Consumer Compliance Outlook: Fourth Issue 2020

On the Docket: Recent Federal Court Opinions


A federal district court temporarily enjoins the Department of Housing and Urban Development (HUD) from implementing its amendments to its Fair Housing Act regulations concerning the disparate impact standard.

Massachusetts Fair Housing Center v. Department of Housing and Urban Development (HUD) (D. Mass. No 20-cv-11765-MGM Oct. 25, 2020). In 2015, the Supreme Court held that disparate impact claims are permissible under the FHA and clarified the standards and burdens of proof for bringing such claims. Texas Dep’t of House. & Cmty. Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519 (2015). In light of this decision, HUD issued a final rule to amend its implementing regulations for the FHA. 85 Federal Register 60288 (Sept. 24, 2020). The rule was scheduled to become effective on October 26, 2020, but a community group filed suit to enjoin HUD from implementing the rule.

The plaintiff argued, among other issues, that the final rule violated the Administrative Procedure Act because it was arbitrary and capricious. See 5 U.S.C. §706(2)(A) (providing that arbitrary or capricious agency action can be challenged in court). The district court agreed. The court observed that several elements of the rule do not appear in any judicial decision and were not merely incorporating the Supreme Court’s new standards into the regulation, such as the amended regulation’s requirement that a plaintiff’s pleading identify a challenged policy that is arbitrary, artificial, and unnecessary to achieve a valid interest (24 C.F.R. §100.500(b)(1)), as well as an “outcome prediction” defense (24 C.F.R. §100.500(d)(2)(i)).

The district court also took issue with the rule’s requirement that a plaintiff establish that “a less discriminatory policy or practice exists that would serve the defendant’s identified interest (or interests) in an equally effective manner without imposing materially greater costs on, or creating other material burdens for, the defendant.” Additionally, the court criticized HUD for conflating the burden of proof for a plaintiff at the pleading stage and the prima facie burden to win the lawsuit. The district court found that these changes to the prior rule would “effectively neuter” disparate impact liability and were not justified. Finally, the court rejected HUD’s assertion that the rule was implemented to provide greater clarity, finding that the rule raised more questions than it answered. The court temporarily enjoined HUD from implementing the rule while the court conducted further proceedings to consider whether to make the temporary injunction permanent.


The Fourth Circuit rejects a lawsuit against a real estate team for an alleged kickback scheme in violation of RESPA §8(b) because the plaintiffs failed to demonstrate they suffered an injury sufficient for standing.

Baehr v. Creig Northrop Team, P.C., 953 F.3d 244 (4th Cir. 2020). The plaintiffs purchased their home in 2008, and their real estate agent said Lakeview Title Company would provide the title insurance. The agent did not disclose that Lakeview paid monthly marketing fees to the agent’s real estate brokerage firm. The plaintiffs’ class action lawsuit alleged that the monthly marketing payments were actually “kickbacks” prohibited under RESPA §8(b), and they were deprived of fair and impartial competition by the alleged scheme. The Fourth Circuit affirmed the district court’s summary judgment order dismissing the case because the plaintiffs did not suffer a concrete injury sufficient to establish injury-in-fact sufficient for Article III standing. In particular, the alleged “deprivation of impartial and fair competition between settlement service providers” was not deemed to be an “intangible harm” conferring standing under Article III when “untethered from evidence that it increased settlement costs.” Invoking Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the court noted that a mere statutory violation is insufficient to establish concrete injury. The court noted the plaintiffs did not allege any monetary harm, they had no interest in seeking alternative settlement service providers or title agencies (they “set forth no evidence that impartial and fair competition was even relevant to their decision to obtain settlement services” from the title company at issue), and they were admittedly satisfied with the services they received. The court also rejected plaintiffs’ other legal theories, including that the real estate brokerage firm owed them a fiduciary duty to remit the kickbacks they received; the court found a fiduciary relationship did not exist under Maryland state law in the circumstances of this case.


Eleventh Circuit dismisses a class-action lawsuit alleging a statutory violation of the Fair and Accurate Credit Transactions Act (FACTA) amendments to the FCRA because the plaintiff did not show the violation caused harm to establish standing.

Muransky v. Godiva Chocolatier, Inc., 979 F.3d 917 (11th Cir 2020) (en banc). Congress enacted the FACTA as an amendment to the FCRA to help prevent identity theft by prohibiting merchants that accept credit cards or debit cards from printing more than the last five digits of card numbers or the expiration date on receipts. 15 U.S.C. §1681c(g). In Muransky, the plaintiff received a receipt from the retailer Godiva displaying the first six and last four digits of his 16-digit credit card number, which is too many digits under the FACTA. He filed a class-action lawsuit seeking statutory damages of $1,000 per violation. A prior three-judge panel of the Eleventh Circuit found that a receipt displaying too many credit card numbers caused harm in terms of the increased risk of identity theft and allowed a $6.3 million class-action settlement to proceed. Muransky v. Godiva Chocolatier, Inc. 918 F. 3d 102 (11th Cir. 2018).

On review of the panel’s decision en banc, the Eleventh Circuit found that plaintiffs alleging a statutory violation must establish that they suffered actual harm, whether tangible or intangible, or a material risk of harm to establish standing. The court rejected the plaintiff’s argument that the violation alone established direct harm, referencing the Supreme Court’s decision in Spokeo, Inc., v. Robins External Link, 136 S. Ct. 1540 (2016), which requires that plaintiffs alleging a violation of a statute must have suffered a “concrete” and particularized injury-in-fact to establish standing under Article III of the Constitution. The court stated that under Spokeo, a “‘bare procedural violation, divorced from any concrete harm’ is not enough to establish an Article III injury.” The court also rejected the plaintiff’s argument that he suffered an increased risk of identity theft, holding that a conclusory allegation of increased risk alone was insufficient, and that he was required to allege facts that if accepted “plausibly allege a material risk, or significant risk, or substantial risk, or anything approaching a realistic danger.”

Fifth Circuit affirms dismissal of lawsuit alleging consumer reporting agencies (CRAs) violated the FCRA by failing to investigate and correct a missing trade line from the plaintiff’s credit report.

Hammer v. Equifax Info. Servs., L.L.C., 974 F.3d 564 (5th Cir. 2020). In 2010, the plaintiff obtained a credit card from Capital One Bank and maintained the account in good standing. In 2017, Experian and Equifax stopped reporting this trade line on his credit report. After filing multiple disputes with these CRAs, they eventually added the trade line, but Equifax removed it a week later. The plaintiff alleged that, as a result, his credit score dropped, he was denied a credit card and mortgage, and he was offered a high interest rate on another mortgage.

His lawsuit alleged the two CRAs violated §1681e(b) of the FCRA (15 U.S.C. §1681e(b)), which provides: “[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” The court found that not reporting a credit line did not violate §1681e(b) because “a credit report does not become inaccurate whenever there is an omission, but only when an omission renders the report ‘misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.’” The court noted that users of credit reports are aware that these reports do not always contain all of a consumer’s credit information and concluded that the omission of a single credit item does not render the report inaccurate or misleading.

The plaintiff also alleged that the CRAs violated §1681i(a) of the FCRA (15 U.S.C. §1681i(a)) by failing to investigate his dispute that his Capital One account was omitted from his consumer report. Section 1681i(a) provides the right to dispute the “completeness or accuracy” of any information in a consumer report and requires a CRA to investigate whether the information is inaccurate. The court found that the dispute right only applies to the completeness of items in the report ― and not the completeness of the report itself ― and therefore did not apply to his omitted trade line.