TransUnion ruling a mushy throwback
In March 2005, Colorado resident Sandra Cortez was in the market for a new car. She intended to finance the purchase with a loan, and requested a copy of her credit report from TransUnion, one of the big three credit reporting agencies.
The report assured her that her credit score was excellent. It raised no red flags. She went to the John Elway Subaru dealership, selected the car she wanted, negotiated a price and applied for the loan.
Here’s the key thing to know about Sandra Cortez. She was born in May 1944 in Chicago. That’s important, for reasons that will soon become clear.
Her salesman ducked into the back to run a credit check. When he came back, he “started asking her questions including whether she had ‘always lived in the United States, if she had ever lived outside of the country’ and other ‘really strange questions,’” according to a subsequent 3rd Circuit Court of Appeals opinion. The FBI was mentioned.
It turns out that TransUnion offered its customers an optional add-on to the usual credit report. For an extra fee, TransUnion would flag consumers whose names were similar to those on a watch list compiled by the Treasury Department.
The people on the watch list are terrorists, international drug dealers, or sanctioned officials of foreign governments. It’s illegal to do business with them. One person on the list was Sandra Cortes Quintero, a citizen of Colombia born in June 1971.
TransUnion had flagged the 60-year-old native Chicagoan as the 33-year-old Colombian.
Credit reporting agencies wield enormous power over the lives of ordinary Americans. Credit reports are routinely checked not just by lenders but by landlords, insurers and employers.
In recognition of the agencies’ vast power, Congress imposes on them a duty to “follow reasonable procedures to assure maximum possible accuracy” in their credit reports. Obviously, TransUnion didn’t do that with regard to Sandra Cortez.
The law also required TransUnion to provide Cortez with “all information in (her) file.” It didn’t do that, either, concealing the red flag warning from her.
Federal law gives people wronged by the credit reporting agencies the right to sue for money damages.
Cortez sued and won big. But, according to Supreme Court Justice Clarence Thomas in a recent dissenting opinion,
the company “made surprisingly few changes after this verdict. It did not begin comparing birth dates. Or middle initials. Or citizenship.”
Inevitably, it was sued again, this time in a class action by 8,185 additional people it had wrongfully red-flagged. Again the plaintiffs won big, because it was a slam dunk case.
But this time, TransUnion took its case to the Supreme Court. In a recent 5-4 opinion written by Justice Brett Kavanaugh, the court ruled largely in TransUnion’s favor, greatly reducing the judgment against it.
The court recognized that TransUnion violated federal law in multiple ways. It also recognized that federal law permitted wronged consumers to sue for damages.
But, the court said, the Constitution allowed only some of them to do so.
About a quarter of the wrongfully labeled people had been directly harmed when TransUnion sent inaccurate credit reports to their lenders, employers, insurers or landlords. Those people, the court said, would be allowed to collect from TransUnion.
But with respect to the rest, TransUnion hadn’t actually transmitted its inaccurate credit reports to anyone during one particular sevenmonth period. Sure, you might say, but the bad information was a ticking time bomb, primed to explode as soon as the affected people did any one of various ordinary things we all do at different times in our lives.
The court rejected that argument, concluding — and I swear I’m not making this up — that it was impermissibly “speculative” to imagine that a company in the business of selling credit reports might sell credit reports. No harm, no foul, the court reasoned (in almost those words).
The Constitution itself is unambiguous. The judicial power of the United States “shall extend to all cases … arising under … the Laws of the United States.”
Kavanaugh struck out the word “all” and replaced it with “some.”
He then amended the Constitution with his own mushy threepart test under which Americans are prohibited from seeking money damages in federal court for violations of federal law unless they allege harm that is “concrete” and also bears a “close relationship” to harms “traditionally” redressed at common law.
Shortly after Justice Antonin Scalia died, the conservative former judge Michael W. McConnell wrote in the Wall Street Journal that “when Justice Scalia arrived at the Supreme Court in 1986, its jurisprudence had become sloppy, results-driven, plagued with fuzzy three-part tests ... with little basis in constitutional text.”
Everything old is new again.