnion (Pedro v. Equifax, Inc., Aug. 24, 2017, Pryor, W.).

According to the consumer, her problems began when she was designated as an authorized user of her parents’ Capital One credit card account in order to make it more convenient for her to assist them with their health problems. After her parents died, the account went into default. The credit card company reported the default to consumer reporting agencies and also reported that the consumer was an authorized user.

Equifax and TransUnion both added the information to her credit reports, and her credit score then dropped by 100 points, she claimed. When Capital One removed the consumer from the account and informed the credit reporting agencies that it had done so, the consumer’s score returned to its earlier level, she said.

FCRA claim. The consumer sued the consumer reporting agencies on the theory that, by including her authorized user status in her credit report, they had reported inaccurate information about her liability for the account. This violated their duty to "follow reasonable procedures to assure the maximum possible accuracy of the information concerning the individual about whom the report relates" (15 U.S.C. §1681e(b)).

The consumer did not allege that any actual damages resulted from the violation. As a result, she asserted only a claim for statutory damages due to the reporting agencies’ willful violation of the FCRA. (Only TransUnion remained as a defendant by the time the suit reached the appellate court.).

Standing to sue. Since a plaintiff’s standing to sue is necessary to a federal court’s jurisdiction, the appellate court considered first whether the consumer had described an injury in fact that would give her standing. She had.

Describing an injury that is adequate to create standing requires showing a concrete and particularized, actual or imminent, invasion of a legally protected interest, the court said. An actual injury is required, not an abstract injury.

According to the court, the consumer had shown an injury in fact because:

  • reporting inaccurate information is closely related to defamation, which is a well-recognized cause of action;
  • the consumer had to spend time in her efforts to resolve the problem; and
  • her credit score fell due to the reported information.

Maximum possible accuracy. The consumer did not allege that TransUnion had violated the FCRA negligently. Since she claimed only statutory damages, she had to show that the violation was knowing or reckless. According to the court, this required her to demonstrate not only that the company had not complied with the Act but also that its noncompliance resulted from an objectively unreasonable interpretation of the Act’s requirements.

The issue was the correct standard for what constituted "maximum possible accuracy," the court observed. There were two options. Procedures to assure "maximum possible accuracy" might mean making certain that any included information was technically accurate, or it might mean making sure the information not only was technically accurate but also was not misleading or incomplete.

TransUnion relied on the first interpretation. The court said that while the second interpretation was better, TransUnion’s interpretation was not objectively unreasonable. The strict definitions of the words "maximum," "possible," and "accuracy" permit that interpretation, and some courts have adopted it. "[W]here the courts are divided, it was not objectively unreasonable for TransUnion to read the Act to require only technical accuracy," the opinion said.

There were neither precedents nor agency interpretive guidance advising that reporting authorized user information was a violation, the court added.

The consumer’s claims that the information was not technically accurate then were rejected by the court with only limited analysis.

Concurring opinion. A concurring opinion by Judge Rosenbaum took a different point of view. She focused on the "reasonable procedures" portion of the FCRA requirement.

The concurring judge first noted that all four U.S. appellate courts that have considered the issue have said that "maximum possible accuracy" means more than technically correct. The reported information must not be misleading or incorrect. The information reported by TransUnion clearly was misleading in a harmful way, she concluded.

However, that was not enough. The question of whether a consumer reporting agency’s procedures were reasonable also might need to be considered, and that would require inquiring about the burden that would be imposed on TransUnion if it were required to use a different procedure. That would be a fact-intensive inquiry that probably would not be appropriate to carry out by considering only the pleadings.

On the other hand, the concurring judge apparently concluded that such an inquiry would be needed only if there were a claim of a negligent violation. Since the consumer had claimed a willful violation, that inquiry was unnecessary and it was proper to dismiss the suit.

The case is No. 16-13404.

Attorneys: Jonathan D. Selbin (Lieff Cabraser Heimann & Bernstein, LLP) for Kathleen N. Pedro. Stephen J. Newman (Stroock & Stroock & Lavan, LLP) and Alex Michael Barfield (Stanton Law Office) for Equifax, Inc. and TransUnion LLC.

Companies: Equifax, Inc.; TransUnion LLC

MainStory: TopStory AlabamaNews CreditDebitGiftCards FairCreditReporting FloridaNews GeorgiaNews

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