On December 6, 2024, federal courts in the United States Second Circuit issued a pair of decisions clarifying that borrowers must identify a concrete injury caused by the dissemination of inaccurate information to establish standing to assert claims for violations of the Fair Credit Reporting Act (FCRA).
No Harm Found in Phipps Case
In Phipps, a consumer brought an FCRA claim against a credit reporting bureau based on the dissemination of allegedly inaccurate information regarding his name and address. The Second Circuit Court of Appeals held that the consumer lacked standing to bring an action for violations of the FCRA because the consumer failed to establish that the dissemination of allegedly inaccurate information caused the consumer any concrete harm.
The Second Circuit noted that slight variations in the consumer’s name and an incorrect address do not constitute concrete harm simply through their dissemination alone. Although the consumer claimed he was subsequently the victim of identity theft, the court noted a lack of evidence that the alleged harm was caused by the credit reporting bureau’s dissemination of inaccurate information.
Alvarez Case Requires Specific Injury
In Alvarez, a class of consumers brought an FCRA claim, alleging that a credit reporting bureau inaccurately reported that they were identified on the U.S. Treasury Department’s list of “Specially Designated Nationals” who are, among other things, ineligible for credit or employment and are potentially subject to deportation or criminal prosecution.
The United States District Court for the Eastern District of New York denied a class member’s motion to intervene and substitute as lead plaintiff and class representative, holding that the prospective plaintiff lacked standing due to his failure to allege a concrete injury.
Although the prospective plaintiff alleged he suffered reputational harm and emotional distress as a result of the dissemination of inaccurate information to a prospective lender, the court noted that the prospective plaintiff failed to allege that the inaccurate reporting had any impact on his ability to refinance his loan, or that the prospective lender paid any mind to the inaccurate reporting. The court further noted that the prospective plaintiff did not allege that he suffered any other resulting monetary harm caused by the inaccurate reporting.
Original Lead Plaintiff in Alvarez Established Standing
In contrast, the court noted that the original lead plaintiff and class representative had established standing as his complaint alleged that his loan application was denied as a direct result of the credit bureau’s dissemination of the alleged inaccurate information, resulting in monetary damages such as additional rent payments as well as reputational harm.
FCRA Focuses on Real Harm, Not Procedural Errors
The decisions in Phipps and Alvarez make clear that while the FCRA is meant to protect consumers from harm caused by inaccurate credit reporting, the statute is not meant as a vehicle for consumers to hold credit reporting bureaus strictly liable for minor procedural errors or inconsistencies.
