On October 16, 2017, the United States District Court for the District of Minnesota dismissed a Fair Credit Reporting Act (“FCRA”) complaint because the plaintiff had failed to plausibly allege that the defendant lacked a reason to believe that lenders intended to use the report for an authorized purpose.
The defendant, Clarity Services, Inc., is a consumer reporting agency. In April of 2015, the plaintiff, Michelle A. Kunza, received a copy of her credit report from Clarity. According to the report, it had been disclosed to two payday lenders, Flurish, Inc. and RHC/Rolling Hills, in 2014. The plaintiff claimed that she had never applied for a loan or any other type of credit from those lenders. The plaintiff discovered that an unknown entity or person had applied for a loan through a company called Quintessential Financial Group. The applicant used the plaintiff’s name, e-mail address, home address, phone number, and social security number; the applicant, however, used the wrong birth year for the plaintiff. Quintessential sold the application to Flurish and Rolling Hills. Those two companies requested the plaintiff’s credit report from Clarity with the incorrect birth year. Clarity provided the credit report to the companies.
The FCRA permits a consumer reporting agency, such as Clarity, to provide a credit report to a third party, but only for certain purposes. For instance, section 1681b(a)(3)(A) of the FCRA permits a consumer reporting agency to provide a credit report “[t]o a person . . . [the agency] has reason to believe . . . intends to use the information in connection with a credit transaction involving the consumer.” The plaintiff alleged that Clarity violated that provision of the FCRA because Clarity provided her credit report to third parties that did not have a valid reason to request the report. According to the plaintiff, because the third parties used an incorrect birth year for her, Clarity should have realized that the plaintiff was not actually involved in the transaction. Clarity filed a motion to dismiss the complaint.
The Court disagreed with the plaintiff. According to the Court, the critical question was whether the lenders intended to use the plaintiff’s credit report for an authorized purpose, such as to help determine whether to lend money to the plaintiff. The complaint conceded that the lenders requested the credit report to evaluate whether to lend money to the plaintiff. For the Court, it did not matter that an incorrect birth year was used “because Clarity had every reason to believe the lenders were evaluating whether to extend credit to . . . [the plaintiff] — indeed, there is no other reason the lenders would have requested her credit report.” The Court, therefore, concluded that the plaintiff had failed to plausibly allege that Clarity lacked a reason to believe that the lenders intended to use the report for an authorized purpose. Notably, the Court remarked, “[t]he FCRA is not a strict liability statute; it does not demand perfection” from consumer reporting agencies. The Court granted Clarity’s motion and dismissed the plaintiff’s complaint with prejudice.
A copy of the Kunza v. Clarity Services, Inc. decision is available here.
