Consumer Compliance Outlook: Third Issue 2021

On the Docket: Recent Federal Court Opinions


Supreme Court holds that a plaintiff with inaccurate information in his credit report that is not disclosed to third parties lacks standing because there is no concrete harm.

TransUnion v. Ramirez, 141 S. Ct. 2190 (2021). The plaintiff sought to buy a car at a dealership, which obtained his credit report from TransUnion. The dealership declined to sell him a car because, he was told, his name appeared on a terrorist list. The dealership subscribed to TransUnion’s OFAC Name Screen Alert, which flagged those whose first and last names match names on a list of the Office of Foreign Assets Control (OFAC) of persons deemed to be threats to national security, such as terrorists and drug traffickers. TransUnion used third-party software to compare consumers’ names with the OFAC list, which only matched names on the list without conducting additional validation, such as matching Social Security numbers and birthdates. Thus, the plaintiff matched a name on the OFAC list, but it was a different person. After the denial, the plaintiff obtained his credit report from TransUnion, which did not show the OFAC listing. TransUnion subsequently mailed him a second report showing the listing but did not provide a required disclosure of his rights under the FCRA.

The plaintiff’s lawsuit against TransUnion alleged FCRA violations 1) in failing to follow reasonable procedures to assure the “maximum possible accuracy” of his credit report because the software only matched names without additional validation, 2) in not providing the OFAC information in the first credit report provided, and 3) in not providing the statutory summary of rights in the second report with the OFAC information. The U.S. District Court for the Northern District of California then certified a class of 8,185 persons whose credit reports incorrectly flagged them as matching persons on the OFAC list for a class-action lawsuit. Within this class, 1,853 class members’ reports were distributed to third parties, while the reports of the other 6,332 class members were not shared. A jury awarded more than $60 million in damages, which a divided panel of the Ninth Circuit affirmed, but reduced to around $40 million.

On appeal, the Supreme Court focused on the threshold issue whether the class members met standing requirements for the three FCRA claims. The court noted that standing is limited to real, concrete injuries, and not abstract ones. This requirement was satisfied for class members whose reports were disseminated to third parties because the information affected their reputation by falsely suggesting they were terrorists or criminals, similar to a defamation claim for injuring someone’s reputation with false information. But class members whose reports were not disseminated lacked standing because “the mere presence of an inaccuracy in an internal credit file, if it is not disclosed to a third party, causes no concrete harm.” The plaintiffs also argued injury for the risk of future harm, but the court found this claim was too speculative. Finally, the court rejected standing for the other two claims: that TransUnion provided the first report without including the OFAC information and provided a second report with the information but lacking the FCRA disclosure. The court characterized these issues as formatting errors because the required information was provided, but it was provided in two separate reports instead of a single report, as the FCRA requires. The court found the plaintiffs failed to submit evidence they suffered any harm from this formatting error and therefore lacked standing. The case was remanded.

Seventh Circuit clarifies a consumer reporting agency is not required to make legal determinations when investigating consumer disputes.

Chuluunbat v. Experian Info. Sols., Inc., 4 F.4th 562 (7th Cir. 2021).The plaintiffs incurred credit card debt that was later sold to third parties. When the purchaser creditors attempted to collect the debts, the plaintiffs filed disputes with the three consumer reporting agencies (CRAs), alleging these creditors did not own the debts. The CRAs contacted the purchaser creditors, which confirmed ownership, but did not produce the original sale or assignment agreements. The CRAs then notified the plaintiffs that no further steps would be taken to investigate their disputes. The plaintiffs’ lawsuits alleged the CRAs violated §§1681e(b) and 1681i of the FCRA because their investigation was inadequate. The court noted that 15 U.S.C. §1681e(b) requires CRAs to “follow reasonable procedures to assure maximum possible accuracy” of information in credit reports and to conduct reasonable reinvestigations to determine if the information is inaccurate if consumers dispute information in their report.

The court explained that a threshold issue is whether the dispute concerns a factual inaccuracy or legal issue, but it also noted the line between them is not always clear. The court contrasted clear factual issues, such as the amount a consumer owes and the date a consumer opened an account or incurred a payment, with clear legal issues, such as whether a debt is invalid because of a legal violation. The court concluded “the central question is whether the alleged inaccuracy turns on applying law to facts or simply examining the facts alone. Consumer reporting agencies are competent to make factual determinations, but they do not reach legal conclusions like courts and other tribunals do.” The court found that whether the plaintiffs’ debts were assigned to other parties requires a legal determination “which the consumer reporting agencies are not statutorily required to do.” Accordingly, the court affirmed the dismissal of the cases.


Eleventh Circuit holds that a debt collector transmitting debtor information to a third-party vendor violates the Fair Debt Collection Practices Act.

Hunstein v. Preferred Collection & Management Services, Inc., 994 F.3d 1341 (11th. Cir. 2021) The plaintiff alleged a debt collector violated the Fair Debt Collection Practices Act (FDCPA) by sharing information about the debt — the plaintiff’s name, the outstanding balance, the nature of the debt as a medical bill for his son’s medical treatment, and his son’s name — with a third-party vendor retained to print and mail a debt collection letter. Section 1692c(b) of the FDCPA prohibits debt collectors, with exceptions not relevant here, from communicating consumers’ personal information to third parties “in connection with the collection of any debt.”

The district court dismissed the case. On appeal, the Eleventh Circuit reversed and remanded. The court identified the following two issues: 1) whether the plaintiff suffered an injury that provided legal standing, and, if so, 2) whether the debt collector violated the FDCPA by improperly sharing the consumer’s information with a vendor in connection with collecting a debt.

The court found standing was established because the plaintiff’s claim was similar to the tort of invasion of a person’s privacy, which is actionable, and because the FDCPA identifies invading individual privacy as one of the harms it seeks to address. With respect to whether sharing information with the vendor violated the FDCPA, the court concluded that sharing the plaintiff’s status as a debtor, the amount of his debt, the creditor to whom the debt was owed, and the purpose for which the debt was incurred concerning his son’s medical treatment, were all tied to collecting the plaintiff’s debt and therefore was a violation. The case was remanded.

The court noted that its ruling “may well require debt collectors (at least in the short-term) to in-source many of the services that they had previously outsourced, potentially at great cost.” However, the court concluded: “Our obligation is to interpret the law as written, whether or not we think the resulting consequences are particularly sensible or desirable. Needless to say, if Congress thinks that we’ve misread §1692c(b) — or even that we’ve properly read it but that it should be amended — it can say so.”

Regulation P Sharing Exception

This decision does not affect financial institutions’ information sharing practices under Regulation P, which permits an institution under 12 C.F.R. §1016.13(a) to disclose nonpublic personal information to a nonaffiliated third party to perform services for the institution if the initial privacy notice is provided, and the third party enters into an agreement prohibiting it from disclosing or using the information other than to perform its functions.

Editor’s note: On October 28, 2021, after we published Outlook Issue 3, the Eleventh Circuit granted a petition to rehear Hunstein to address the Supreme Court’s intervening decision in TransUnion v. Ramirez, 141 S. Ct. 2190 (2021), which we summarized above. A divided panel vacated its original opinion and replaced it with a new one (Hunstein 2) that reaffirms its prior ruling, Outlook will summarize Hunstein 2 in our next issue.