Consumer Finance Litigation

The U.S. District Court for the Western District of Wisconsin recently held that Synchrony Bank did not violate the Fair Credit Reporting Act (“FCRA”) when it mistakenly requested a consumer’s credit report. In Carlson v. Synchrony Bank, No. 21-cv-077-wmc, 2022 WL 1302841 (W.D. Wis. May 2, 2022), Synchrony requested plaintiff’s credit report after a third party accidentally provided plaintiff’s social security number in connection with a credit application. When plaintiff learned that the account was opened, he contacted Synchrony to advise that he did not open the account. Synchrony requested that the consumer reporting agencies (“CRAs”) remove the account from plaintiff’s credit report, but the hard inquiry into his credit remained. Plaintiff filed suit alleging Synchrony violated § 1681b(a)(3)(F)(i) of the FCRA by accessing his credit report without a “permissible business purpose.” Synchrony moved for summary judgment.

The sole issue before the court was whether Synchrony’s mistaken request for plaintiff’s credit report violated the FCRA. Under § 1681b(a)(3)(F)(i), CRAs may furnish a credit report “to a person which it has reason to believe . . . otherwise has a legitimate business need for the information. . . in connection with a business transaction that is initiated by the consumer.”. Plaintiff alleged that because he did not apply for credit with Synchrony, Synchrony lacked a permissible purpose to access his credit report.

Noting that the Seventh Circuit has yet to address the issue, the court looked to the Sixth Circuit’s decision in Bickely v. Dish Network, LLC. In Bickley, an identity thief used a stolen social security number to open an account. Upon receiving the application, Dish accessed the plaintiff’s credit report to evaluate his eligibility. The Bickley court determined that Dish acted in good faith and had a legitimate business purpose when it pulled the plaintiff’s credit report and, therefore, Dish did not violate the FCRA.

Relying on Bickley, the court rejected plaintiff’s argument that Synchrony lacked a “legitimate business need” because a third party—and not plaintiff—opened the account. The court found there was no evidence that Synchrony had any reason to believe the report it requested belonged to anyone other than the applicant and, as a result, Synchrony had a legitimate business need to access the credit report.

The court also rejected plaintiff’s argument that the “reasonable belief” standard applied only to CRAs and not Synchrony. It acknowledged the language in § 1681b(a)(3) seems to apply to CRAs, but found that later language authorizes a business to request a credit report if it has “a legitimate business need for the information . . . in connection with a business transaction that is initiated by the consumer.”. Additionally, the court relied on the Fourth Circuit’s decision in Korotki v. Thomas, Randolph & Cooper, P.A., 131 F.3d 135 (4th Cir. 1997), to find the “reason to believe” language applies equally to a user (such as Synchrony). Importantly, the court pointed out that other courts addressing this issue have consistently focused on the reasonableness of an entity’s belief that the consumer initiated the transaction. Because there was no evidence to suggest that Synchrony knew or should have known the social security number was incorrect, the court granted Synchrony’s motion for summary judgment.

It is worth noting that the court sua sponte analyzed whether plaintiff had standing to assert a FCRA claim. While numerous courts have declined to find standing in the FCRA context, the Carlson court followed the Seventh Circuit’s recent decision in Persinger v. Southwest Credit Systems, L.P., and found that allegations for reputational damages alone were sufficient to establish standing.

Written by Kristen Peters Watson.