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Levine v. World Financial-FCRA Class Action Defense Cases: Facially Valid Request for Consumer Credit Report Does Not Relieve Consumer Reporting Agency Of Duty To Evaluate Permissible Purpose Of Request Pursuant To Federal FCRA (Fair Credit Reporting Act

Federal District Court Order Granting Defense Motion to Dismiss FCRA Action Against Consumer Reporting Agency Reversed

A consumer (Stephen Levine) opened a store credit card account with a clothing retailer (Structure) through its financial affiliate (World Financial National Network Bank) that the consumer closed in 1998. Credit reports at a consumer reporting agency (Experian Information Solutions) showed that the account had been paid in full and closed. Nonetheless, in 2002 Structure requested credit reports on Levine from Experian, stating that it needed them for purposes of “account review.” Structure had not reported Experian with any new information on Levine’s account during the preceding four years, and Levine had not made any inquiries to Experian or Structure concerning his closed account. Experian provided copies of Levine’s credit report to Structure in May 2002 and in August 2002. Levine sued Experian and Structure for violating the federal Fair Credit Reporting Act (FCRA). 15 U.S.C. §§ 1681 et seq. Experian’s defense attorneys moved to dismiss the complaint. The district court granted the motion on two grounds: (1) “FCRA does not suggest that a credit report may only be permissibly obtained for account review during particular points in the parties’ relationship” and “Experian had not duty to investigate a facially valid request for a consumer report,” and (2) Levine failed to adequately allege damage. Levine v. World Financial Network Nat’l Bank, 437 F.3d 1118, 1119-20 (11th Cir. 2006). The Eleventh Circuit reversed.

The Circuit Court began by summarizing the operative allegations of the complaint: “(1) Levine’s account with Structure had been voluntarily closed and paid in full for years; (2) Levine could no longer use the account; (3) Levine had not disputed any information on the account; (4) Structure did not ask solely for information regarding its own trade line but instead requested the entire credit report; and (5) Structure twice requested his credit report from Experian within the span of about three months.” Levine, at 1120. Levine argued that Structure did not have any permissible purpose to review his credit report because his account had been closed long before, and that Experian negligently or willfully produced reports in violation of the FCRA because it receives a fee for each requested report. Id., at 1120-21.

The Court of Appeals held that the FCRA prohibited Experian from producing Levine’s credit report to Structure “if it ha[d] reasonable grounds for believing that the consumer report will not be used for a purpose listed in section 1681b,” Levine, at 1121 (quoting § 1681e(a)). Experian argued that so long has it receives a facially valid request for a consumer report it may produce it “notwithstanding any reasonable grounds to believe that the request is instead made for an impermissible purpose.” Id. The Circuit Court soundly rejected this argument, explaining at pages 1122:

Levine alleges that his report was twice requested within the span of a few months despite his account being closed for years with an undisputed zero balance. A simple recitation of “account review” by a former creditor does not automatically absolve Experian of its duty to protect confidential information when there are reasonable indications that the request was for other purposes. In light of the legislative findings in FCRA and considering the standard of review, we conclude that the question of whether Experian had “reasonable grounds” to believe that Structure intended to use Levine’s consumer report for an impermissible purpose, or whether Experian made “reasonable efforts” to verify the validity of Structure’s request, is a fact intensive one that is not resolved by the pleadings.

The Court also held that Levine had adequately pleaded damages. Id., at 1123-25.

NOTE: The Eleventh Circuit expressly reserved deciding “whether there is an absolute prohibition against such requests [for consumer reports] by former creditors for accounts that are closed and paid in full.” Levine, at 1122.

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