Banking and Finance Law Daily Consumer suffered concrete injury when bank obtained credit report for unauthorized purpose
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Friday, November 1, 2019

Consumer suffered concrete injury when bank obtained credit report for unauthorized purpose

By Colleen M. Svelnis, J.D.

In two issues of first impression, the Ninth Circuit found that obtaining a credit report for a purpose not authorized by the FCRA constitutes an injury-in-fact and consumers need only allege that credit report was obtained without a legitimate purpose to survive a motion to dismiss.

The U.S. Court of Appeals for the Ninth Circuit has decided, in a case of first impression, that the plaintiff did suffer a concrete injury in fact when a bank obtained her credit report for a purpose unauthorized by the Fair Credit Reporting Act (FCRA). This is true regardless of whether the credit report is published or otherwise used by the third party. The court further found that the consumer-plaintiff is not required to plead the third-party’s actual unauthorized purpose in obtaining the credit report in order to survive a motion to dismiss. The court reversed the district court’s dismissal of the claim for lack of standing and failure to state a claim (Nayab v. Capital One Bank, Oct. 31, 2019, Rice, T.).

An individual, Freshta Nayab, alleged that Capital One Bank (USA), N.A., obtained her credit report for an unauthorized purpose in violation of 15 U.S.C. § 1681b(f). The panel reviewed the district court’s decision de novo. According to the court, there are two issues of first impression for the Circuit: whether a consumer suffers a concrete Article III injury in fact when a third-party obtains her credit report for a purpose not authorized by the FCRA; and whether the consumer-plaintiff must plead the third-party’s actual unauthorized purpose in obtaining the report to survive a motion to dismiss.

Injury in fact. In order to establish injury in fact, a plaintiff must show "that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical," according to the court. For an injury to be particularized, it "must affect the plaintiff in a personal and individual way." The court adopted the Second Circuit’s holding that "an alleged procedural violation [of a statute] can by itself manifest concrete injury where Congress conferred the procedural right to protect a plaintiff’s concrete interests and where the procedural violation presents ‘a risk of real harm’ to that concrete interest."

The court stated that Nayab has standing to pursue her FCRA claim based on Capital One’s alleged violation of 15 U.S.C. § 1681b(f)(1). Obtaining a credit report for a purpose not authorized under the FCRA "violates a substantive provision of the FCRA" and "every violation invades the consumer’s privacy right that Congress sought to protect in passing the FCRA." The court noted that it had previously held that the invasion of "the right to privacy in one’s consumer credit report" confers standing. Additionally, the court stated that historical practice also supports a finding of standing, because the harm is "closely related to—if not the same as—a harm that has traditionally been regarded as providing a basis for a lawsuit: intrusion upon seclusion," a form of invasion of privacy. The consumer is harmed, according to the court, "because he or she is deprived of the right to keep private the sensitive information about his or her person."

Purpose for obtaining report. With regard to the second issue, the court held that a consumer-plaintiff must allege only that her credit report was obtained for a purpose not authorized by the statute to survive a motion to dismiss, and the defendant bears the burden of pleading it obtained the report for an authorized purpose. According to the court, the plaintiff did not have to plead the actual purpose for which the credit was obtained, but only allege facts giving rise to a reasonable inference that the bank obtained the credit report in violation of Sec. 1681b(f)(1). The defendant has the burden of pleading it obtained the report for an authorized purpose. The court held that the district court erred in holding that Nayab has the burden of pleading the actual purpose behind the bank accessing her credit report.

The case is No. 17-55944.

Attorneys: Tamim Jami (The Jami Law Firm PC) for Freshta Y. Nayab. Chelsea L. Diaz (Doll Amir & Eley LLP) for Capital One Bank USA NA.

Companies: Capital One Bank USA NA

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