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There is No Standing to Sue for Technical Violations of the Fair Credit Reporting Act

In Dreher v. Experian Information Solutions, Inc., 856 F.3d 337 (4th Cir. 2017), the United States Court of Appeals for the Fourth Circuit was asked to decide whether the decision of Experian Information Solutions, Inc. (“Experian”), to list a defunct credit card company, instead of the name of its servicer, as a source of information on an individual’s credit report creates a sufficient injury under the Fair Credit Reporting Act (“FCRA”) to satisfy the standing requirements of Article III of the Constitution. The court concluded that the requirements of standing were not satisfied because the plaintiff failed to establish a particular and concrete harm.

Michael Dreher (“Dreher”) was undergoing a background check for a security clearance when the federal government informed him that he was associated with a delinquent credit card account. Dreher received a series of credit reports from different credit agencies, including Experian. The Experian reports listed a delinquent account under the names “Advanta Bank” or “Advanta Credit Cards” (collectively, “Adventa”). To resolve the matter, Dreher sent a letter to Advanta in early 2011and requested verification of the debt that appeared on his credit report. Having not received any response, Dreher sent another letter requesting the same on April 15, 2011, at which point “Dreher received a response on Advanta letterhead dated April 18, 2011, with a March statement showing an outstanding balance of $15,746.94, along with the online credit card application bearing Dreher’s name and social security number.” On May 23, 2011, Dreher sent a follow-up letter “‘instructing [Advanta] to delete the inaccurate information from [his] credit files.’” Having received no response, Dreher contacted Experian to resolve the matter, but his credit report continued to list the delinquent Advanta account. The Avenda account was not deleted from his credit file until June 6, 2012.

By way of background, the Utah Department of Financial Institutions had closed Advanta in 2010 because it failed to withstand the 2008 financial crisis. Thereafter, the Federal Deposit Insurance Corporation (“FDIC”) was named as receiver and Deutsche Bank Trust Company (“Deutsche Bank”) received a security interest in Advanta receivables, appointing CardWorks, Inc., and CardWorks Servicing LLC (collectively, “CardWorks”), as servicer of Advantas portfolio starting August 1, 2010. CardWorks, however, continued to do business using Advanta’s name, phone number, and website, with the goal of “mak[ing] the servicing transfer seem as innocuous as possible.”

Dreher filed a class action lawsuit against Experian and CardWorks in the United State District Court for the Eastern District of Virginia, claiming “Experian willfully violated the FCRA by failing to include the name ‘CardWorks’ in the Advanta tradelines in its credit reports.” The district court certified the class to include:

[a]ll natural persons who: (1) requested a copy of their consumer discourse from Experian on or after August 1, 2010; (2) received a document in response that identified “Advanta Bank” or “Advanta Credit Cards” as the only source of information for the tradelines; (3) and whose “date of status” or “last reported” field reflected a date of August 2010 or later.

The district court found that Experian willfully violated the FCRA as a matter of law because “no jury could find Experian’s intentional omission of CardWorks [from the credit report] was objectively reasonable.” The district court, however, did not analyze whether the injury at issue was specific and concrete. Instead, it determined that any violation of the FCRA would be enough to create an injury sufficient for standing under Article III of the Constitution. Experian appealed on the grounds that the Dreher had not satisfied the threshold requirements for standing.

The Fourth Circuit applied the three prong test enunciated in Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), to determine whether the requirements of standing were satisfied. The court explained that Dreher “must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Relying on Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), as revised (May 24, 2016), the Fourth Circuit stated “[t]o establish injury in fact ‘a plaintiff must show that [he/she] suffered an invasion of a legally protected interest’ that is [ both] ‘ concrete and particularized [,]” noting that the two requirements are “quite different.” (emphasis added). A concrete injury is one that ‘“actually exist[s], and is ‘real, and not abstract[.]’” The court emphasized, however, that “[c]oncreteness” “is not . . . necessarily synonymous with ‘tangible.’”

The Fourth Circuit reiterated the Supreme Court’s position in Spokeo that in determining whether an intangible harm constitutes an injury in fact ‘“history and the judgment of Congress play important roles.’” It explained that a claimant cannot automatically satisfy this requirement “just because ‘a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.”’ The court further explained that “a bare procedural violation divorced from any concrete harm” does not satisfy the constitutional requirement of an injury in fact. One type of intangible injury that can constitute an injury in fact, however, is “informational injury.”

Dreher alleged he suffered a cognizable “informational injury” because he was denied information he was entitled to under the FCRA. He relied on a provision of FCRA that stated that a consumer reporting agency “shall, upon request . . . clearly and accurately disclose to the consumer . . . [t]he sources of the information [in the consumer’s file at the time of the request].” (emphasis added). The Fourth Circuit disagreed with Dreher. Relying on a recent decision of the United States Court of Appeals for the District of Columbia Circuit, the court determined that to satisfy Article III standing requirements, “a plaintiff [must] suffer[] a concrete informational injury where he is denied access to information required to be disclosed by statute and he ‘suffers, by being denied access to that information, the type of harm Congress sought to prevent by requiring disclosure.’” (emphasis in original). The court found that Dreher failed to show “how viewing the name ‘Advanta’ rather than ‘CardWorks’ adversely affected his conduct[.]” The court further found that Dreher was able to obtain a fair and accurate credit report, received the information he needed to cure his credit issues, and ultimately was able to resolve those issues. Moreover, Dreher’s background check process was not in any way undermined as a result. Because Dreher had failed to show a concrete injury sufficient to satisfy Article III standing, the Court vacated the district court’s judgment, and instructed that the class action be dismissed on jurisdictional grounds.

Dreher is an important decision because companies may violate the FCRA, and other statutes, potentially without facing liability for those violations if the claimant(s) cannot establish an injury in fact to satisfy Article III standing requirements.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585 or Amitis Darabnia at adarabnia@hwlaw.com or (410) 260-6592.

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