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Sheldon v. Experian Information Solutions

September 28, 2010


The opinion of the court was delivered by: Edmund V. Ludwig, J.


Ludwig, J.

This is a putative class action arising under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. Jurisdiction is federal question. 28 U.S.C. § 1331.

Plaintiffs purport to represent a class of individuals who have been incorrectly classified as "deceased" on credit reports issued by defendant Experian Information Solutions, Inc. The complaint alleges that the inclusion of this information violates 15 U.S.C. § 1681e(b) because Experian did not implement reasonable procedures to assure the reports' accuracy. Additionally, it is alleged that the sale of the reports with the incorrect "deceased" notation violates 15 U.S.C. § 1681e(a) because Experian's purpose for selling credit reports on deceased individuals does not come within a statutorily permitted purpose. These violations are alleged to have been both negligent and wilful. Complaint, Count I.

Defendant moves for summary judgment. The motion will be denied as to the allegedly negligent violations and granted as to those alleged to be wilful.

The undisputed facts are as follows.*fn1 Experian is a consumer reporting agency. It collects information from "furnishers" - such as credit card issuers, auto dealers, lenders, and other creditors - and distributes that information to "subscribers." The latter use the information to make decisions as to whether to extend credit to a particular consumer, to review or collect accounts, and for other purposes permitted under the FCRA. Declaration of David Browne, Compliance Manager for Experian, ¶ 3. Experian receives information from about 30,000 furnishers. Id., ¶ 4. The information is stored in databases; it is not stored in the form of individual credit reports. Instead, each piece of credit information is kept separately, along with the individual consumer's identifying information, such as the name, social security number, address. Id., ¶ 5. When an inquiry is received, Experian generates a credit report, compiling "trade lines," each of which contains an individual item of credit information concerning the specific consumer. Id., ¶ 6. Experian's databases consist of information pertaining to about 200 million consumers. The databases contain approximately 2.6 billion trade lines. Experian processes some 50 million updates from its furnishers each day. Id., ¶¶ 4, 5. It receives data from about 30,000 furnishers. Id.

Before accepting information from a particular furnisher, Experian conducts an investigation to determine whether the furnisher is a source of reliable information. This consists of an inspection of the furnisher's physical plant and an audit of the furnisher's data.

After a furnisher is accepted as a reliable source, Experian conducts periodic audits of the furnisher's data in an effort to assure its continuing reliability. Id., ¶¶ 7, 8.

Before furnishing credit reports, Experian requires all potential subscribers to certify that they will use the information only for permissible uses as set forth in the FCRA. Id., 9. Experian investigates a subscriber to determine whether its business routinely involves permissible purposes and no impermissible purposes. Once Experian determines that a subscriber requested credit information only for permissible purposes, it performs no further investigation or auditing of this particular point. Id.

When a furnisher reports that a consumer is deceased, Experian places a notation on that individual trade line to that effect.*fn2 The purpose of the notation is to alert creditors and help prevent identity theft. Id., 11. Experian does not require evidence of the death of the consumer. Deposition of Pat Finneran, Exhibit 6 to plaintiffs' opposition, at 166-67, 181-82. Instead, relying on its previous finding of a furnisher's reliability, it accepts the information without more. Experian's ongoing audit process does include consideration of whether, for example, a particular furnisher has reported consumers deceased at an unusually high rate. Id., ¶¶ 7, 8, 12.

If a consumer disputes a deceased notation on a credit report, Experian (1) contacts the furnisher to verify the information; (2) requests the consumer to submit a notarized letter as to identity that also states that the individual is not deceased. Once it receives such a confirmation, it deletes the deceased notation, notifies the furnisher of the error, and places a flag on the trade line to prevent another inaccurate report. Id., ¶¶ 13-15.

Experian does not independently verify the death of a consumer, but it does collect information pertaining to deceased individuals. Finneran N.T., at 163-64. From the Social Security Administration, Experian compiles a "Death Master File." Deposition of David Browne, Exhibit 7 to plaintiffs' opposition, at 87-90. This information is stored in Experian's FileOne database and identifies the social security number of every individual the U.S. government believes to be deceased. Finneran N.T., at 89, 91, 147. Additionally, Experian obtains notifications of death through an automated process known as "Metro 2." Finneran N.T., 147-49. The provenance of the information is furnishers and subscribers. Id. Experian accepts the "X" notation assigned to consumers reported deceased through this process. Finneran N.T., at 174-75. The "X" code data is also stored in FileOne. Finneran N.T., at 154. The Death Master File and the Metro 2 data are not cross-referenced, though they could be. Finneran N.T., 344; deposition testimony of Joyce Hwang, at 81, 82, 85-86, Exhibit 8 to plaintiffs' opposition.*fn3

Experian sells credit reports as to consumers marked "deceased." It does not, however, promote or prevent the sale of such credit reports, and does not specifically inquire into the report's use other than its initial determination of the subscriber's permissible purpose. Browne N.T., at 108-09. None of Experian's 170 "purpose codes" is designated for sales of reports as to a deceased consumer. Purpose codes, Exhibit 12 to plaintiffs' opposition. Credit reports for consumers marked deceased do not include credit scores. Interrogatory response no. 9, Exhibit 13 to plaintiffs' opposition; deposition testimony of Angela Granger, at 99-100. Without a credit score, consumers generally cannot obtain credit and lenders generally will not extend loans. Granger N.T., at 105-08, 114-18.

In this case, Experian sold credit reports that mistakenly showed that plaintiffs were deceased. Each plaintiff was denied credit because of the error. Excerpts of deposition testimony of named plaintiffs, Exhibit 1 to plaintiffs' opposition. Four of the plaintiffs received adverse action letters from potential lenders.*fn4 Exhibit 2 to plaintiffs' opposition. In plaintiffs' opinion, Experian did not maintain reasonable procedures to prevent this error from occurring. Furthermore, Experian lacked a permissible purpose for selling credit reports on deceased consumers and did not have reasonable procedures in place to prevent the sale of these reports for ...

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