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									             FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

The Strasburger FCRA Newsletter is   The FTC Issues Guidance on Red Flag Rule and
designed to keep you current on      Extends Enforcement Deadline
FCRA-related legal issues and
events. For more frequent updates,   The Federal Trade Commission (“FTC”) recently issued
see our blog at the FCRA Blog.       guidance on the Red Flags Rule to assist businesses in
                                     determining whether the Red Flags Rule applies to them
         PREPARED BY                 and how to comply with it. To assist in this effort, the FTC
                                     further delayed the enforcement date on the Rule until
                                     November 1, 2009.
                                     The Red Flags Rule is intended to combat fraud and
                                     identity theft by requiring “creditors” and “financial
                                     institutions” with covered accounts to implement
                                     programs to identify, detect, and respond to the warning
                                     signs, or “red flags,” that could indicate identity theft. The
                                     financial regulatory agencies, including the FTC,
                                     developed the Rule, which was mandated by the Fair and
                                     Accurate Credit Transactions Act of 2003.
          M. Kasey Ratliff           The Red Flags Rule requires financial institutions and
   kasey.ratliff@strasburger.com     creditors that hold consumer accounts, or other accounts
    901 Main Street, Suite 4400      for which there is a reasonably foreseeable risk of identity
      Dallas, TX 75202-3794          theft, to develop and implement an Identity Theft
          (214) 651-4708             Prevention Program (“Program”) for combating identity
                                     theft in connection with new and existing accounts. The
            EDITORS                  Program must include reasonable policies and
                                     procedures for detecting, preventing, and mitigating
         Erik J. Grohmann            identity theft and must enable a financial institution or
                                     creditor to:
          Tiffany L. Cox
                                        •   Identify relevant patterns, practices, and specific
         Marc F. Kirkland
                                            forms of activity that are “red flags” signaling
           Paul L. Myers                    possible identity theft and incorporate those red
                                            flags into the Program;
          M. Kasey Ratliff
         Paul W. Sheldon                •   Detect red flags that have been incorporated into
                                            the Program;
      Martin E. Thornthwaite
                                        •   Respond appropriately to any red flags that are
                                            detected to prevent and mitigate identity theft; and

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                                             … continued on page 2.
              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

Continued from Page 1
   •   Ensure the Program is updated periodically to reflect changes in risks from identity theft.

The Rule also requires credit and debit card issuers to develop policies and procedures to
assess the validity of a request for a change of address that is followed closely by a request for
an additional or replacement card. In addition, the Rule requires users of consumer reports to
develop reasonable policies and procedures to apply when they receive a notice of address
discrepancy from a consumer reporting agency.
Since the introduction of the Red Flags Rule in November 2007, much uncertainty has followed
regarding the Rule’s applicability, coverage, and requirements for compliance. In response, the
FTC extended the enforcement deadline for an additional three months (the Rule was set to
take effect on August 1, 2009) and issued “frequently asked questions” information to address
those concerns.      The FTC’s guidance on the Red Flags Rule can be found at:

Eleventh Circuit Affirms Dismissal of Pro Se’s FCRA Claims for Failure to State a Claim
Peart v. Shippie, 2009 U.S. Dist. LEXIS 18019 (11th Cir. Aug. 11, 2009) link to opinion
Facts: Pro Se Appellant appealed the dismissal of his complaint alleging violations of the Fair
Credit Reporting Act (“FCRA”), Fair Credit Billing Act (“FCBA”), and various Florida state law
claims for failure to state a claim. These claims were brought against a bank, the bank’s CEO,
and three consumer reporting agencies (“CRAs”). The Appellant’s brief failed to challenge the
district court’s dismissal of his FCBA claim so the FCRA claim was the only federal claim
properly before the Court. The Eleventh Circuit affirmed the dismissal of the FCRA claim
because the consumer did not allege that: (1) the bank failed to conduct an investigation into the
consumer’s credit history after being notified of a dispute by a CRA, and (2) the CRAs failed to
reinvestigate his credit history upon request or to generally follow reasonable credit reporting
   •   Failure to State a Claim. The Court construes pro se pleadings liberally and holds
       them to a less stringent standard than those drafted by attorneys. Nonetheless,
       arguments raised for the first time on appeal and claims not raised in an appellate brief
       will not be considered by the Court.
   •   Notification. Pursuant to § 1681s-2(b), a consumer has a private right of action against
       a furnisher if the furnisher received notice of the consumer’s dispute from a CRA.
       Plaintiff failed to state a claim under this provision because he did not allege that the
       bank received notice of his dispute.
   •   Reinvestigation. Pursuant to § 1681i, once a consumer disputes information with a
       CRA, the CRA must reinvestigate the dispute and record the current status of that
       information unless it has reasonable grounds to believe that the dispute is frivolous or
       irrelevant. Plaintiff failed to state a claim under this provision because he did not allege
       that the CRA failed to reinvestigate any of his disputes.

              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

   •   Reasonable Procedures. Pursuant to § 1681e(b), a CRA must follow reasonable
       procedures to assure maximum possible accuracy of the information it reports on
       consumers. Plaintiff failed to state a claim under this provision because he did not
       allege that the CRAs generally failed to follow reasonable credit reporting procedures.

Furnisher’s Failure to Report the Disputed Nature of Consumer’s Debt Precludes
Summary Judgment
Shames-Yeakel v. Citizens Financial Bank, 2009 U.S. Dist. LEXIS 75093 (N.D. Ill. Aug. 21,
2009) link to opinion
Facts: Plaintiffs fell victim to identity theft when an unknown person gained access to a home
equity line of credit and stole certain funds from it, prompting Plaintiffs to refuse payment to
Citizens Financial Bank for the loss. Plaintiffs alleged § 1681s-2(b) claims, as well as others
against Citizens Financial Bank for the erroneous “delinquent status” reporting of their home
equity line of credit, despite numerous prior disputes filed by Plaintiffs. Citizens Financial Bank
filed a motion for summary judgment, arguing that its investigation upon notice of Plaintiffs’
disputes was reasonable as a matter of law. The Court granted in part and denied in part
Defendant’s motion.
   •   Furnisher Duties. While there is no private right of action for a violation of § 1681s-
       2(a), a private right of action does exist for alleged violations of § 1681s-2(b).
   •   Furnisher Investigation. Liability pursuant to § 1681s-2(b) occurs as a result of an
       unreasonable investigation, not simply the reporting of inaccurate information. Where a
       furnisher conducts an investigation and concludes that the disputed information is
       accurate, it will not be liable pursuant to § 1681s-2(b) if the investigation was
   •   Furnisher Duties. Where a consumer has presented a furnisher with a colorable
       argument against liability, failure to note the dispute in any credit report may be
       “misleading” and therefore “incomplete or inaccurate” within the meaning of § 1681s-
       2(b). Citizens Financial Bank knew that Plaintiffs contested the debt and therefore had
       a duty to report the disputed nature of the debt, which it failed to do. The genuine FCRA
       issue lies not in the reasonableness of Citizen’s factual investigation but rather in the
       reasonableness of its ultimate decision to report Plaintiffs’ credit account as delinquent
       without acknowledging the disputed nature of their debt.
   •   Willful Noncompliance. Willful noncompliance under the FCRA includes not only acts
       known by the furnisher to violate the FCRA but also the furnisher’s reckless disregard of
       its statutory duties.
   •   Negligence. Fiduciary institutions such as furnisher Citizens Bank have a common law
       duty to protect their members’ or customers’ confidential information against identity

              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

Court Certifies Class for FCRA Claims Related to a Creditor's Failure to Truncate Credit
Card Receipts
Shurland v. Bacci Café, et al., 2009 U.S. Dist. LEXIS 73309 (N.D. Ill. Aug. 19, 2009) link to
Facts: Plaintiff 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. Defendant
processed customers’ credit card payments using a single credit card processing terminal it had
purchased from National Translink Corp. (“National Translink”). Plaintiff filed suit seeking to
represent a class of more than 6,000 consumers to whom Defendant allegedly issued receipts
that violate the FCRA. Defendant lodged a third-party complaint for breach of contract and
contribution against National Translink. The Court simultaneously decided Plaintiff’s Motion for
Class Certification, Bacci’s Motion for Summary Judgment on Plaintiff’s willful claims, and
National Translink’s Motion to Dismiss Bacci’s contribution claim. The Court granted Plaintiff’s
Motion for Class Certification, denied Bacci’s Motion for Summary Judgment, and granted
National Translink’s Motion to Dismiss.
   •   Willfulness. Willfulness under the FCRA includes both knowing and reckless conduct.
       Recklessness entails an unjustifiably high risk of harm that is either known or so obvious
       that it should be known. The standard is an objective one, constituting something more
       than negligence but less than knowledge of the law’s requirements.
   •   Willfulness. Evidence produced by National Translink of the detailed methods
       employed to notify hundreds of clients of the need to truncate credit card receipts, along
       with their documentation and contemporaneous handwritten notes of this process,
       support the inference that National Translink did in fact contact Bacci regarding the new
       truncation requirements. A reasonable jury could conclude that Bacci received notice
       and either knowingly or recklessly disregarded it. Thus, Plaintiff has demonstrated
       genuine issues of material fact as to when Defendant obtained knowledge of the FCRA’s
       truncation requirements and whether it acted willfully in disregarding those requirements
       when it issued Plaintiff’s receipt.
   •   Class Certification Standard. To obtain class certification, a plaintiff must satisfy all
       four requirements of Fed. R. Civ. P. 23(a): (1) the class is so numerous that joinder of all
       members is impracticable (numerosity); (2) there are questions of law or fact common to
       the class (commonality); (3) the claims or defenses of the representative parties are
       typical of the claims or defenses of the claims (typicality); and (4) the representative
       parties will fairly and adequately protect the interests of the class (adequacy of
   •   Class Certification. A present lack of identifying details such as contact information or
       the names of class members need not defeat class certification. In ascertaining class
       size, the Court may rely on common sense assumptions or reasonable inferences based
       on known facts. Plaintiff’s allegation that Defendant allegedly produced 6,359 receipts
       that violated the FCRA by displaying more than the final five digits of the cardholder’s
       credit card number meets the numerosity requirement.

              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

   •   Class Certification. When and under what circumstances Defendant printed the
       receipts on its machines and whether Defendant did so willfully and what damages may
       be appropriate are circumstances here generating common questions of fact and law.
   •   Class Certification Standard. Fed. R. Civ. P. 23(b)3 requires that questions of law or
       fact common to members of the class predominate over questions affecting only
       individual members, and that a class action is superior to other methods of adjudicating
       the class claims.
   •   Class Certification. Common issues of fact and law are 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 Certification. Plaintiff has met its burden of production regarding Defendant’s
       willfulness, and the question of whether Defendant acted willfully is central both to
       Plaintiff’s individual claim and to the claims of the class as a whole.
   •   Class Certification. Damage amounts available in FCRA actions are especially well-
       suited to resolution by class action. Class certification is superior to other forms of
       litigation for the resolution of the issues in this case.
   •   Contribution. A private contractual right to contribution must arise from an express
       agreement between the parties where Congress has not created an affirmative action for
       contribution or Federal common law fails to recognize such a right. The Court will not
       imply an agreement to share liability where there is no evidence the parties
       contemplated such an arrangement.

Plaintiff’s Claim for Merchant’s Willful Violation of the FCRA Survives Motion to Dismiss
Steinberg v. Stitch & Craft, Inc. 2009 U.S. Dist. LEXIS 72908 (S.D. Fla. Aug. 18, 2009) link
to opinion
Facts: Plaintiff filed a class action suit against Defendant for issuing electronically generated,
point-of-sale receipts that contained consumers credit/debit card expiration dates, in violation of
§ 1681c(g) of the FCRA. Defendant filed a motion to dismiss for failure to state a claim because
it claimed its conduct was not willful and because the Clarification Act indicates its actions were
not willful, which the Court denied. Plaintiff’s allegations that: 1) Defendant had knowledge of
the FCRA’s truncation requirements; 2) Defendant was directly notified by the major credit card
companies of the FCRA’s truncation requirements; and, 3) Defendant ignored such
requirements to avoid the additional associated expense association with compliance, was
deemed sufficient to state a claim for a willful violation of § 1681c(g).
   •   Willfulness. “Willful,” as used in § 1681n, encompasses knowing and intentional
       violations of the FCRA as well as reckless violations.
   •   Willfulness. A defendant acts willfully when he violates the terms of the FCRA with
       knowledge or reckless disregard of the law.

              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

   •   Willfulness. In reviewing a motion to dismiss the only issue is whether a “construction
       of the factual allegations will support the cause of action.” Plaintiff alleged that
       Defendant knew of its obligations under the FCRA but ignored them. That allegation is
       sufficient to support Plaintiff’s claim that Defendant acted willfully.
   •   Clarification Act. The Clarification Act precludes claims for willful noncompliance based
       only on a merchant’s failure to redact an expiration date from a credit card receipt for
       any transaction occurring between December 4, 2004, and June 3, 2008. Defendant’s
       alleged conduct occurred after June 3, 2009 and this was not covered by the
       Clarification Act.

Furnisher’s Failure to Carry Initial Evidentiary Burden Dooms Summary Judgment on
FCRA and Fair Credit Billing Act Claims
Gaughen v. Sears Roebuck & Co., 2009 U.S. Dist. LEXIS 76335 (E.D. Wash. Aug. 17, 2009)
link to opinion
Facts: Plaintiff opened a Sears credit card through Citibank to purchase several appliances.
Unsatisfied with the appliances, he returned them. While Sears accepted Plaintiff’s decision to
return the items, Citibank did not adjust his credit card account accordingly. Plaintiff disputed
the information with the three CRAs and Citibank, in response to the CRAs’ subsequent
investigations, verified the disputed account information as accurate. Plaintiff brought suit
against Sears and Citibank, alleging violations of the FCRA, the FCBA, and Washington’s
Consumer Protection Act. Defendants filed motions for summary judgment, which were denied.
   •   Furnisher Duties. A furnisher’s duty under § 1681s-2(b) includes conducting an
       investigation upon receiving notice of a consumer’s dispute, and such investigation
       being reasonable in light of the information received from the CRAs.
   •   Summary Judgment. Defendants argued that they were entitled to summary judgment
       because Plaintiff failed to present evidence from which a rational jury could find that
       Citibank’s investigations were unreasonable. The moving party bears the initial burden
       in bringing a summary judgment under Federal Rule of Civil Procedure 56. The moving
       party may satisfy its burden by producing evidence negating an essential element of the
       non-moving party’s claim, or by showing that the non-moving party does not have
       enough evidence of an essential element to carry its ultimate burden of persuasion at
       trial. Defendants failed to offer evidence describing Citibank’s reasonable investigation
       conducted in response to the notices it received from the CRAs. Absent such evidence,
       Defendants cannot negate an essential element of Plaintiff’s FCRA claim, nor can they
       show that Plaintiff did not have enough evidence of an essential element to carry his
       ultimate burden of persuasion at trial. Accordingly, Defendants failed to carry their initial
       burden of production under Rule 56.
   •   Fair Credit Billing Act. When an FCBA debtor sends a FCBA creditor a billing-error
       notice that complies with 15 U.S.C. § 1666(a), the FCBA creditor must acknowledge the
       notice and conduct an investigation. Here, absent evidence that Plaintiff could not
       produce any documents or, in the alternative, that the documents he produced were

              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

       inadequate to trigger Citibank’s duties under the FCBA, Defendants did not satisfy their
       initial burden of production, and their summary judgment failed at the threshold.

Pro Se Plaintiff’s Multiple FCRA Claims Dismissed for Failure to State a Claim
Hinton v. Trans Union, LLC 2009 U.S. Dist. LEXIS 70144 (E.D. Va. Aug. 11, 2009) link to
Facts: Plaintiff, a pro se litigant with a documented history of filing frivolous law suits, brought
suit against Trans Union, Experian and Equifax alleging numerous violations of the FCRA and
Virginia credit reporting laws. Defendants filed a 12(b)(6) motion to dismiss for failure to state a
claim because Plaintiff’s complaint was completely devoid of specific factual averments to
support his alleged claims and insufficient to notify Defendants as to the basis of the claims
asserted against them. The Court granted Defendants’ motion, and dismissed Plaintiff’s
complaint with prejudice.
   •   Failure to State a Claim. The Supreme Court has recently declared that threshold
       dismissal pursuant to Rule 12(b)(6) must be granted unless the complaint “contains
       sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its
       face.” It follows that to survive a Rule 12(b)(6) motion, a complaint must contain “more
       than an un-adorned, the defendant-unlawfully-harmed-me accusation.” And in this
       respect, it is also true that “the tenet that a court must accept as true all of the
       allegations contained in a complaint as inapplicable to legal conclusions.” Ashcroft v.
       Iqbal, 129 S. Ct. 1937, 1949 (2007). The requirement that a plaintiff’s factual allegations
       give the defendant fair notice of what the claim is and the grounds upon which it rests
       applies to all claimants, including those proceeding pro se.
   •   Permissible Purpose. Section 1681b provides that CRA’s may not furnish a
       consumer’s credit report to third parties except for the circumstances listed in §1681b.
       Here, Plaintiff appears to rest his §1681b claim on the allegation that he never
       consented to the inquiries listed in his credit reports. The plain language of §1681b
       makes clear that consumer consent is not a prerequisite to the release of a credit report
       to a third party.
   •   Fraud. Section 1681c-1 sets forth those circumstances in which a CRA, at the request of
       a consumer and on receipt of appropriate proof of identity, must include a fraud alert in
       the file of that consumer. Section 1681c-1 also specifies certain circumstances where,
       on receipt of appropriate proof of identity, a consumer may request that a fraud alert be
       removed from his file. In the instant case, Plaintiff’s allegations do not specify that
       Defendant failed to place a particular, requested fraud alert on his credit report, nor does
       he allege any facts that give rise to a plausible inference that Defendant did not properly
       respond to an appropriate request by Plaintiff.
   •   Reasonable Procedures. With respect to a §1681e(a) claim, a plaintiff must first show
       that a CRA released a report in violation of §1681b. With regard to a §1681e(b) claim, a
       plaintiff must show: 1) that a particular consumer report contains inaccurate information;
       and, 2) that the CRA did not follow reasonable procedures to assure maximum possible
       accuracy. In the instant case, Plaintiff simply alleged that the CRA’s were reporting

              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

       disputed fraudulent credit inquiries, addresses, and a notation regarding inquiries. Such
       general and vague allegations are not adequate to show that the pleader is entitled to
       relief, and those allegations fall short of establishing a plausible inference that Plaintiff
       has a valid claim for reasonable procedures.
   •   Disclosures to Consumers. Section 1681g requires that CRA’s must, at the
       consumer’s request, disclose certain information in the consumer’s credit report.
       Plaintiff’s only factual allegations were: 1) that on certain occasions, Defendants did not
       respond to letters sent by Plaintiff; and, 2) that at various, unidentified times, Defendants
       blocked Plaintiff’s access to their websites and to a third party FICO website. Plaintiff’s
       various allegations did not give any reason to believe his letters (the contents of which
       the Plaintiff did not describe) imposed a duty to respond under §1681g, nor do Plaintiff’s
       allegations give rise to a plausible inference that Defendants blocked any websites in a
       manner contrary to §1681g’s provisions.
   •   Reinvestigation. A consumer who brings a §1681i failure to reinvestigate claim must
       first show that his credit file contains inaccurate or incomplete information. Given that
       Plaintiff failed to adduce facts that might allow a plausible inference that his credit
       reports contained any inaccurate information, his §1681i claim fails.
   •   Consumer Reporting Agency. Section 1681h states that CRA’s must provide trained
       personnel to explain to the consumer any information furnished to him pursuant to
       §1681g. Plaintiff’s claim fails because he does not provide any factual content
       explaining which of Defendant’s personnel were inadequately trained, nor does he
       specify how such inadequate training harmed him.
   •   Disclosure Charges. Section 1681j governs the monetary charges that CRA’s may or
       may not charge for providing certain disclosures. Plaintiff’s claim fails because he does
       not specify which disclosures were the subject of inappropriate charges, and he does not
       give the Defendants fair notice of what the claim is and the grounds upon which it rests.
   •   Users of Consumer Reports. Because § 1681m imposes certain requirements on
       parties obtaining credit reports, and not on CRA’s, Plaintiff’s claim fails.

Plaintiff’s FCRA Claim against Furnisher Fails Due to Lack of Actual, Emotional or
Punitive Damages
Zean v. Unifund CCR Ptnrs., 2009 U.S. Dist. LEXIS 69707 (D. Minn. Aug. 10, 2009) link to
Facts: Plaintiff’s suit stems from a dispute regarding the responsibility for a credit card issued
by US Bank to Plaintiff’s brother. While Plaintiff and his brother apparently started the process
of making Plaintiff an authorized user on the account, Plaintiff claims that he never received or
used the card. Plaintiff’s brother subsequently filed for Chapter 7 Bankruptcy, and US Bank and
subsequently Unifund, who purchased the account, took various steps to collect from Plaintiff,
including asserting that he was a joint account holder, and also commencing a collection action
against him in Minnesota State Court. Plaintiff asserts violations of the FCRA, the Fair Debt
Collection Practice’s Act (“FDCPA”) and also asserts a state law claim of credit defamation.

             FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

Unifund filed a motion for partial summary judgment, seeking summary judgment as to the
FCRA and defamation claims, which the Court granted.
   •    Damages. The term “actual damages” under the FCRA includes out-of-pocket
       expenses for an attorney incurred by a plaintiff prior to litigation because a consumer
       should not be required to bear the expense of an attorney to obtain compliance with the
       law. However, the term does not include attorney’s fees or expenses associated with a
       plaintiff’s FCRA litigation. The Court found that Plaintiff’s out-of-pocket economic
       damages were not compensable because they did not arise from his attempts to enforce
       compliance with the law; rather these expenses were incurred in connection with the
   •   Emotional Distress. The Eighth Circuit has not specifically addressed the standard to
       be applied to emotional distress damages. A physical manifestation of emotional
       distress is not always required before a plaintiff may recover. Plaintiff’s evidence of
       emotional distress consisted of his own deposition testimony of occasional
       sleeplessness and that he did not feel like smiling. The Court concluded that Plaintiff
       had not put forth sufficient evidence to allow recovery of emotional distress damages
       under any standard. Further, even if Plaintiff had produced sufficient evidence to
       support his claims of emotional distress, his claims still fail because he did not show that
       his damages were caused by Defendant’s conduct.
   •   Punitive Damages. The Court relied on the Supreme Court’s Safeco standard for willful
       conduct under the FCRA, as including knowing violations and reckless disregard. The
       Supreme Court further characterized reckless conduct as action entailing “an
       unjustifiably high risk of harm that is either known or is so obvious that it should be
       known.” Safeco Ins. Co. of America v. Burr, 551 U.S. 47, 52, 59 (2007.) Plaintiff’s
       evidence of willful conduct consisted of Defendant’s alleged failure to correctly reflect
       Plaintiff’s account as being in dispute upon receiving notification of same. The Court
       held that while such conduct could be construed as negligent, by itself it did not
       constitute knowing or reckless conduct constituting willful non-compliance.
   •   Preemption. Regarding Plaintiff’s state law claim for credit defamation, the Court found
       no evidence on the record that Defendant’s conduct was motivated by malice or willful
       intent to injure Plaintiff, or even by reckless disregard. The Court noted that Defendant
       erred by failing to notify the credit reporting agencies that Plaintiff had disputed the
       account. However, while such error may constitute negligence, it does not fall within the
       exception to preemption in §1681h(e).

Plaintiff’s FCRA Claim Survives Summary Judgment But Only With Respect to Mental
Anguish Damages Related to Inaccurate Employment Background Report
Christensen v. Acxiom Info. Sec. Servs., 2009 U.S. Dist. LEXIS 69177 (W.D. Ark. Aug. 6,
2009) link to opinion
Facts: Plaintiff alleged Defendants violated § 1681e(b) and § 1681k(a) of the FCRA. Plaintiff
applied for a psychology teaching position and consented to a background investigation. Her
prospective employer requested the background investigation from Defendant Per Mar Security

              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

and Research Corp. (“Per Mar”), a CRA under the FCRA. Per Mar retained Defendant Acxiom
Information Security Services, Inc. (“Acxiom”) to provide information regarding Plaintiff. The
prospective employer was provided with a consumer report that contained inaccurate
information including a conviction of assault and family violence. Plaintiff was subsequently not
hired for the position. The Court granted Defendants’ motions for summary judgment except as
to Plaintiff’s claim for mental anguish damages related to the inaccurate employment
background report.
   •   Reasonable Procedures. Even if inaccurate information is included, a CRA may avoid
       liability under § 1681e(b) if it followed “reasonable procedures to assure maximum
       possible accuracy.”
   •   Strict Procedures. Under § 1681k(a), absent notice under § 1681k(a)(1), a CRA must
       maintain strict procedures designed to ensure that the information is complete and up to
       date when it reports information which are matters of public record and are likely to have
       an adverse effect upon a consumer’s ability to obtain employment.
   •   Willful Noncompliance. Plaintiff’s claim that Defendants willfully violated § 1681e(b)
       and § 1681k(a) failed because there was no evidence Defendants “knowingly and
       intentionally committ[ed] an act in conscious disregard for the rights of [Plaintiff].”
       Rather, the evidence suggested that the error in reporting occurred as a result of simple
       human mistake – writing the control number of an individual other than Plaintiff’s on a
   •   Negligence. The Court found that Plaintiff’s claim that Defendants negligently violated §
       1681e(b) and § 1681k(a) survived summary judgment because a trier of fact could find
       (1) that Acxiom overworked its researchers and failed to sufficiently vet, train, and
       monitor them; and (2) that Per Mar did not have procedures in place to instruct its
       subvendors on the appropriate sources for reliable information about a person’s criminal
   •   Damages. Defendants were granted summary judgment on Plaintiff’s damages claim
       related to the rescission of her offer of employment because the prospective employer
       testified that after the erroneous background report was resolved, Plaintiff was re-offered
       the position. The offer was withdrawn the second time because of a negative
       conversation about the handling of the background report Plaintiff had with a
       representative of the employer.
   •   Emotional Distress. Plaintiff’s claim for emotional distress related to the erroneous
       consumer report survived summary judgment because, in light of Plaintiff’s professional
       background teaching about the psychology of domestic violence, Plaintiff testified that
       she “suffered shock and panic upon learning that a consumer report showed that she
       had committed an act of domestic violence ….”

              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

Court Clarifies Credit Reporting Agencies’ Reinvestigation Obligations
Cornock v. Trans Union, LLC, 2009 U.S. Dist. LEXIS 66447 (D. N.H. July 29, 2009) link to
Facts: Plaintiff’s ex-wife opened a credit account in his name with MBNA. Plaintiff disputed
ownership of the account with MBNA. MBNA eventually commenced an arbitration proceeding
against Plaintiff for the outstanding balance on the account. MBNA prevailed in the arbitration
proceeding and later filed suit seeking to enforce the arbitration award. While this action was
pending, Plaintiff disputed ownership of the MBNA account with Trans Union. Trans Union
investigated Plaintiff’s dispute by communicating with MBNA exclusively through the ACDV
process and MBNA verified the account. Plaintiff filed suit against Trans Union alleging violation
of the FCRA. Trans Union moved for summary judgment and the Court granted the Motion.
   •   Reinvestigation. The FCRA imposes no obligation on CRAs to resolve questions that
       can only be resolved by a court of law. Whether an arbitration award is valid is precisely
       that sort of question.
   •   Accuracy. Because any reasonable investigation by Trans Union into Plaintiff’s debt to
       MBNA would have uncovered the facially valid arbitration award, Plaintiff cannot show
       that his credit report was “inaccurate” in the sense required to prevail.
   •   Reinvestigation. The decisive inquiry in whether a consumer has identified a factual
       inaccuracy on his or her credit report that would activate § 1681i’s reinvestigation
       requirement is whether the CRA could have uncovered the inaccuracy if it had
       reasonably reinvestigated the matter. The nature of the inquiry is predictive, not
       retrospective. It asks what could have happened if the CRA had conducted a
       reasonable reinvestigation, not what did happen as a result of whatever reinvestigation
       the CRA actually performed.
   •   Reinvestigation. 1681i does not require a CRA to investigate latent infirmities in a
       document that, on the face of it, affirms the debt in question.

FCRA Class Action against the United States Dismissed Based on Sovereign Immunity
Bormes v. United States, 2009 U.S. Dist. LEXIS 65685 (N.D. Ill. July 24, 2009) link to opinion
Facts: Plaintiff brought a class action against the United States for alleged violations of the
FCRA related to an internet-based billing and payment processing system that allows
consumers to make online payments to various government agencies by credit or debit card.
Plaintiff brought the action on behalf of himself and a class of individual cardholders who were
provided electronically-printed receipts that purportedly displayed more than the last five digits
of the cardholder’s credit or debit card and/or the expiration date of the card, in violation of
§ 1681c(g)(1). The United States filed a 12(b)(1) motion to dismiss for lack of subject matter
jurisdiction based upon sovereign immunity, which the Court granted.
   •   Failure to State a Claim. Following the Supreme Court’s decision in Twombly, a
       complaint will survive a motion to dismiss only when the complaint contains enough
       detail, factual or argumentative, to indicate that the plaintiff has a substantial case. Bell
       Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

   •   Sovereign Immunity. The doctrine of sovereign immunity protects the United States
       from suit except where congress has an unequivocally-expressed waiver of immunity. In
       determining whether the FCRA unequivocally expresses a waiver of sovereign immunity,
       the Court held that the inclusion of the generic term “government” within § 1681a(b)’s
       definition of “person” does not effectively waive the United States’ sovereign immunity.
       Other federal statutes have unequivocally waived the United States’ sovereign immunity
       by expressly inserting the specific term “United States” into the statutory language. In
       fact a separate section of the FCRA, § 1681u(i), expressly provides that the “United
       States” may be liable for certain violations. Because §1681n, under which Plaintiff seeks
       relief, has not so unequivocally waived the sovereign immunity of the United States,
       Plaintiff fails to present a claim under which relief can be granted.

Court Holds That Purportedly Incomplete Credit Reports Not Inaccurate; Grants
Summary Judgment
Harris v. Experian Information Solutions, Inc., No. 6:06-cv-1808-GRA (D. S.C. Filed
June 30, 2009) link to opinion
Facts: Plaintiff brought this class action claiming that Experian negligently and willfully violated
the FCRA in failing to include credit limit data for Capital One credit card accounts. Plaintiff
contended that this omission from Experian’s credit reports resulted in inaccuracies that
adversely affected class members’ credit scores and violated the FCRA. Capital One withheld
credit limit information in an effort to gain a competitive advantage and out of a concern that
rival credit card companies would obtain the information and use it to target Capital One’s
customers. Due to Capital One’s policy, credit reports issued by Experian for consumers with
Capital One accounts did not include the credit limit for those accounts and instead indicated
the high balance for the account. Experian moved for summary judgment arguing that there
was nothing inaccurate about the reports and that any purported “incompleteness” of the reports
did not render them inaccurate. The Court agreed and granted the motion.
   •   Accuracy. A credit report is not “inaccurate” when it does not include a credit limit that
       has not been provided by a furnisher. A credit report is not “inaccurate” simply because
       it does not include all relevant information about a consumer.
   •   Furnisher’s Duties. With narrow, expressly enumerated exceptions, those who may
       have credit information have no legal obligation to report that credit information to the
       CRAs. Instead, it is a voluntary reporting system, under which furnishers of credit data
       may choose whether to furnish any information and, if so, which particular items to
   •   Reasonable Procedures. It would be counter-intuitive to conclude that Congress
       intended to hold CRAs liable for producing reports without credit limits, when data
       furnishers were never required to provide the information.
   •   Reasonable Procedures. There is no requirement in the FCRA that CRAs affirmatively
       collect information. There is no obligation on the CRA to take steps to procure
       information not provided to it.

              FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

   •   Reasonable Procedures. Experian’s alleged failure to adopt procedures to somehow
       coerce Capital One into producing credit limit information or to adopt procedures to
       affirmatively collect credit limit information in some other way, does not state a
       cognizable violation of § 1681e(b)’s “reasonable procedures” requirement.
   •   Damages. Nominal damages are not available under § 1681o in light of the statutory
       language expressly limiting recovery to “actual damages.”
   •   Willfulness. If Plaintiff cannot prevail on a willfulness claim unless the Defendant’s
       interpretation of the FCRA is “objectively unreasonable” – that is, the Defendant’s
       reading of the requirements of the FCRA is contrary to “pellucid” statutory text, pertinent
       decisions by the Federal Courts of Appeals, or authoritative guidance from the Federal
       Trade Commission.

Fraud Alert Request Made by Corporation Rather Than Individual Consumer Found To Be
An Unfair Business Practice
Experian Information Solutions, Inc. v. Lifelock, Inc. 2009 U.S. Dist. LEXIS 44010 (C.D.
Cal. May 19, 2009) link to opinion
Facts: Defendant Lifelock offered its individual customers a “bundle of identity theft protection
services” including the submission of fraud alert requests to CRAs, thereby requiring the CRAs
to place certain information in a consumer’s credit file, refer the request to the other CRAs, and
send the consumer certain disclosures. Experian brought several claims against Lifelock,
including an allegation that Lifelock’s fraud alert business practices violate California’s Unfair
Competition Law (“UCL”). Experian filed a motion for partial summary judgment, claiming that
Lifelock’s business practice of requesting CRAs to place fraud alerts on consumer files violates
§ 17200 of the UCL because it offends a public policy established by the FCRA. The court
   •   Unfair Competition Law (UCL):         Section 17200 of the California Business &
       Professions Code, known as the UCL, specifically prohibits “any unlawful, unfair or
       fraudulent business act or practice.”
   •   CRA Fraud Alert Requirements: Section 1681c-1 of the FCRA requires CRAs to place
       a fraud alert “upon the direct request of a consumer, or an individual acting on behalf of
       or as a personal representative of a consumer, who asserts in good faith a suspicion that
       the consumer has been or is about to become a victim of fraud or related crime,
       including identity theft….”
   •   CRA Fraud Alert Requirements: Congress expressly excused CRAs from placing
       fraud alerts on consumer credit files requested by companies like Lifelock because of
       §1681c-1’s use of the term “consumer” (individual only) rather than “person” (individuals
       and/or entities).
   •   Congressional Intent: When § 1681c-1 was drafted, Congress intended that fraud
       alert requests come directly from consumers or individuals and not corporations and/or
       entities “such as credit repair clinics.”

                  FCRA NEWSLETTER • October 1, 2009 • STRASBURGER & PRICE, LLP

South Carolina Supreme Court Rules that Out of State Law Firm Must Obtain a License
to Provide Credit Counseling Services in South Carolina
Lexington Law Firm v. South Carolina Department of Consumer Affairs, 2009 S.C. Lexis
133 (S.C. May 12, 2009) link to opinion
Facts: The Department of Consumer Affairs in South Carolina advised Lexington Law Firm, a
Utah firm that was providing credit counseling services to South Carolina citizens, that it needed
to obtain a license in order to legally provide credit counseling services in the state. In
response, the Lexington law Firm cited an exemption to the licensing requirements of the South
Carolina Consumer Credit Counseling Act (“SCCCCA”) for attorneys at law when acting in the
regular course of their respective business and professions. The firm subsequently filed a
declaratory judgment action in Administrative Law Court seeking a declaration that the firm was
entitled to the SCCCCA’s attorney at law exemption. The trial court found that Lexington Law
Firm fell under the attorney at law exemption and was not subject to the licensing requirement.
The South Carolina Supreme Court reversed this decision on appeal.
    •    SCCCCA. Section 37-7-101(2)(d)’s conditional “regular course of . . . business”
         language is unambiguous. The language indicates a clear Legislative intent to limit the
         exemption to a listed business (or profession) when the credit counseling service is part
         of the regular course of that business. If a statutorily enumerated business provides
         credit counseling services not in the regular course of its business, the exemption is
    •    SCCCCA. The untenable dichotomy Lexington Law Firm advances is they fall under the
         attorney exemption but do not commit the unauthorized practice of law in South Carolina
         because they are conducting a business. If Lexington Law Firm is, in fact, acting in the
         regular course of the practice of law in South Carolina, then it is engaging in the unlawful
         unauthorized practice of law. Conversely, if Lexington Law Firm is merely conducting a
         credit counseling business, then it may not gain relief from the statutory compliance
         requirements due to the “Attorneys at Law” exemption.
    •    SCCCCA. Lexington Law Firm is not barred from providing credit counseling services to
         South Carolinians but the firm must comply with the statutes enacted by the legislature
         regarding licensing.

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