An $11.7 million judgment awarded against credit reporting company Experian in a 69,000-member class action brought under the federal Fair Credit Reporting Act (FCRA) was vacated by the Fourth Circuit in Dreher v. Experian Information Solutions, Inc., because the named plaintiff had not suffered a concrete injury as required to satisfy Article III standing.

The plaintiff claimed that Experian willfully violated the FCRA by failing to accurately disclose the source of the information contained in an entry, known as a tradeline, on his Experian credit report. The tradeline at issue concerned a credit card account with Advanta Bank, an institution that failed to survive the 2008 financial crisis. The FDIC was appointed as receiver, and CardWorks, Inc., and CardWorks Servicing LLC became the servicer of Advanta’s portfolio. When the plaintiff subsequently requested his Experian credit report, Experian continued to identify Advanta, rather than CardWorks, as the source of the tradeline’s account information.

The plaintiff filed suit in the Eastern District of Virginia, claiming that Experian failed to accurately identify CardWorks as the source of the information in the Advanta tradeline. The district court certified a class and granted plaintiff’s motion for partial summary judgment on liability. It also rejected Experian's argument that the plaintiff and class members lacked Article III standing. In the district court’s view, the FCRA created a statutory right to receive the "sources of information" for one's credit report, a violation of which right creates a sufficient injury-in-fact to confer standing. The district court's analysis did not consider whether the injury was specific and concrete. Instead, it found that any FCRA violation would create a sufficient injury-in-fact.

Experian appealed the district court's ruling. After holding the case in abeyance pending the U.S. Supreme Court's decision in Spokeo v. Robins, the Fourth Circuit held that the plaintiff, and thus the class, failed to demonstrate an injury-in-fact for Article III standing because plaintiff's "alleged informational injury" was not sufficiently concrete. Applying Spokeo, the court explained that Experian's failure to provide the source of tradeline information must cause a "real" harm with an adverse effect. To determine whether a party has suffered such a harm, courts may look to whether there is a common law analogue to the purported informational injury or to whether the plaintiff suffered the type of harm that Congress sought to prevent by requiring disclosure.

The plaintiff did not identify any common law analogue for his alleged informational injury, and his alleged injury—i.e., lacking knowledge of the specific company he was "dealing with"—was not the type of harm that Congress sought to prevent by passing the FCRA, the Fourth Circuit ruled. The court pointed out that the FCRA aims "to ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy." Naming Advanta rather than CardWorks as the source of information did not prevent plaintiff from efficiently obtaining an accurate credit report. On the contrary, the appellate court observed that naming the creditor of an account, rather than the servicer, may actually assist consumers, many of whom would not recognize a servicer's name. This observation is consistent with industry policies and the views of the Consumer Financial Protection Bureau (CFPB) and several states, which recommend identifying the original creditor, particularly in a collection context. See, e.g., CFPB, SBREFA Proposal, App. F (July 28, 2016) (requiring debt validation notices to include "the name of the creditor at the time of default"); 23 NYCRR 1.2(b)(1) (requiring debt collector to provide "clear and conspicuous written notification" of "the name of the original creditor"); N.Y.C. Admin. Code § 20-493.1(a)(iii) (requiring debt collection agency to provide "the originating creditor of the debt").

Concluding that the plaintiff lacked standing under Article III because he did not suffer any real harm, the Fourth Circuit vacated and remanded the case to the district court with instructions to dismiss the action based on lack of subject matter jurisdiction. As discussed in a previous alert, this decision may be a Pyrrhic victory for Experian if the plaintiff simply pursues his claims in state court.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.


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