Wisconsin District Court Dismisses FCRA Request After Bank Mistakenly Accessed Consumer’s Credit Report | Strawberry and Forman

The US District Court for the Western District of Wisconsin recently ruled 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 (WD Wis. May 2, 2022), Synchrony requested Plaintiff’s credit report after a third party accidentally provided Plaintiff’s social security number as part of of a credit application. When the requester learned that the account had been opened, he contacted Synchrony to inform them that he had not opened the account. Synchrony requested that the Consumer Reporting Agencies (“CRA”) remove the account from the applicant’s credit report, but the thorough investigation of his credit remained. Plaintiff filed a lawsuit alleging that Synchrony violated Section 1681b(a)(3)(F)(i) of the FCRA by accessing its credit report without a “permitted business purpose.” Synchrony offered summary judgment.

The only issue before the court was whether Synchrony’s erroneous request for the plaintiff’s credit report violated the FCRA. Under Section 1681b(a)(3)(F)(i), CRAs may provide a credit report “to a person whom they have reason to believe . . . otherwise has a legitimate business need of this information . . . in connection with a commercial transaction initiated by the consumer.” The plaintiff alleged that because he had not applied for credit from Synchrony, Synchrony had no authorized reason to access their credit report.

Noting that the Seventh Circuit has yet to address the issue, the court reviewed 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. After receiving the application, Dish consulted the applicant’s credit report to assess his eligibility. The Bickley court determined that Dish acted in good faith and had a legitimate business purpose when it withdrew the plaintiff’s credit report and, therefore, Dish did not violate the FCRA.

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

The court also rejected plaintiff’s argument that the “reasonable belief” standard only applied to credit rating agencies and not to Synchrony. He acknowledged that the wording of Section 1681b(a)(3) appears to apply to credit rating agencies, but found that later wording allows a company to request a credit report if it has “a need legitimate business of information . . . in the course of a consumer-initiated commercial transaction.” In addition, the court relied on the Fourth Circuit’s decision in Korotki vs. Thomas, Randolph & Cooper, Pennsylvania, 131 F.3d 135 (4th Cir. 1997), to find that the “reason to believe” language also applies to a user (such as Synchrony). Importantly, the court noted that other courts dealing with this issue have always 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 that the Social Security number was incorrect, the court granted Synchrony’s motion for summary judgment.

It should be noted that the court spontaneously analyzed whether the plaintiff had standing to assert an FCRA claim. While many courts have declined to grant standing in the context of the FCRA, the Carlson court followed the recent decision of the Seventh Circuit in Persinger v Southwest Credit Systems, LP.and concluded that the reputational allegations alone were sufficient to establish standing.

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