Consumer Finance Litigation

In Pedro v. Equifax, Inc., --- F.3d ---, 2017 WL 3623926 (11th Cir. 2017), the Eleventh Circuit held that it was not objectively unreasonable for TransUnion, LLC to interpret section 1681e(b) of the Fair Credit Report Act ("FCRA") to allow it report an account belonging to an authorized user.

Kathleen Pedro filed a putative class action alleging that TransUnion willfully violated section 1681e(b), which requires consumer reporting agencies to "follow reasonable procedures to assure maximum possible accuracy," when it reported her parents' credit card account for which she was an authorized user. Pedro claimed that TransUnion's reporting on a delinquent account was inaccurate because she was not liable on the account, and the reporting caused her credit score to drop. TransUnion moved to dismiss the complaint, and the district court granted its motion. Pedro appealed.

On appeal, the court first addressed TransUnion's argument that Pedro lacked Article III standing because she failed to allege that she suffered an injury in fact. The court noted that an injury is sufficient if it involves "an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical." Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). The court compared Pedro's alleged injury-harm caused by the reporting of inaccurate information about her credit-to the publication of defamatory information, which has been deemed sufficient to show a concrete injury. The court also considered time Pedro spent attempting to resolve the alleged inaccuracy and the drop in her credit score to conclude that she sufficiently alleged injury in fact. As a result, the court found that Pedro had standing.

Turning to the FCRA claim, the court said that in order to state a claim for a violation of section 1681e(b), Pedro had to show that TransUnion knowingly or recklessly violated this section. A violation is reckless if the agency takes an action that "is not only a violation under a reasonable reading of the statute's terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless." Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 69 (2007). An interpretation of the FCRA based on the statutory language, judicial precedent, or guidance from administrative agencies does not indicate that a violation is reckless. Further, a consumer reporting agency does not knowingly violate the Act if it adopts an objectively reasonable interpretation of the Act and, under such circumstances, a court will not look to the subjective intent.

The court found that TransUnion's interpretation of section 1681e(b) was objectively reasonable because TransUnion could have found that the "maximum possible accuracy" standard requires only that it report technically accurate information. While the court thought that the better reading of the statute requires credit reports to be both technically accurate and not misleading, it acknowledged judicial precedent which would support TransUnion's interpretation that the FCRA requires technical accuracy only. Because Pedro was, in fact, an authorized user, the information that TransUnion reported was true. The court held that because TransUnion's interpretation of the FCRA was based in the statutory text and judicial precedent, its interpretation was not objectively unreasonable. Further, the court held that because TransUnion's interpretation was reasonable, it did not willfully violate the requirement that it adopt reasonable procedures to assure maximum possible accuracy. Accordingly, the court affirmed the dismissal of Pedro's FCRA claim.