The Ninth Circuit upheld a $430,000 jury verdict on a Fair Credit Reporting Act claim related to an auto finance company’s alleged failure to investigate an identity theft claim.  The plaintiff, Seungtae Kim, alleged that he suffered damage to his credit and emotional distress as a result of the company’s failure to adequately investigate his claims of identity theft.  

The jury awarded Kim $250,000 to cover damage to his credit and $150,000 in emotional distress damages under California’s Identity Theft Law.  The jury also awarded a $30,000 civil penalty under the same statute 

In the underlying suit, Kim claimed that in 2013, he learned that the credit bureaus were reporting a delinquency on a car loan account that Kim never openedKim filed a police report, but the bureaus refused to correct their records, and the auto finance company claimed Kim did not have a valid identity theft claim.  Kim alleged that the companies willfully and negligently failed to prepare accurate reports or conduct proper investigations.   

The credit bureaus settled with Kim, leaving only the claim against the finance company.  At trial, the finance company moved for judgment as a matter of law on the FCRA claim, arguing that Kim’s evidence of actual damages to his credit reputation was insufficient.  The company advanced the same argument with respect to the civil penalty.   

The district court denied the motion and the Ninth Circuit affirmed, finding the evidence Kim was denied credit by three lenders as a result of the credit reporting and was not denied credit after the tradeline was removed was sufficient to allow a reasonable jury to infer harm as to Kim’s credit reputation.  With respect to the civil penalty, the Ninth Circuit found no plain error in the jury’s awarding the civil penalty. 

The Ninth Circuit also affirmed the district court’s denial of the company’s motion for a new trial, finding the district court properly instructed the jury on the elements of an FCRA claim including that any investigation be “reasonable.” 

During oral argument at the Ninth Circuit, Judge Harry Pregerson indicated that he expects similar suits will be filed against companies as a result of customer service issues.  He questioned the company’s attorney, asking “Have you ever tried to call one of these companies when you have a legitimate claim to try to talk to somebody?  Try it sometime.  You’ll spend half your life.  You end up talking to someone 10,000 miles away.” 

This verdict and the recent Ninth Circuit decision highlights the importance of investigation procedures as well as the maintenance of procedures to address consumer claims of identity theft.   

Troutman Sanders is an industry leader in FCRA compliance and litigation and will continue to monitor developments in this area.