United States: Experian’s Failure To Disclose Immediate Provider Of Information Violates FCRA

Dreher v. Experian Info. Solutions, Inc., 2014 U.S. Dist. LEXIS 167534 (E.D. Va. Dec. 3, 2014).

Facts: In November 2010, Michael T. Dreher ("Plaintiff") discovered Experian Information Solutions, Inc. ("Experian") was reporting a delinquent credit card account identified as an Advanta Credit Card ("Advanta Account"). Plaintiff disputed the Advanta Account with Experian. At that time, Advanta Bank Corp. ("Advanta") had already been shut down by the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation ("FDIC") had stepped in to oversee the bank as a receiver. In July 2010, the FDIC had appointed CardWorks, Inc. and CardWorks Servicing, LLC ("CardWorks") to service all Advanta accounts, including acting as a customer-service intermediary for Advanta and handling all communications with customers regarding their Advanta accounts.

As a result of these changes implemented by the FDIC, CardWorks was also the immediate provider of information to Experian with respect to the Advanta Account. Even though it was providing the information to Experian, CardWorks specifically requested that Experian not list it as the source of information, but rather to continue listing Advanta as the source with respect to Plaintiff's Advanta Account and other similarly situated accounts. Experian honored CardWorks' request and included the Advanta Account on Plaintiff's credit file listing Advanta as the only source of information.

Plaintiff brings only one class claim in which he alleges that Experian willfully violated 15 U.S.C. 1681g(a)(2) of the Fair Credit Reporting Act ("FCRA") as to him and the other class members by failing to clearly and accurately disclose the source of the Advanta trade lines in their respective credit reports. Experian previously, and unsuccessfully, sought summary judgment and defended its actions as objectively reasonable. Both Plaintiff and Experian later asked the Court to grant summary judgment on the issue of Experian's liability for willfully violating the FCRA. The Court found that Experian's interpretation of "sources of information" to include any variety of entities other than the one that actually provided the information as objectively unreasonable and granted Plaintiff's motion for summary judgment as it related to willfulness liability.

• Willfulness Under the FCRA. Under § 1681n and 1681o, the FCRA provides a cause of action to consumers for either a negligent or willful violation(s) of the FCRA. The Supreme Court further interpreted willful violations of the FCRA to include not only knowing and intentional violations, but also reckless violation. Safeco Ins. Co. v. Burr, 551 U.S. 69 (2007). Because Congress did not specifically define willful in the FCRA, the Supreme Court applied "the general rule that a common law term in a statute comes with a common law meaning, absent anything pointing another way." Id. at 58. The Supreme Court further elaborated that the objective unreasonableness standard to include instances where the defendant's conduct involved "an unjustifiable high risk of harm that is either known or so obvious that it should be known." Id. at 69.
• Willfulness Under the FCRA. The Third Circuit in Fuges provided a three part test to further examine and analyze a claim for willful violation of the FCRA using the objective unreasonableness standard. Fuges v. Sw. Fin. Svcs., Ltd., 707 F.3d 241 (3d Cir. 2012). The three considerations are (1) whether the Act provides clear guidance as to the meaning of particular statutory language; (2) whether the defendant's proposed interpretation had a foundation in the statutory text; and (3) whether the defendant was interpreting the statute in the absence of any contrary authority on the meaning of the statutory language in question because no court of appeals had spoken on the issue, and no authoritative guidance had yet come from the FTC. at 251-53.
• Willfulness Under the FCRA. The Court found that the FCRA language gives clear guidance on the meaning of sources of information and that the term "'sources' clearly includes, at the very least, the entity that gives that information directly to the consumer reporting agency." In this case, the entity that directly gave to Experian the information related to the Advanta Account was CardWorks, not Advanta. Likewise, the Court found Experian's arguments regarding why it listed Advanta as the source had no foundation in the statutory text. The Court further held that the lack of interpretation of the term "sources of information" by either the courts or the FTC did not inject ambiguity; rather, it signified that the term's meaning is self-evident.
• Willfulness Under the FCRA. Experian argued that its decision to list Advanta as the "source" was objectively reasonable because CardWorks operated under the Advanta name, the FDIC instructed Experian to list the accounts as Advanta accounts and not CardWorks on consumers' credit reports, and industry standard practices supported its decision to list Advanta as the source. In its analysis, the Court held that the relevant agency to look towards for guidance was the FTC and not the FDIC and therefore was unpersuaded by Experian's reliance on FDIC's guidance on the reporting of the Advanta Account. With respect to industry standards, Experian argued that the industry standard was to list only the owner of the account and not the servicer in order to list only a single entity – even when that entity is not the immediate provider of the information. The Court rejected this reasoning and stated that "no jury could rightly conclude that the argument of 'everyone else did it that way' is objectively reasonable."
• Summary Judgment. The Court identified the principal question to be resolved on summary judgment was if a jury could find that Experian's intentional omission of CardWorks as the source of information to be objectively reasonable. The Court concluded that the jury would find just the opposite and that "Experian's interpretation of the term 'sources of information' to include any variety of entities other than the one that actually provided the information is objectively un" (emphasis in original). Thus, the Court denied Experian's motion for summary judgment and granted Plaintiff's motion for summary judgment on the issue of willfulness liability.

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