The U.S. Supreme Court sided with credit bureau TransUnion last week in a decision that limits consumers’ ability to sue for damages under federal statutes.
The case involved a class-action lawsuit that included thousands of consumers whose names were inaccurately flagged as potential terrorists in their credit files. The verdict will have sweeping implications for future consumer claims under federal statutes, according to privacy and automotive legal experts.
The suit originated in 2011 when Sergio Ramirez attempted to purchase a vehicle at a California Nissan dealership. A check of his credit report erroneously connected him with the U. S. Treasury Department’s Office of Foreign Assets Control’s list of terrorists, drug traffickers and other serious criminals.
Dealerships are required by federal law to verify if a consumer is on the Specially Designated Nationals and Blocked Persons List before completing an automotive transaction. If there’s a match with the list, the car deal cannot legally proceed.
Ramirez led a class of 8,185 people who also had false Office of Foreign Assets Control alerts in their credit files in a lawsuit against TransUnion under the Fair Credit Reporting Act. They said the credit bureau failed to use reasonable procedures to ensure the accuracy of their credit files. Credit reporting agencies are required under the act to maintain reasonable procedures to ensure consumer report information is as accurate as possible.
A jury awarded the class more than $60 million, which was reduced to $40 million in a federal appeals court.
In the 53-page decision, the nation’s highest court decided June 25 the concrete harm requirement could be satisfied if there was “material risk of future harm … in the context of a claim for injunctive relief to prevent the harm from occurring” as long as a plaintiff could establish the risk of harm is sufficiently imminent and substantial. Ramirez and the other class members were unable to provide that evidence, according to Justice Brett Kavanaugh.
The court ruled, however, that only a fraction of those involved in the suit were able to prove injury, and threw out the claims of the 6,332 remaining members. Since the inaccurate information was never disclosed to a third party, that portion of the class was unable to establish concrete harm, Kavanaugh wrote for the majority.
“In cases such as these where allegedly inaccurate or misleading information sits in a company database, the plaintiffs’ harm is roughly the same, legally speaking, as if someone wrote a defamatory letter and then stored it in her desk drawer,” Kavanaugh said. “A letter that is not sent does not harm anyone, no matter how insulting the letter is. So too here.”
Jennifer Sarvadi, a partner with Hudson Cook, said in an email that the case clarified the requirement that consumers must suffer concrete harm to reach sufficient standing under Article III of the Constitution, which typically includes “physical, monetary or cognizable intangible harm traditionally recognized” under the common law.
“It will be interesting to see how litigants will raise a standing challenge to claims filed under other consumer protection statutes that provide for private causes of action, such as the Fair Debt Collection Practices Act,” Sarvadi said.