Two opinions issued the same day by Judge Matthew E. Orso of the Western District of North Carolina represent an important development under the Fair Credit Reporting Act ("FCRA"). In the first, Judge Orso certified a nationwide class action. In the second, he denied Trans Union's motion for summary judgment, concluding that a jury should decide whether Trans Union violated the FCRA by furnishing more than 800,000 consumer reports to Liberty Credit Management, an alleged participant in a massive fraudulent debt collection scheme later shut down by the Federal Trade Commission.
According to the FTC, Liberty and affiliated entities purchased defaulted consumer debt, used Trans Union's Collection Prioritization Engine ("CPE") reports to obtain consumers' personal information and "scrub" accounts to exclude those that had filed bankruptcy, then sent threatening collection letters demanding payment of debts that consumers either did not owe or that the collectors had no authority to collect. The FTC ultimately obtained a permanent injunction and more than $8 million in monetary relief against the operators.
The plaintiff alleged that Trans Union violated both 15 U.S.C. §§ 1681b and 1681e(a) by furnishing consumer reports to Liberty without having sufficient reason to believe Liberty had a permissible purpose and by failing to maintain reasonable procedures designed to prevent such misuse.
Class Certification
Judge Orso first concluded that the case should proceed as a nationwide class action.
The certified class consists of consumers whose CPE reports were furnished by Trans Union to Liberty Credit Management beginning August 12, 2019. The court found that Rule 23's requirements of numerosity, ascertainability, commonality, typicality, adequacy, predominance, and superiority were all satisfied.
Trans Union argued that individualized issues predominated because each consumer's circumstances would have to be examined separately. Judge Orso disagreed. The central questions are common to every class member:
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Did Trans Union have "reason to believe" Liberty had a permissible purpose to obtain consumer reports?
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Did Trans Union maintain reasonable procedures to limit disclosure of reports to permissible purposes?
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If not, were any violations willful?
Those issues depend principally upon what Trans Union knew—or reasonably should have known—about Liberty, not upon the circumstances of each individual consumer. As a result, class treatment was appropriate.
Summary Judgment Denied
Judge Orso also denied Trans Union's motion for summary judgment.
Trans Union argued that it was entitled to judgment because Liberty repeatedly certified that it would use reports only for permissible purposes, represented itself as a debt collector, completed Trans Union's credentialing process, and had generated no prior consumer complaints before August 2022.
The court rejected the notion that such certifications automatically establish a "reason to believe" under the FCRA.
Instead, Judge Orso carefully examined the record and concluded that a reasonable jury could find numerous warning signs existed before Trans Union furnished the reports. Among the evidence identified by the court were:
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Liberty was a newly created business.
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Its initial application contained a fictitious employer identification number.
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The company had virtually no online business presence.
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Two of three business references could not be verified.
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It operated from approximately 212 square feet of rented office space.
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Mitchell Evans had significant financial difficulties, including a six-figure judgment and prior requests for court fee waivers based upon indigency.
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A Dun & Bradstreet report later classified Liberty as inactive and unable to confirm business operations.
Judge Orso did not conclude that these facts established liability. Nor did he hold that Trans Union necessarily violated the FCRA.
Rather, he rejected both parties' attempts to convert the statute into a bright-line rule.
Trans Union effectively argued that blanket certifications alone created the required "reason to believe." The plaintiff argued that the various red flags necessarily defeated any such belief.
Judge Orso adopted neither position. Instead, he concluded that whether a consumer reporting agency had "reason to believe" a subscriber would use reports for a permissible purpose is a fact-intensive inquiry that depends upon all of the surrounding circumstances. Certifications are relevant evidence, but they are not automatically dispositive. Likewise, warning signs may or may not be sufficient depending upon the totality of the evidence. On this record, those competing inferences present classic jury questions.
Commentary:
These opinions illustrate why the FCRA imposes duties directly on consumer reporting agencies rather than relying solely upon the promises of those purchasing consumer reports.
If all a consumer reporting agency had to do was obtain a signed certification that the subscriber intended to comply with the law, Congress could simply have omitted the statutory requirement that the agency have a "reason to believe" the reports would be used for a permissible purpose. Judge Orso's analysis gives independent meaning to that language without imposing strict liability whenever a subscriber later proves dishonest.
From a bankruptcy perspective, another aspect of the allegations deserves attention.
According to the receiver's report, Liberty allegedly used Trans Union's reports to identify consumers who had filed bankruptcy before deciding whom to target for collection efforts. If those allegations ultimately prove true, that is deeply troubling. The bankruptcy discharge is intended to provide honest debtors with a fresh start—not to become a data point identifying consumers who may be particularly vulnerable to abusive collection tactics.
Finally, the class certification ruling serves as an important reminder that many consumer protection statutes depend upon aggregate litigation for meaningful enforcement. Few consumers will file individual lawsuits over statutory damages of a few hundred dollars. Yet if the allegations here are correct, hundreds of thousands of consumers may have had their reports furnished under circumstances that violated the FCRA. Class actions remain one of the few practical mechanisms for enforcing those rights.
Judge Orso's opinions do not determine that Trans Union violated the FCRA. They simply recognize that, on this record, reasonable jurors could disagree. That is precisely why the case will now proceed to trial.
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