Tennessee Suit Over False Report by Check Verification Firm Allowed

A person does not have to show actual damages to be able to sue a check verification firm for mistakenly reporting information affecting consumer credit files, the U.S. Circuit Court of Appeals for the Sixth District recently ruled.

The decision interpreting the Fair Credit Reporting Act (FCRA) reversed a Nashville district court dismissal of a claim brought in 2007 by Tennessee resident Cheryl Beaudry against TeleCheck Services.

According to Beaudry, the check verification company neglected to account for a change in the numbering used by the Tennessee driver’s license system, leading its systems to reflect incorrectly that many Tennessee consumers, including Beaudry, were first-time check-writers. Claiming that this error affected her and “hundreds of thousands, if not millions” of other Tennesseans, she contended that the defendants’ willful failure to provide accurate information entitled the class members to “declaratory relief, injunctive relief, statutory damages, punitive damages, attorneys’ fees, costs and expenses.”

The defendant successfully argued for a dismissal of the claim before the district court on the grounds that she had not alleged any injury and that the statute does not authorize courts to grant injunctive relief.

But the 6th Circuit disagreed. Justice Jeffrey Sutton noted in his opinion that one of the requirements of the federal law is that consumer reporting agencies must “follow reasonable procedures to assure maximum possible accuracy of the information” about a person. The law also provides that any wronged private individuals may obtain relief against “willful[]” or “negligent” violators of the law.

The defendants argued that that Beaudry must allege consequential damages. “Plaintiff,” they note, “has not . . . had a check rejected or any other transaction terminated as a result of a TeleCheck recommendation;” nor has she “suffered any harm with respect to the availability of credit.”

But, the 6th Circuit countered, the FCRA imposes no such hurdle on willfulness claimants. It “does not require a consumer to wait for unreasonable credit reporting procedures to result in the denial of credit or other consequential harm before enforcing her statutory rights,” the court said.

The court said the federal law requires regulated companies to use “reasonable procedures” when preparing a consumer report and it “creates a cause of action in favor of the consumer when they do not.”

The court also said that the law also does not impose the consequential damages requirement that defendants claimed.