U.S. Supreme Court by Victoria Pickering via Flickr (https://creativecommons.org/licenses/by-nc-nd/2.0/)
This is the first post in a series on upcoming Supreme Court cases regarding class action lawsuits and corporate power.
Credit reporting agencies have come to wield an extraordinary amount of power over virtually every aspect of our lives: Whether we can buy a home or car, the interest rate we receive when we do, even our ability to find a job is controlled, in some way, by “the big three” credit agencies (TransUnion, Equifax and Experian). So when a company like TransUnion makes a mistake on a credit report, it can have extensive, harmful repercussions…even if we don’t find out about the mistake until years later.
Just ask Sergio Ramirez.
When Ramirez applied for a car loan at his local dealership, he learned that TransUnion had identified him as being on the “Office of Foreign Assets Control” list. The real OFAC list, which is kept by the Treasury Department, is better known as “the terrorist watch list.” This is a list the U.S. government maintains of people whom no American should do business with, a list of people identified by the government as terrorists and international drug traffickers. So TransUnion took the government’s terrorist watch list, and developed its own “product,” which was a list of people with the same names as people on the government’s list, and sold it to all sorts of businesses. One of those businesses was the car dealership where Mr. Ramirez attempted to buy a car. As a result, he was not only denied the car loan, but had to cancel an international family vacation.
Ramirez had been mistakenly placed on the list by TransUnion because of mistaken identity. It was a different Sergio Ramirez – someone who merely shared his name – who was supposed to be listed. As it did with many of thousands of people, TransUnion never bothered to differentiate between the two. And it wouldn’t have been news to TransUnion that it was selling false information about people supposedly being on the terrorist watch list, because it had previously lost a trial (where the jury had awarded punitive damages, and a federal court of appeals in Philadelphia upheld the verdict), and because the Treasury Department reached out to TransUnion several times to tell it that it was incorrectly identifying people as supposedly being on the list.
As Ramirez worked to clean up his credit report – and clear his name – he learned that he was not alone. TransUnion had made the same mistake on more than 8,100 other credit reports, mostly impacting non-white consumers with common Latino or Middle Eastern names. Roughly 1800 of those, like Ramirez, had their terrorist designation shared with a third party, such as a loan company or potential employer. The rest likely did not know they were the victim of such a potentially devastating mistake.
But according to TransUnion, if a credit reporting agency labels you a terrorist or drug smuggler – with your mistaken identity lying in wait for someone to ask for it and find out - it’s simply a case of “no harm done” unless YOU can prove that TransUnion sold this false information to a third party. (They say that they don’t keep accurate records of the businesses to whom they sell this information, so you can’t ask them.)
This Spring, the United States Supreme Court will decide if that is, indeed, the case.
Ramirez brought a class action lawsuit under the Fair Credit Reporting Act against TransUnion on behalf of the 8,100 individuals who were mistakenly identified as being on the OFAC, and who had received confusing letters about the mistake. The district court certified the class, finding that TransUnion had put those consumers at risk – a reasonable conclusion if you have been mistakenly identified as a terrorist and are one credit report pull away from being publicly labeled as such.
Unlike many class actions, the case went all the way to a jury trial, and a jury of Mr. Ramirez’s peers agreed that he had, indeed, been harmed by TransUnion’s action, and that other class members also mistakenly placed on the OFAC had also been at risk of similar harm. The jury awarded more than $60 million in the case, recognizing that such labels, on documents with such a pervasive impact on consumers’ day-to-day lives, carries significant consequences. Recognizing that TransUnion had done nothing until Ramirez came forward to correct its error, the jury rightly found that the credit agency was at fault, and should pay.
When TransUnion appealed the case to the Ninth Circuit, they lost, offering yet another condemnation of their inaction and another affirmation of the harm – both suffered and potential – that consumers faced because of the company’s error. (The court did reduce the punitive damages some, however.)
Now TransUnion – a company with revenue of $2.3 billion in 2018 – is asking the Supreme Court to step in and wipe away any compensation for the other 8,100 people the company wrongly labeled as terrorists or drug kingpins, arguing that their designation as such was no big deal. Indeed, the credit agency told the Court that “inaccurate information laying dormant in a file” is the legal equivalent of no harm, no foul. To get to this conclusion, TransUnion reasons that since it denies generally keeping track of the corporations to whom it sells this false information, that people were not harmed unless they can prove that TransUnion sold this misinformation about them to a third party.
Even assuming that TransUnion did not sell the information, however, the consumers still suffered a legal injury by being put at risk of harm. Each one of those dormant files was, in fact, one credit pull away from wrongly labeling someone as a security threat and putting their lives – and the lives of their families and loved ones – in danger. If Sergio Ramirez hadn’t come forward, how many others would have been denied mortgages, car loans and even jobs because of TransUnion’s error?
So if TransUnion broke the law (the FCRA) when it wrongly identified consumers as being on the terror watch list – and took no proactive steps to clean up its own mess – should it be given a free pass as long its (in)action, even if illegal, has not yet ruined someone’s life, but only has the (very real, very consequential) potential to do so?
According to TransUnion, the answer is “yes,” and the company should not have to compensate the thousands of people it mislabeled. In TransUnion’s view, it doesn’t matter if the company did the wrong thing; it only matters if the consumers can somehow prove that the wrong thing has already caused harm.
If the Supreme Court agrees, the results will be widespread and serious. Class action lawsuits have been an extraordinarily effective tool in keeping companies honest. When a corporation knows it can be held accountable to all of its clients and customers, it’s far more likely to make an effort to do the right thing. Forcing individual consumers into their own, individual lawsuits, by contrast, makes it far more likely that the company will get away when it misbehaves. By asking the Supreme Court to intervene, TransUnion is seeking Court-ordered immunity that would wipe away consumers’ ability to protect themselves and pre-emptively prevent even further, more widespread, harm.
Our organization, Public Justice, wrote an amicus brief that sets out in great detail how it is very risky for and harmful to consumers to have false information like this in their credit files.
A jury looked at the evidence and recognized the harm TransUnion had done. The Supreme Court should respect that process and turn the company away.
