Credit report inaccuracies caused ‘concrete’ injury; FCRA claims revived on remand from SCOTUS
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Thursday, August 17, 2017

Credit report inaccuracies caused ‘concrete’ injury; FCRA claims revived on remand from SCOTUS

By Marjorie Johnson, J.D.

Following remand from the Supreme Court, the Ninth Circuit breathed new life into a plaintiff’s lawsuit alleging that a consumer reporting agency that posted inaccuracies in his credit report willfully violated various procedural requirements of the Fair Credit Reporting Act (FCRA). Reversing and remanding the action back to district court, the appeals court found that the plaintiff sufficiently alleged a “concrete injury” for purposes of Article III standing. Congress established the FCRA provisions at issue to protect consumers’ concrete interests (as opposed to purely procedural rights), and real harm could be caused by the falsely published information concerning his age, marital status, educational background, and employment history (Robins v. Spokeo, Inc., August 15, 2017, O’Scannlain, D.).

Willful violation. Spokeo is a consumer reporting agency that operates a “people search engine,” which searches various databases to gather and provide personal information about individuals to a variety of users, including employers wanting to evaluate prospective employees. The plaintiff alleged that Spokeo willfully violated the FCRA by failing to follow reasonable procedures to assure “maximum possible accuracy” of the information in his consumer report, resulting in it publishing a report that falsely stated his age, marital status, wealth, education level, and profession. It also included a photo of a different person. He claimed these errors harmed his employment prospects while he was unemployed, causing him emotional distress.

“Concrete injury” required. Dismissing his claim, the district court found that he lacked Article III standing since he did not allege that the “bare violation” of the statute caused him to suffer an actual injury-in-fact. On appeal, the Ninth Circuit disagreed and found that he established standing by asserting that Spokeo violated his statutory rights, which Congress established to protect against individual rather than collective harms (Spokeo I).

Reversing, the Supreme Court found the Ninth Circuit’s injury-in-fact analysis was incomplete because it focused only on whether the alleged injury was “particularized,” without determining whether it was also “concrete” (Spokeo II). While Congress plays an important role in identifying injuries and creating causes of action, there must still be a concrete injury; solely alleging a bare procedural violation is not enough. Accordingly, at issue was whether the plaintiff pled a “concrete” injury.

Intangible harm caused by statutory violation. The plaintiff argued that Spokeo’s violation of the FCRA’s requirement that it reasonably ensure the accuracy of his consumer report was enough to establish a concrete injury. However, the Supreme Court made clear in Spokeo II that a plaintiff does not automatically establish an injury in fact, but that he must show the statutory violation caused some real—not purely legal—harm. Therefore, the Ninth Circuit first examined whether the FCRA regulations at issue were established to protect the plaintiff’s concrete interests (as opposed to purely procedural rights).

Guided by both Congress’s judgment and historical practice, the appeals court concluded that the FCRA procedures were crafted to protect consumers’ concrete interest in accurate credit reporting about themselves. As other courts have observed, the interests that FCRA protects “also resemble other reputational and privacy interests that have long been protected in the law,” such as defamatory statements that falsely attributed characteristics “incompatible with the proper exercise of [an individual’s] lawful business, trade, profession, or office.” The Ninth Circuit respected Congress’s judgment that similar harm would result from inaccurate credit reporting.

More than just an incorrect zip code. The plaintiff also alleged FCRA violations that actually harmed his concrete interest, and not just “bare procedural” violations that were “divorced” from the real harms that the FCRA was designed to prevent. The Supreme Court explained in Spokeo II that a plaintiff won’t be able to show a concrete injury simply by alleging that a consumer reporting agency failed to comply with one of FCRA’s procedures, since not all violations will materially affect the consumer’s protected interests in accurate credit reporting. Indeed, the high court explicitly rejected the notion that every minor inaccuracy reported in violation of FCRA will cause a concrete harm, giving the example of an incorrectly reported zip code.

Here, Spokeo falsely reported that the plaintiff was married with children, was in his 50s, was employed in a professional or technical field, had a graduate degree, and had a higher level of wealth than he had. Such inaccurate reports on such a broad range of material facts about his life could be deemed a real harm. For example, he alleged that he was unemployed and seeking a job, but that the inaccurate reports caused actual harm to his employment prospects by misrepresenting facts that would be relevant to employers, causing him to suffer anxiety and stress. The misinformation at issue—age, marital status, educational background, and employment history—was the type that could be important to employers or others making use of a consumer report.

Further, determining whether any given inaccuracy in a credit report would help or harm an individual (or perhaps both) is not always easily done. For example, in support of the plaintiff, the Consumer Financial Protection Bureau argued that even seemingly flattering inaccuracies can hurt an individual’s employment prospects as they could cause a prospective employer to question the applicant’s truthfulness or to determine that he was overqualified for the position sought. The court also squarely rejected Spokeo’s assertion that his allegations of harm were too speculative, finding the challenged conduct and injury had already occurred.

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