Credit Reporting & Data Brokers

On January 16, the U.S. District Court for the Eastern District of Michigan denied a motion to dismiss a plaintiff’s Fair Credit Reporting Act claims on statute of limitations grounds, taking a strict interpretation of the complaint’s allegations as to the plaintiff’s discovery of facts underlying her claims.  A copy of the decision in Blake v. TransUnion LLC, No. 18-10406, 2019 WL 211141 (E.D. Mich. Jan. 16, 2019) can be found here.

The FCRA provides for a two-year statute of limitation from the date of discovery of the FCRA violation, as well as a statute of repose requiring that FCRA claims be brought within five years of the date of the FCRA violation.  See 15 U.S.C. § 1681p.  Further, in many jurisdictions, including the Sixth Circuit, an FCRA limitations period begins to run when the plaintiff discovers the facts that give rise to the claim – not when the plaintiff discovers that these facts constitute a legal violation.

Plaintiff Leilani Blake alleged that defendants Granite Bay Acceptance, Inc. and Lease Maturity Services, LLC (“LMS”) accessed her credit report from a national consumer reporting agency, or “CRA,” for an impermissible purpose, including reselling her information, in violation of the FCRA.  Blake became aware that Granite Bay and LMS obtained her consumer information around July 24, 2014, outside of the two-year limitations period.  All three defendants filed motions to dismiss on limitations grounds.

In denying those motions to dismiss, the Court explained that because a motion to dismiss only tests the sufficiency of a complaint, such motions are typically only “appropriate vehicles to resolve a statute of limitations defense” if the “complaint affirmatively shows” that the “claims are time-barred.”  In Count I, Blake alleged that the CRA failed to maintain reasonable procedures to avoid providing consumer reports for an impermissible purpose.  In Count III, Blake alleged that Granite Bay purchased and resold her information without taking reasonable steps to ensure the purchaser had a permissible purpose.  Of critical importance, however, nowhere in the complaint did Blake allege when she learned that her information was being resold.  That fact was unclear, and the lack of clarity resulted in denial of the motions as to Counts I and III.

In Counts II and IV, Blake alleged that Granite Bay and LMS unlawfully obtained her consumer report without a permissible purpose.  Essentially, she claimed that the defendants were not in the business of making firm offers of credit and, therefore, could not use that permissible purpose to justify obtaining her consumer report.  See 15 U.S.C. § 1681b(c)(1).  Again, the complaint did not allege when Blake discovered that the defendants were not in this line of business, and thus the Court declined to dismiss those counts.

Notwithstanding the rulings, the Court noted in its opinions that it had “serious reservation about the timeliness of these claims,” suggesting that the defendants could be successful in later motions practice after development of Blake’s knowledge through discovery.

The Blake decision reiterates the importance of thoroughly reviewing all of the key allegations in an FCRA complaint, as vague language could provide for an early dismissal on procedural grounds.  Blake also cements the notion that raising statute of limitations issues at a preliminary stage of litigation could elicit valuable feedback from the Court and set the stage for future negotiations or favorable motions practice.

Since the Spokeo, Inc. v. Robins decision in 2016, many defendants have worried that a valid standing argument could have the actual impact of leading to more cases being litigated in state court rather than outright dismissals on the merits.  

This month’s ruling in Ratliff v. LTI Trucking Services, Inc. proved to be exactly the kind of holding defendants worried about after SpokeoPlaintiff Jerome Ratliff, Jr. brought a Fair Credit Reporting Act (15 U.S.C. § 1681) suit in an Illinois federal court.  The suit involved a putative class action alleging that LTI Trucking Services violated procedural requirements of the FCRA by failing to provide notices required under § 1681(b)(3)(B) considering negative information disclosed on Ratliff’s background check.  That court cited Spokeo’s concrete injury requirements for standing and dismissed the matter outright for lack of subject matter jurisdiction.   

Ratliff refiled in state court, and LTI removed the case to federal court.  Upon removal, LTI moved to dismiss the case for lack of subject matter jurisdiction, and Ratliff argued for the federal court to dismiss the case and remand to state court.   

The federal court agreed with Ratliff and elected to remand the matter for state court.  The net result was a defendant facing a class claim in state court rather than federal court, and likely a situation where the defendant is no better off, and perhaps in a worse position, than if Spokeo did not exist.

A recent case out of the U.S. District Court in Arizona has shown that it is not easy for a defendant to recover attorneys’ fees under the “bad faith” provision of the Fair Credit Reporting Act. 

In Perri v. Diversified Adjustment Serv., 2018 U.S. Dist. LEXIS 213612 (D. Ariz. Dec. 19, 2018), a district court denied the defendant’s motion for attorneys’ fees under the FCRA after the pro se plaintiff’s case was dismissed. The plaintiff, Joshua Perri, filed a complaint against Diversified Adjustment Services, a debt collector, alleging defamation, negligent enablement of identity theft, and violation of the FCRA. However, Perri failed to comply with the district court’s orders and failed to prosecute the claims. The district court dismissed the case as a result.    

Diversified moved for attorneys fees under the FCRA. § 1681n(c) provides that “[u]pon a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this section was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney’s fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper.” In bringing the motion, Diversified argued that Perri was acting in bad faith because he disobeyed several court orders, including failing to attend the Rule 16 conference. Diversified also argued that the action was frivolous because Perri never prosecuted the claims. Finally, Diversified argued that because the complaint contained no facts coupled with an email he sent calling the defense counsel “dishonest dirt bags,” it was evident that the complaint was filed for the purpose of harassment.  

The Court found Diversified’s arguments unpersuasive, stating that the debt collector had not shown that Perri filed any document in the case in bad faith or for harassment purposes as required for an award of attorneys’ fees under the FCRA. The Court pointed out that Perri’s actions in disobeying several court orders coupled with his failure to prosecute the case was the reason why the Court terminated the case as a sanction. The Court reasoned that attorneys’ fees under § 1681n(c) may be awarded based on an action filed in bad faith, not for misconduct of the parties during the pendency of the action. The Court also noted in its opinion that it could not infer bad faith or harassment from the lack of factual allegations in the complaint because it did not know enough about the allegations to know whether they were frivolous. 

Ultimately, the Perri Court held that to be awarded attorneys’ fees under § 1681n(c) of the FCRA, a defendant must show that the motion or complaint was filed in bad faith or for purposes of harassment. It is not enough that a pleading or motion in question later turned out to be baseless.


Who should decide the “gateway” issue of arbitrability? That is, should a court or an arbitrator decide whether a particular issue is subject to arbitration?  According to the Fourth Circuit, it depends on the agreement to arbitrate.  

On January 4, the Fourth Circuit issued an opinion in Novic v. Credit One, No. 17-2168, 2019 WL 103878 (4th Cir. 2019), holding that the “delegation clause” in a credit card agreement dictated that the “gateway” issue of arbitrability was itself subject to arbitration.  Specifically, the arbitration provision of the agreement contained a clause that stated “[c]laims subject to arbitration include disputes related to enforceability or interpretation of this Agreement.”  

The case concerned a consumer, Charleene Novic, who obtained a credit card from Credit One.  After she accrued a past-due balance, Credit One sold the account to a debt collector.  Novic, however, argued that the past-due balance was the result of fraudulent charges.  The debt collector sued over the outstanding balance and Novic eventually prevailed.  Novic then turned her sights on Credit One, suing the company for alleged violations of the Fair Credit Reporting Act resulting from reporting of the past-due balance.  Credit One moved to compel arbitration under the cardholder agreement.  

The district court denied Credit One’s motion to compel, concluding that the company had lost its right to compel arbitration after it assigned Novic’s account to a debt collector.  Credit One appealed, arguing that an arbitrator should decide the “gateway” issue of whether Novic’s claims should be arbitrated as well as the actual merits of the case.  

The Fourth Circuit agreed with Credit One and vacated the district court’s ruling.  In its opinion, the Court held that parties may agree to arbitrate the threshold issue of arbitrability, which allows the arbitrator to determine his or her own jurisdiction. The Court cautioned, however, that any delegation of issue of arbitrability must be set out in “clear and unmistakable” language in the parties’ agreement.  After applying that standard to the card holder agreement at issue, the Court concluded that it “unambiguously require[d] arbitration of any issues concerning the ‘enforceability’ of the arbitration provisions .”  

The Fourth Circuit’s decision represents another affirmation of the strong federal policy favoring arbitration, and serves as a reminder that the “gateway” to a favorable result when compelling arbitration is the use of “clear and unmistakable” language in arbitration agreements.


On Oct. 4, 2018, in Smith v. Mutual of Omaha Insurance Company,[1] the United States District Court for the Southern District of Iowa ruled the plaintiff could not advance his putative class action under the Fair Credit Reporting Act if he qualified as an independent contractor rather than an employee. The decision presents another helpful reading of the “employment purposes” provision in the FCRA and becomes part of a small but growing body of law providing clarity on this recurring issue of importance. The decision highlights a limitation on the FCRA’s reach, but the issue has been unsettled and companies who utilize a large number of independent contractors may still find themselves defending against FCRA class actions.

Requirements for Reports Used for “Employment Purposes”

Some of the FCRA’s most litigated protections apply when a consumer report is obtained by an employer for “employment purposes.”[2] This includes obtaining the consumer’s written authorization in a “stand-alone disclosure” and providing a pre-adverse action notice and summary of rights if the consumer report will be used to make an adverse employment decision. Likewise, a consumer reporting agency furnishing a consumer report for employment purposes must follow certain certification requirements and provide a summary of rights with the report. Importantly, these steps are only required if the report is obtained for employment purposes. “Employment purposes” is defined by the FCRA as “a report used for the purpose of evaluating a consumer for employment, promotion, reassignment or retention as an employee.”[3] It’s these last three words that have caused confusion.

Continue reading the article on Law360.


[1] Smith v. Mutual of Omaha Insurance Company , No. 4:17-cv-00443 (S.D. Iowa Oct. 4, 2018).

[2] 15 U.S.C. § 1681b(b).

[3] 15 U.S.C. § 1681a(h).

The Northern District of California recently held that medical records are not discoverable in Fair Credit Reporting Act cases when a plaintiff only generally alleges that he or she suffered emotional harm.  In Prado v. Equifax Information Services, LLC, the plaintiff claimed Equifax mixed up her credit report with that of her sister, whose report contained several negative items.  Prado claimed that because of the mix-up, her credit card companies lowered her credit limits and denied her requests to have the original limits reinstated.  Prado claimed Equifax violated the FCRA by failing to adequately respond to her disputes.  In her suit, she did not assert a separate claim for intentional infliction of emotional distress. 

During discovery, Equifax served a request for production seeking all documents relating to “any medical or mental treatments” Prado “received in the past seven years.”  Prado objected to the request on the grounds that it was overly broad, irrelevant, and an invasion of her privacy.  In response to her objection, Equifax argued the medical records were relevant based on the emotional distress allegation.  Moreover, Equifax argued that it was not seeking a medical examination. 

The Court sustained Prado’s objections, relying on other similar decisions from its district.  The Court noted that where a plaintiff alleges general “garden variety” distress without a separate claim for emotional distress and does not intend to use an expert or medical records to prove emotional-distress damages, she does not place her medical history so at issue to warrant compelling production of her medical records.”  The Court further noted that “delving” into a plaintiff’s medical or psychiatric records may be “even more invasive than conducting a medical or psychological examination.” 

This decision is an example of why it is important to know each Court’s case law on discrete discovery issues.  While the result may have been different in another court, it is clear, at least for now, that the Northern District of California is not going to allow defendants access to a plaintiff’s medical records in FCRA cases unless the plaintiff has asserted a separate and distinct claim for emotional distress.  Other courts have reached a different conclusion on this issue. 

A Fair Credit Reporting Act claim by any other name is still an FCRA claim. That’s the recent holding by the Northern District of New York in Arnold v. Navient Sols., LLC. Plaintiffs cannot avoid federal court jurisdiction through “artful pleading” when they assert claims relating to the responsibilities of information furnishers. 

Factual Background 

In 2013, plaintiff John Jay Arnold failed to make payments on three private and one federal student loan. The servicer of his loans, Navient Solutions, LLC, reported the delinquencies to the three major credit reporting agencies (“CRAs”). Arnold settled the private loans for less than the full balance and did not settle the federal loan. Navient then reported the private loans as “paid off but less than the full balance” and continued to report the federal loan as delinquent, noting that the “consumer disputes [the federal loan] account.”  

Due to the derogatory student loan account reporting, Arnold alleged his credit score was negatively affected and claimed that he was denied financing to purchase a home. When Navient refused to change the information reported to the CRAs, Arnold sued in New York’s state trial court, alleging deceptive acts in the conduct of business in violation of New York General Business Law § 349. Navient removed the case to federal court, and Arnold moved for remand back to state court. 

FCRA Preemption 

The Arnold Court held that it had federal question jurisdiction over the action because the FCRA preempted Arnold’s state-law claim. The Court acknowledged that plaintiffs are the masters of their complaint and that they can usually dodge federal court through “artful pleading.” However, Congress can completely preempt areas of state law, and, barring minor exceptions, it did so with respect to claims “relating to the responsibilities of persons who furnish information to [CRAs]” pursuant to 15 U.S.C. § 1681t(b)(1)(F). Because Arnold’s suit was based on Navient’s responsibilities as an information furnisher—namely, its duties to report accurate information and investigate disputed debts—his claims were preempted by the FCRA and, thus, arose under federal law. 

The Second, Fourth, and Seventh circuits have likewise held that the FCRA preempts similar state law claims against furnishers of information to CRAs, as demonstrated in Macpherson v. JPMorgan Chase Bank, N.A., 665 F.3d 45, 47 (2d Cir. 2011); Purcell v. Bank of Am., 659 F.3d 622, 625 (7th Cir. 2011); and Ross v. F.D.I.C., 625 F.3d 808, 813 (4th Cir. 2010). These cases serve as a reminder that, in the context of credit reporting disputes, a suit may be removable even though the plaintiff asserts only state law claims.

A recent immigration proposal from the Trump administration seeks to require the use of credit reports and scores as part of the U.S.’s immigration and green card review process.  The proposal, which specifically notes the Fair Credit Reporting Act in discussing an applicant’s requirement to provide (and sometimes pay for) a credit report, will also require the federal government and United States officials to comply with the FCRA.

Specifically, the proposal states:

In addition to the opportunity cost of time associated with completing and filing Form I-944, applicants must bear the cost of obtaining a credit report and credit score from any one of the three major credit bureaus in the United States to be submitted with the application.  Consumers may obtain a free credit report once a year from each of the three major consumer reporting agencies (i.e., credit bureaus) under the Fair Credit Reporting Act (FCRA). However, consumers are not necessarily entitled to a free credit score, for which consumer reporting agencies may charge a fair and reasonable fee.  DHS does not assume that all applicants are able to obtain a free credit report under FCRA specifically for fulfilling the requirements of filing Form I-944 and acknowledges that obtaining a credit score would be an additional cost.

It is expected that by giving the federal government, and specifically the Department of Homeland Security and U.S. Citizenship and Immigration Services, the ability to require the pulling of, and review of, an individual’s credit report, the federal government, in turn, will be faced with potential liability under the FCRA.  Moreover, it should be assumed that state attorneys general—some with differing views from the Trump administration—will be monitoring compliance with the FCRA, in addition to how an individual’s credit report and score directly impacts the immigration review process.

While the proposal does not state the exact weight that will be given to an individual’s credit score, the specific requirement that credit reports are to be part of the immigration process, alone, suggests that it will likely be a key aspect of any review.

Your diet and fitness goals are not the only things scheduled to change come the New Year.  On April 10, 2018, Iowa Governor Kim Reynolds signed Senate File 2177, which modified provisions applicable to consumer security freezes and personal information security breach protection.  The Act, which goes into full effect on January 1, was proposed by the Iowa Attorney General’s office as well as state legislators to address certain changes in technology.

With respect to consumer security freezes, S.F. 2177:

  • eliminates the requirement for consumers to submit requests for security freezes through certified mail, and instead allows for such requests to be submitted by mail, telephone, email, or through a secure online connection;
  • requires consumer reporting agencies (“CRAs”) to commence security freezes within three business days after receiving a request, as opposed to the previous five days;
  • requires CRAs to identify for consumers, under certain circumstances, any other “consumer reporting agency that compiles and maintains files on consumers on a nationwide basis” (as defined by section 1681a(p) of the Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq.), and inform them of appropriate contact information that would permit the consumer to place, lift, or remove a security freeze from such other CRA; and
  • prohibits CRAs from charging a fee for placing, removing, temporarily suspending, or reinstating a security freeze.

CRAs will want to ensure their processes and procedures have been updated to account for such changes, and that employees have been trained to comply with them.

As noted above, S.F. 2177 also modified Iowa’s personal information security breach protection statute. Those changes, however, went into effect July 1, 2018, and include the following:

  • The definition of “encryption” was modified to mean only those certain algorithmic processes that meet accepted industry standards.
  • The Act clarified that the law does not apply to businesses that are subject to and comply with the Health Insurance Portability and Accountability Act of 1996, or “HIPAA.”
  • The Act now requires notification of a security breach to the Iowa Attorney General within five business days after giving notice of the breach of security to any consumer.

Companies tracking data breach notification requirements as part of their incident response plans, policies, and procedures should ensure their materials have been updated to account for such changes.


A New Jersey district court allowed a Fair Credit Reporting Act claim past the pleading stage, denying the defendant credit reporting agency’s motion for judgment on the pleadings despite its claims that the plaintiff failed to plead facts sufficient to establish a claim under the FCRA because the alleged information reported was, in fact, accurate.

The action centered on the credit reporting agency’s (or CRA’s) reporting of a mortgage for a home that was jointly owned by plaintiff Marina Radley and her ex-husband.  Following dissolution of the marriage in 2013, Radley and her ex-husband entered into an agreement whereby the ex-husband took ownership of the home and would indemnify her against liability for mortgage payments.  Radley thereafter had no ownership interest in the property.  Defendant Equifax Information Services LLC continued to report the mortgage on her credit reports, which Radley thereafter disputed.  At issue was whether Radley had alleged sufficient grounds to plead a FCRA violation where the alleged inaccurate information reported by Equifax was technically correct but may nevertheless be “inaccurate” pursuant to the FCRA.

The Court agreed with Radley’s contention that, at the pleading stage, she does not have to prove that the reported information is, in fact, inaccurate.  Under 15 U.S.C § 1681e(b), a CRA “shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom” a report relates.  “Maximum possible accuracy” signifies that a report may be inaccurate not only when it is patently incorrect, but when it is misleading in such a way and to such an extent that it can be expected to have an adverse effect.  Accordingly, a consumer report that contains technically accurate information may be deemed “inaccurate” if the statement is presented in such a way that it creates a misleading impression.

On these grounds, the Court found that Radley was not required to prove that the reported information was in fact inaccurate at the pleading stage.  Rather, because she alleged that the reported information was the responsibility of her ex-husband, she had set forth facts sufficient to support her contention that the reported information was misleading, or otherwise not as complete as it could have been.  Therefore, whether the information was “inaccurate” under the FCRA was a question of fact, and Equifax was not entitled to judgment on the pleadings.

The New Jersey District Court decision confirms CRAs’ duties to not only report accurate information, but also to avoid reporting information that creates a misleading impression.  We will continue to monitor and report on developments involving the responsibilities of CRAs, furnishers, and users under the FCRA.