Credit report

FCRA Act – Federal Court finds inaccurate credit report alone does not establish Section III

Recently, a case heard in the Eastern District of California addressed the division of authority regarding whether an inaccurate credit report by itself is sufficient to establish material harm for the purposes of Article III.

The applicant in the case was a California consumer who sued an information provider alleging 2 motion causes for violation of the Fair Credit Reporting Act (FCRA) as well as the California Consumer Credit Report Reporting Agencies Act regarding consumer credit card debt that the plaintiff owed the defendant . The plaintiff in this case claimed that the defendant reported that the debt was written off or otherwise unpaid or overdue, which was incorrect.

Plaintiff asserts that the debt should have been declared discharged in bankruptcy after the discharge of his “assetless” Chapter 7 bankruptcy, in which the debt would have been provided for. Plaintiff also claimed that Defendant’s failure to comply with the Metro 2 report was a misleading or inaccurate statement.

The defendant moved to dismiss the plaintiff’s claims entirely, saying the plaintiff had made no allegation that she suffered damages, nor did she have standing in the case. The Court then considered the plaintiff’s claim for actual damages and concluded that the plaintiff’s claims for alleged actual damages were not sufficient to establish standing in the case. Indeed, the damages she claimed were lower than the legal costs. After that, the Court analyzed the plaintiff’s claim for emotional distress.

The Court found the claims of emotional distress to be conclusive and vague. Accordingly, they concluded that these allegations were insufficient to establish standing. The Court focused primarily on the damage done to the plaintiff’s solvency as well as the supposed “chilling effect” that the plaintiff claims the defendant’s reporting caused. The defendant said the plaintiff’s allegations were not sufficient to make a claim based on the decision in Jaras v. Equifax. Plaintiff wanted the Court to make a decision based on Robins v. Spokeo.

In the first case, the Court decided that in the absence of an imminent transaction or attempted transaction, an inaccurate credit report is not sufficient to allege actual concrete harm. In the latter case, the Court decided that an inaccurate credit report in itself constitutes real harm.

The Court in that case said that “there is no clear authority on whether an inaccurate credit report alone is sufficient to establish concrete harm in fact.” However, the Court also noted that the facts in these two previous cases were distinct. The plaintiff in the Spokeo III case argued concrete harm by alleging that a faulty credit report had already been requested by at least a single third party and that the inaccuracies were such as to harm their employment prospects that they were actively sought out at the time.

The Court said that in the current case, the facts were more similar to the Jaras case, as the plaintiff did not claim concrete harm or show facts establishing that the inaccurate credit report harmed her ability to enter into a transaction in the past or at any time in the near future. The Court found that the plaintiff’s alleged damage to its solvency and the allegations of chilling effect were not sufficient to establish standing under Article III.

The Court granted the defendant’s motion to dismiss, but granted leave to amend. The defendant also sought to strike the plaintiff’s collective allegations for each of the claims. However, the Court dismissed this motion because it was moot since the Court dismissed the applications with leave to amend.

Employer Takeaways

Although these motions occurred before the Supreme Court’s landmark decision in TransUnion v. Ramirez, they provide a clear indication of the division of authority that still exists with respect to standing under Article III. Accordingly, the employer and his attorney would be well served in determining whether the plaintiff has standing in his FCRA claims.

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