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Financial Services Law Insights and Observations

9th Circuit allows FCRA action to move forward against national bank

Courts FCRA Standing Appellate Ninth Circuit Credit Report

Courts

On October 31, the U.S. Court of Appeals for the Ninth Circuit, in a split panel decision, reversed the district court’s dismissal of a consumer’s FCRA action against a national bank alleging the bank obtained her credit report for an impermissible purpose. According to the opinion, the consumer filed the complaint against the bank after reviewing her credit report and noticing the bank had submitted “numerous credit report inquiries” in violation of the FCRA because she “did not have a credit relationship with [the bank]” as specified in the FCRA and, therefore, the inquiries were not for a permissible purpose. The bank moved to dismiss the action, arguing that the consumer did not suffer any injury from the credit inquiries. The district court agreed, and dismissed her claim with prejudice for lack of standing and failure to state a claim.

On appeal, the majority disagreed with the district court, concluding that (i) a consumer suffers a concrete injury in fact when a credit report is obtained for an impermissible purpose; and (ii) a consumer only needs to allege that her credit report was obtained for an impermissible purpose to survive a motion to dismiss. The appellate majority emphasized that the consumer does not have the burden of pleading the actual purpose behind the bank’s use of her credit report; the burden is on the defendant to prove the credit report was obtained for an authorized purpose. Moreover, the majority noted that the consumer alleges she only learned about the bank’s inquiry after reviewing her credit report and, therefore, it is implied “that she never received a firm offer of credit from [the bank],” and taken together with the fact that the bank actually obtained her credit report, she stated a plausible claim for relief.

One panel judge concurred in part and dissented in part, arguing that the consumer had standing but failed to state a plausible claim. Specifically, the judge argued that “the majority characterize[d] [the] plaintiff’s claim in terms of ‘possibility,’” but “mere possibility of liability does not plead a plausible claim.” Moreover, the judge disagreed with the majority’s conclusion that the defendant bears the burden of proof in these instances, stating “the Supreme Court has expressly placed the burden of pleading a plausible claim squarely on the plaintiff rather than on the defendant.”

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