Alexander v. Moore & Associates, Inc., Civ. No. 79-0488.

• Decision Date: 30 December 1982
• Docket Number: Civ. No. 79-0488.
• Citation: Alexander v. Moore & Associates, Inc., 553 F. Supp. 948 (D. Haw. 1982)
• Court: U.S. District Court — District of Hawaii
• Parties: Patricia ALEXANDER, James M. Okubo, and all others similarly situated, Plaintiffs, v. MOORE & ASSOCIATES, INC., dba Uni-Check, and Turner Corporation, dba Rentcheck, Defendants.

553 F. Supp. 948

Patricia ALEXANDER, James M. Okubo, and all others similarly situated, Plaintiffs, v.MOORE & ASSOCIATES, INC., dba Uni-Check, and Turner Corporation, dba Rentcheck, Defendants.

Civ. No. 79-0488.

United States District Court, D. Hawaii.

December 30, 1982.

Steven Guttman, Honolulu, Hawaii, for Patricia Alexander.

John Paer, Legal Aid Society of Hawaii, Honolulu, Hawaii, for James Okubo.

John A. Hoskins, Honolulu, Hawaii, for defendants.

DECISION AND ORDER

FONG, District Judge.

Plaintiffs were tenants who had a dispute with their landlords.Plaintiff Alexander refused to pay her landlord's claim for repairs and cleaning of her apartment after she moved out.Plaintiff Okubo paid his share of the rent to his roommate, but the roommate's check for the rent to the landlord bounced.The landlords were subscribers of RENTCHECK, a service which guarantees the payment of a tenant's security deposit.The landlords submitted claims to RENTCHECK for amounts which they claimed was due from the plaintiffs.

After paying the landlords' claims, RENTCHECK took an assignment of those claims and filed a report with UNI-CHECK, a check guaranty service, after both plaintiffs refused to reimburse RENTCHECK for the amounts paid to the landlords.UNI-CHECK gave both plaintiffs a "Code 4".This caused the plaintiffs to later have their checks refused by various merchants, and, in the case of plaintiff Okubo, prevented him from opening a checking account at a number of banks.

Plaintiffs, by Motion for Summary Judgment, contend that both defendants are in violation of the Fair Credit Reporting Act(15 U.S.C. § 1681 et seq.) and the Fair Debt Collection Practices Act(15 U.S.C. § 1692 et seq.).

I.FAIR CREDIT REPORTING ACT.

Plaintiffs claim that both defendants violate the following provisions of the Act:

§ 1681 e(b)—maintaining reasonable procedures to assure maximum possible accuracy of the information.

§ 1681 e(a)—maintaining reasonable procedures to avoid violations of the statute and to assure disclosure to only authorized persons.

§ 1681 i(c)—notation of fact that statement of dispute is filed by consumer, with a summary of the statement of the consumer provided with the report.

§ 1681b—furnishing a consumer report to persons other than to those permitted by statute.

If the defendants were held to be within the purview of the Act, a finding of a willful violation or noncompliance with the requirements of the Act would render the defendants liable to the consumer for actual and punitive damages, as well as court costs and reasonable attorneys fees.15 U.S.C. § 1681n.Negligent noncompliance with the Act's requirements would render the defendants liable to the consumer for actual damages as well as costs and attorneys fees.15 U.S.C. § 1681o.

The threshold question is whether the Fair Credit Reporting Act has any application in the instant case, since the requirements of the Fair Credit Reporting Act apply only to "consumer reporting agencies".A "consumer reporting agency" is defined in U.S.C. § 1681 a(f) as:

1) any person who, for monetary fees,

2) regularly engaged in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers,

3) for the purpose of furnishing consumer reports to third parties,

4) and uses any means of interstate commerce for the purpose of preparing or furnishing consumer reports.

The only dispute in this regard is whether the defendants issue "consumer reports" as defined in the statute.¹In particular, the dispute centers around the exclusion in 1681 a(d)(C):

The term "consumer report" does not include ... (C) any report in which a person who has been requested by a third party to make a specific extension of credit directly or indirectly to a consumer conveys his decision with respect to such request ....

Defendants claim that the information given to landlords and merchants are not consumer reports, and are instead simply a communication of their decision to not extend credit to the consumer.

First, the defendants claim that UNI-CHECK is simply a check guarantee service, and that the Code 4 it issues simply means that it will not guarantee payment of checks drawn on the consumer's account.This, it claims, is a decision regarding an "extension of credit" to the consumer.

It is undisputed that UNI-CHECK provides information to banks in connection with the individual's opening a checking account.Defendants argue that when the banks call UNI-CHECK, they are inquiring whether UNI-CHECK will guarantee a check written by that person.The court finds that this argument borders on the facetious.It is more accurate to say that whenever a person applies to a bank to open a checking account which necessitates the bank's inquiry to UNI-CHECK, the purpose of the inquiry is for the purpose of determining whether the applicant has a good credit record.The bank does not benefit by, nor is it likely that it is really interested in, the particular datum that a person's checks will or will not be guaranteed by UNI-CHECK.The bank's inquiry to UNI-CHECK, then cannot reasonably be construed to be a request to extend credit to the customer.

Moreover, the exception under the statute is limited to situations where a specific extension of credit is requested.Even if the bank's inquiry could somehow be found to be a request for an extension of credit, it is at best a very generalized inquiry, i.e., "will you guarantee checks written by this person if we open a checking account in his name?"This cannot be considered sufficiently specific to fall under the explicit words of the statute.

In addition, it appears that UNI-CHECK's informational service is also provided to persons who do not purchase the check guarantee.Landlords would call UNI-CHECK, not RENTCHECK, to inquire about a prospective tenant.In so inquiring, they would get the same answers as would a merchant.UNI-CHECK also provides an inquiry-only service to merchants, with no guarantee.Finally, UNI-CHECK will provide to merchants an advice-only service, again with no guarantee, on certain other checks not falling within its guarantee, such as second-party checks, payroll checks, stopped payment checks, name only inquiries, checks accompanied by a temporary or renewal driver's license or driver's permit, checks where a social security number is the only imprint on the check, checks on which a P.O. box number is the address, and multiple checks for a single sale.UNI-CHECK in these situations is not requested to provide any extension of credit to the consumer, and the exclusion would therefore not apply.

In sum, because UNI-CHECK does issue "consumer reports", and because the parties do not dispute that it does fit within the other requirements of the statute, it must as a matter of law be considered a "consumer reporting agency" within the purview of § 1681.

There is no specific allegation that RENTCHECK is a consumer reporting agency, or that the reports to a subscribing landlord (which uses a code designation similar to that used by UNI-CHECK) are "consumer reports" within the meaning of the statute.Further, while there is some indication that RENTCHECK reports losses of other besides itself, the record as it presently stands shows only that RENTCHECK reports only the names of those persons for whom it has had to pay on its rent guarantee.This would normally bring the matter under § 1681 a(d)(A), which excludes from the definition of "consumer reports" any report "containing information solely as to transactions or experiences between the consumer and the person making the report".²

Having found that UNI-CHECK falls within the purview of the Fair Credit Reporting Act, we now must consider whether any particular provision of the Act has been violated.Plaintiffs claim that there has been a violation of four provisions.

1.Violation of § 1681 e(b).This section requires that the consumer reporting agency follow reasonable procedures to assure maximum possible accuracy of the information concerning the consumer.Plaintiffs allege that, as a matter of law, the actions of UNI-CHECK violate this provision.

Plaintiffs argue that the use of information concerning a landlord-tenant dispute as a basis for a Code 4 designation gives an inquiring merchant an inaccurate impression of the credit worthiness of the consumer, since the merchant would normally assume that the Code 4 relates to bad check writing or other bad credit experiences.This assumption is encouraged by UNI-CHECK's service agreement with the merchant subscribers, which states that the information provided by UNI-CHECK relates to dishonored checks, cancelled credit cards, and other previous bad risk experiences.

Plaintiffs argue that problems in a landlord-tenant dispute have nothing to do with the above.When a Code 4 is given to a consumer, the inquiring merchant would naturally have in mind only cancelled checks and the like.Plaintiffs thus argue that UNI-CHECK has a duty to disclose the nature of the reasons for the Code 4 so as to not give the merchant the wrong impression.

UNI-CHECK counters that it has followed reasonable procedures, and that the Code 4 relates to the fact that a subscriber of UNI-CHECK (i.e., RENTCHECK) has suffered a loss because of the actions of the consumer.UNI-CHECK argues that the use of information relating to landlord-tenant disputes is reasonable, since it relates to the financial responsibility of the consumer.

Defendants argue that no cause of action will lie under § 1681 e(b) unless the consumer report is first determined to be "inaccurate", citing Middlebrooks v. Retail Credit Co.,416 F.Supp. 1013(N.D.Ga.1976).While Middlebrooks and other reported cases³ may stand for such a general proposition, those cases are distinguishable because the information sought to be clarified could have been done so only by subsequent investigation and updating of the files, or...