In an unpublished opinion, the Ninth Circuit reached the alarming conclusion that plaintiffs alleging inaccuracies on credit reports that lowered their credit ratings, had no constitutional standing to sue the credit reporting agencies under the FCRA because they could not show “that they had tried to engage in or were imminently planning to engage in any transactions for which the alleged misstatements in their credit reports made or would make any material difference.” Jaras v. Equifax, No. 17-15201(9th Cir. March 25, 2019) (unpublished).
The plaintiffs in these related cases were four chapter 13 debtors who found that their credit was being reported by the three major credit reporting agencies in a manner that was inconsistent with their confirmed bankruptcy plans. After seeking, and failing to obtain, correction, they sued the agencies under the Fair Credit Reporting Act (FCRA) and its California corollary. The district courts dismissed the cases after finding that the reports were not inaccurate.
On appeal, the Ninth Circuit found that even if the reports were inaccurate the plaintiffs lacked standing to sue under the FCRA because they did not allege that the inaccuracies caused concrete injury.
The court relied in large part on the reasoning in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016), where the credit reporting agency incorrectly reported the plaintiff’s age, marital status, education, wealth and profession. There, the Supreme Court held that a plaintiff does not “automatically satisf[y] the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” The Supreme Court offered an incorrect zip code as an example of an inaccuracy that may not cause injury. On remand, the Ninth Circuit concluded that the plaintiff in Spokeo had standing under the FCRA in light of the fact that he was actively looking for work, at least one potential employer had sought the credit report, and the misinformation was likely to adversely affect his employment prospects.
Following the reasoning in Spokeo, the court here found that merely by being in bankruptcy, the plaintiffs’ creditworthiness suffered. But because they did not point to any particular transaction that the incorrect credit reports affected, they could not show that the inaccuracies in the reports were any more significant than an inaccurate zip code. “Without any allegation of the credit report harming Plaintiffs’ ability to enter a transaction with a third party in the past or imminent future, Plaintiffs have failed to allege a concrete injury for standing.”
The court reversed and remanded with instructions to dismiss without prejudice to allow the plaintiffs to allege specific harm.
In a dissenting opinion, Judge Berzon took issue with the majority’s interpretation and application of Spokeo. She pointed out that all of the plaintiffs (with the exception of Mr. Jaras whose case she agreed warranted dismissal) reported lower credit scores by reason of the inaccuracies. In her opinion, that alone constituted concrete injury to support standing to sue under the FCRA. Judge Berzon emphasized the realities of credit reporting noting that credit reports may be accessed without the knowledge of the subject of the report for transactions ranging from home purchase to cell phone purchase. For that reason, Judge Berzon reasoned, to establish concrete injury it is enough to show that inaccuracies led to a lower credit score. Furthermore, Spokeo does not mandate a different conclusion. That case was based on a finding that the credit report contained “materially inaccurate information” rather than specific instances of a potential creditor or employer accessing the report. Finally, Judge Berzon concluded that in the face of actual inaccuracies affecting the credit score, the issue of damages was a matter to be determined within the context of the FCRA case, not a constitutional threshold question of standing.
Mr. Jaras has been granted an extension of time to file a petition for rehearing.
Tags: FCRA, Standing
