Fourth Circuit Holds FCRA Claim Fails Under Spokeo

On May 11, 2017, the Fourth Circuit Court of Appeals, relying on the Supreme Court’s decision in Spokeo, Inc. v. Robins (Spokeo), vacated and remanded a $12 million class action judgment against a credit reporting company (“Company”).  The Company allegedly listed incomplete or incorrect information on credit reports in violation of the Fair Credit Reporting Act (FCRA).  The Fourth Circuit found plaintiff had no concrete injury, and therefore no constitutional standing for federal court jurisdiction.

In 2010, a federal government security clearance background check of the named plaintiff uncovered a delinquent credit account.  Plaintiff claimed his cousin had improperly opened the account in plaintiff’s name.  To resolve the matter, plaintiff requested credit reports from three credit agencies, including the Company. The Company provided a credit report listing a delinquent account held by a creditor.  Plaintiff attempted to correspond with that creditor, as well as the Company, but was initially unable to clear his name from the account.  Plaintiff obtained the security clearance, notwithstanding the delinquent account, and eventually got the account deleted from his credit profile at the Company.

The creditor closed in 2010, unable to withstand the 2008 financial crisis, which plaintiff did not know when he was initially trying to clear the delinquent account from his credit profile.  The FDIC became the receiver for the creditor and assigned the account to a new creditor, who appointed a servicer for the original creditor’s accounts. The servicer conducted business using the original creditor’s name, phone number, website, and address to make “the servicing transfer seem as innocuous as possible.”  The servicer also listed the original creditor’s name on the accounts appearing in consumer credit reports – a practice the FDIC had blessed.  Consequently the servicer, instead of the original creditor, responded to customer inquiries.

Plaintiff, after learning of the servicer’s practices, filed a complaint against the Company and the servicer in the Eastern District of Virginia.  He alleged, among other things, that the Company violated the FCRA by failing to include the servicer’s name with the accounts on its credit reports. The district court, in granting judgment in favor of plaintiff, explained the FCRA provides a statutory right to receive “sources of information” for one’s credit report.  When such information is not disclosed, that right is violated, creating a “sufficient injury-in-fact for constitutional standing.”

The Fourth Circuit disagreed.  The district court had failed to analyze whether the injury was specific or concrete, as required under Spokeo.  The district court had incorrectly concluded that “any violation of the statute sufficed to create an Article III injury in fact.”

The Fourth Circuit found plaintiff’s claim for an “informational injury” insufficient to establish Article III standing, because plaintiff failed to demonstrate a concrete injury.  Citing Spokeo, the Court clarified that a constitutionally cognizable informational injury “requires that a person lack access to information to which he is legally entitled and that the denial of that information creates a ‘real’ harm with an adverse effect.”

Since plaintiff’s security clearance was approved, and because he had “received a fair and accurate credit report, obtained the information he needed to cure his credit issues, and ultimately resolved those issues,” he failed to demonstrate any concrete injury.  The Court vacated the district court’s decision and remanded the case with instructions to dismiss.

On May 25, 2017, plaintiff filed a petition for rehearing en banc; the Court of Appeals issued a stay pending its ruling on this petition.

The Fourth Circuit’s May 11, 2017 opinion can be viewed here:  http://www.ca4.uscourts.gov/Opinions/Published/152119.P.pdf.