United States: The Fourth Circuit Finds No Article III Injury In Fair Credit Reporting Act Case

The U.S. Court of Appeals for the Fourth Circuit held that the plaintiff's allegations that Experian denied him access to information to which he was entitled under the Fair Credit Reporting Act was insufficient to establish injury under Article III in Dreher v. Experian Information Solutions, Inc., et al.

The Fair Credit Reporting Act

The Fair Credit Reporting Act was enacted to "ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy." Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52 (2007). It imposes certain requirements on any "consumer reporting agency" that "regularly ... assembl[es] or evaluat[es] consumer credit information ... for the purpose of furnishing consumer reports to third parties." 15 U.S.C. § 1681a(f). Such requirements include, but are not limited to, "clearly and accurately" disclosing to the consumer "[t]he sources of information [in the consumer's file at the time of the request]." 15 U.S.C.§ 1681(g)(a)(2). The FCRA provides a private right of action against consumer reporting agencies for their willful or negligent failures to comply with the FCRA's requirements. See 15 U.S.C. § 1681n(a) & 1681o(a).

Background

Plaintiff Michael Dreher filed a class action suit in September 2011 against defendants Experian Information Solutions, Inc. (Experian) and CardWorks, Inc. and CardWorks Servicing, LLC (CardWorks) in the Eastern District of Virginia alleging that Experian willfully violated the FCRA by failing to provide accurate information in its credit report. Dreher alleged that, in 2010, he was undergoing a background check for security clearance when the federal government discovered he was associated with a delinquent credit card account. Dreher requested his credit report from Experian, which listed a delinquent account under the names Advanta Bank or Advanta Credit Cards. Dreher corresponded with Advanta about removing the delinquent account, which remained on his credit report until June 2012. The delinquent account did not affect Dreher's security clearance.

Unknown to Dreher at the time, Advanta had gone into receivership in early 2010, and CardWorks had been appointed as servicer of Advanta's portfolio. CardWorks continued using the Advanta name, website, and phone number, and continued to list Advanta accounts on consumer credits reports as being associated with the Advanta name. Dreher alleged the listing on his credit report of Advanta rather than CardWorks as the holder of his delinquent account violated the FCRA's requirement that a consumer report accurately identify the source of information in the report.

In May 2013, the district court certified a class of all persons who requested a copy of a consumer disclosure from Experian after August 1, 2010 and received a document in response that identified Advanta Bank or Advanta credit cards. The district court later granted Dreher's motion for partial summary judgment concluding that Experian committed a willful violation of the FCRA and denied Experian's cross-motion for partial summary judgment wherein Experian argued that Dreher lacked Article III standing. The district court held that the FCRA "creates a statutory right to receive the 'sources of information' for one's credit report," and when a credit reporting agency fails to disclose those sources, "it violates that right, thus creating a sufficient injury-in-fact for constitutional standing."

Fourth Circuit Decision

The Fourth Circuit reversed the district court's decision, concluding that Dreher failed to allege a concrete injury in fact sufficient to satisfy standing under Article III.

The court began its standing analysis with a review of the Supreme Court's holding in Spokeo v. Robins, 136 S.Ct. 1540 (2016). In Spokeo, the Supreme Court held that a plaintiff cannot "allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement." Spokeo, 136 S. Ct. 1549. The Supreme Court further explained that a technical violation of the FCRA may not rise to the level of an injury in fact for constitutional purposes. In its decision, the Supreme Court noted that, while a consumer reporting agency may fail to provide the required notice to a user of the agency's consumer information, the information may be entirely accurate and, if inaccurate, not all inaccuracies cause harm or present any material risk. Id. at 1550.

The Fourth Circuit then reviewed the FCRA provision at issue, which provides that a consumer reporting agency "shall, upon request . . . clearly and accurately disclose to the consumer . . . [t]he sources of information [in the consumer's file at the time of the request]." 15 U.S.C. § 1681g(a)(2). Dreher alleged that Experian violated this provision because it failed to clearly and accurately disclose the source of the Advanta Bank account entry, which he claimed was, in fact, CardWorks. Dreher argued that he suffered an "informational injury" because he was denied "specific information to which [he] w[as] entitled under the FCRA."

The Fourth Circuit then analyzed whether Dreher's alleged "informational injury" constituted an Article III injury in fact. The Fourth Circuit explained that courts look to a variety of sources to determine whether a party has suffered such injury, including whether the injury is the type that has "traditionally been regarded as providing a basis for a lawsuit in English or American Courts." Spokeo, 136 S. Ct. at 1549. The court noted that Dreher failed to identify a common law analogue for his alleged FCRA injury, or show that he suffered the type of harm that Congress sought to prevent when it enacted the FCRA.

The Fourth Circuit explained that Dreher failed to show how the knowledge that he was corresponding with a CardWorks employee, rather than an Advanta employee, would have made any difference in the "fair[ness] or accura[cy]" of his credit report, or that it would have made the credit resolution process more efficient. The court held that Dreher had alleged a "statutory violation divorced from any real world effect." The court observed that Dreher's allegations of harm were unlike those in cases where the deprivation of information adversely affected the plaintiff's conduct, holding that, despite viewing the name Advanta rather than CardWorks, "[h]e was able to receive a fair and accurate credit report, obtain the information he needed to cure his credit issues, and ultimately resolve those issues." Indeed, the court concluded that, if anything, the record showed that listing Advanta may have actually assisted an alleged identity theft victim.

Takeaways

Dreher has significant implications for the standard for pleading injury sufficient to confer Article III standing in statutory violation cases (at least in the Fourth Circuit). This decision, which is consistent with the Fourth Circuit's decision in Beck v. MacDonald, 848 F.3d 262, 266 (4th Cir. 2017), adopts a narrow interpretation of Spokeo in statutory injury cases and aligns with recent post-Spokeo decisions finding that purely procedural or technical violations of statutory rights are insufficient to establish Article III standing. For instance, the Seventh Circuit in Gubala v. Time Warner Cable, Inc. 846 F.3d 909 (7th Cir. 2017) and Myers v. Nicolet Rest. of de Pere, LLC, 843 F.3d 724 (7th Cir. 2016), and Eighth Circuit in Braitberg v. Charter Communications, Inc., 836 F.3d 925 (8th Cir. 2016) have denied Article III standing on this basis.

However, other circuits have applied Spokeo more expansively and recognized Article III standing solely based on violations of the statutory protections created by federal privacy statutes. For example, the Third Circuit in In re: Horizon Healthcare Services Data Breach Litigation, 846 F.3d 625 (3d Cir. Jan. 20, 2017), Ninth Circuit in Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017) and Van Patten v. Vertical Fitness Group, LLC, 847 F.3d 1037 (9th Cir. 2017), and the Eleventh Circuit in Church v. Accretive Health, Inc., 654 Fed. Appx. 990 (11th Cir. 2016) and Perry v. Cable News Network, Inc., et al., No. 16-13031 (11th Cir. April 27, 2017) have recently held that statutory violations alone under, respectively, the FCRA, Fair Debt Collection Practices Act, Telephone Consumer Protection Act, and Video Privacy Protection Act were sufficient to establish Article III standing. Dreher exacerbates this growing division among the circuits concerning how Spokeo is applied in statutory injury cases. This division will likely not be resolved until and if the Supreme Court decides to address the issue further.​​

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