Is an Inaccurate Credit Report Alone Enough to Establish Article III Standing?

A recent case out of the Eastern District of California addressed the split in authority on whether an inaccurate credit report alone is enough to establish a concrete injury in fact for purposes of Article III standing. 

In Kellie Gadomski v. Patelco Credit Union, No. 2:17-cv-00695-TLN-AC, 2020 WL 223878, 2022 U.S. Dist. LEXIS 13741 (E.D. Cal. Jan. 24, 2022), Plaintiff, a California consumer, filed suit against Defendant, a furnisher of information, alleging two causes of action for violations of the Fair Credit Reporting Act (“FCRA”) and the California Consumer Credit Reporting Agencies Act (“CCCRAA”) in regards to a consumer credit card debt (the “Debt”) owed by Plaintiff to Defendant. 

Plaintiff claimed that Defendant inaccurately reported the Debt as being “charged off” or otherwise past due/unpaid, as opposed to “Discharged in Bankruptcy,” after Plaintiff’s “no asset” Chapter 7 bankruptcy, in which the Debt was allegedly scheduled, was discharged. Additionally, Plaintiff claimed that Defendant’s failure to comply with the Metro 2 reporting standard constituted an inaccurate or misleading statement. 

Defendant moved to dismiss Plaintiff’s claims in their entirety because Plaintiff lacked standing and failed to allege she was damaged.  The Court first addressed Plaintiff’s claim for actual damages, finding Plaintiff’s alleged actual damages were insufficient to establish actual standing because she failed to allege actual damages beyond the costs of litigation. Next, the Court analyzed Plaintiff’s claim for emotional distress, finding the allegations were vague and conclusory, and were thus insufficient to establish standing. 

The bulk of the Court’s analysis focused on the damage to Plaintiff’s creditworthiness and the alleged “chilling effect” of Defendant’s reporting. Defendant argued Plaintiff’s allegations of harm were insufficient to state a claim based on the ruling in Jaras v. Equifax, 766 F.App’x 492 (9^th Cir. 2019). In Opposition, Plaintiff argued the Court should rely on Robins v. Spokeo, Inc., 867 F.3d 1108 (9^th Cir. 2017)(“Spokeo III”). 

In Jaras, the court concluded absent allegations showing that an inaccurate credit report affected an attempted or imminent transaction, an inaccurate credit report alone was not enough to allege a concrete injury in fact. In Spokeo III, the court held a plaintiff need not allege any additional harm because an inaccurate credit report standing alone constitutes an injury in fact. 

In addressing these two conflicting positions, the Court stated “there is no clear authority on whether an inaccurate credit report alone is enough to establish a concrete injury in fact.” The Court acknowledged that Jaras distinguished itself from Spokeo III by emphasizing that the Spokeo III plaintiff’s credit report “had already been requested and obtained by at least one third party, and that they were of a type likely enough to cause harm to his employment prospects at a time when he was unemployed and actively looking for work.” In Gadomski, the Eastern District of California ultimately found the facts of Jaras mirrored the facts of the instant case, namely that, similar to Jaras, “Plaintiff did not allege a concrete injury in fact because she did not provide any facts alleging that the inaccurate credit report harmed her ability to enter a transaction in the past or imminent future.” Instead, the Court rejected Plaintiff’s contention that an inaccurate credit report had a “chilling effect precluding her from establishing new positive accounts and improving her credit” finding that alleged injuries of creditworthiness and of chilling effect are insufficient to establish Article III standing. 

Finding that the Plaintiff lacked standing, the Court granted Defendant’s motion to dismiss but granted leave to amend. Defendant also moved to strike Plaintiff’s class allegations for both claims. The Court denied Defendant’s motion to strike Plaintiff’s class allegations as premature and moot because the Court dismissed the claims with leave to amend.  

Practice Tip:

Although the motions in Gadomski were briefed before the Supreme Court’s TransUnion LLC v. Ramirez decision, Gadomski demonstrates that Ramirez did not resolve the split in authority for all questions of Article III standing.  Practitioners should continue to evaluate whether Article III standing exists in Fair Credit Reporting Act claims asserted in federal courts.