SC to Consumers: When It Comes To Suing in Federal Court – No Harm, No Foul

June 29, 2021 at 8:49 am 1 comment

A decision by the Supreme Court last week, TransUnion, LLC v. Ramirez, has some very practical implications for credit unions large enough to be on the radar of class action attorneys anxious to sue in federal court over alleged violations of federal law.  In a nutshell, the Supreme Court made it more difficult for plaintiffs to sue your credit union in federal court.

In order to understand just how important this case may be, it’s important to understand just how bad a job TransUnion did complying with the FCRA. A majority of the court held that notwithstanding all these mistakes, only individuals that could show they were harmed by these mistakes in a concrete way had the right to sue the company in federal court. 

In the aftermath of 9/11, TransUnion offered financial institutions a feature which allowed them to more easily spot individuals subject to OFAC sanctions. Specifically, the service informed creditors when a person’s first and last name was the same as an individual on an OFAC list.  Needless to say, this service generated a lot of false positives. One of its victims was Sergio Ramirez.  When he and his wife went to buy a Nissan Maxima, he thought the deal was done only to be informed by the car dealership that it would not sell the car to him because when they ran a TransUnion credit report it indicated that his name was a match for an individual who was on the OFAC sanctions list (incidentally, in the finest tradition of car salesmen everywhere, the dealership closed the deal with the alleged terrorist’s wife).

Things got even worse in the weeks ahead. Mr. Ramirez called TransUnion and requested a copy of his credit file. In response he received the statutory summary of his rights which he is entitled to under the FCRA, but the file he received did not include the OFAC notice.

Mr. Ramirez brought a class action lawsuit on behalf of individuals whose credit reports wrongly identified them as OFAC miscreants. The “class” contained 8,185 members but only 1,853 of these individuals had their credit reports disseminated to potential creditors during the relevant period. He successfully won at trial since there was more than enough evidence to prove that TransUnion violated several key provisions of the FCRA by failing to follow reasonable procedures to insure the accuracy of its credit reports and failed to provide consumers with accurate credit files upon request. In addition, the FCRA explicitly gives individuals the right to sue for violations of its provisions.

As I talked about in this blog before, an individual seeking to sue in federal court has to show not only that they were subject to a violation of the law but that they were subject to an actual concrete harm. In this case, the Supreme Court ruled that even when Congress writes a statute such as the FCRA and gives a person the right to receive damages for violations of that act, plaintiffs must still show that they suffered injury “in fact” in order to access the federal courts. In this case, a majority of the court agreed that the 1,800 individuals whose credit report was disseminated to potential creditors suffered an injury in fact by effectively being defamed. But what makes this decision so potentially significant is that the court did not believe that an inaccurate credit report by itself injured individuals enough to give them access to the federal courts. As judge Cavanaugh pithily explained “no concrete harm, no standing.”

Why does this matter so much? First, because its rationale could easily be applied not only to cases involving violations of the FCRA but to other violations of federal consumer laws such as the Truth In Lending Act which allowed consumers to sue lenders simply because a statute has been violated irrespective of whether or not anyone was harmed by this violation. To be clear, states such as NY and California are free to have their own standards for determining when someone can sue in state court. The long term impact of this decision may simply be to empower state courts to exercise greater influence over the way consumer laws are interpreted. But in the short term, expect more disputes over whether or not creditors can be sued in federal court.

Entry filed under: Compliance, Legal Watch. Tags: , , , , , .

What The End of New York’s State of Emergency Means For Your Credit Union DFS Issues Ransomware Guidance

1 Comment Add your own

  • 1. Chris S.  |  June 29, 2021 at 8:57 am

    Literally laughed out loud after reading the end of the third paragraph. That was so great.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 739 other followers

Archives