Greenway v. Information Dynamics, Ltd., Civ. 74-313 Phx. WPC.

• Decision Date: 16 September 1974
• Docket Number: No. Civ. 74-313 Phx. WPC.,Civ. 74-313 Phx. WPC.
• Citation: 399 F. Supp. 1092
• Parties: James GREENWAY and Laurie Greenway, husband and wife, on behalf of themselves and others similarly situated, Plaintiffs, v. INFORMATION DYNAMICS, LTD., a California Corporation, Defendant.
• Court: U.S. District Court — District of Arizona

399 F. Supp. 1092

James GREENWAY and Laurie Greenway, husband and wife, on behalf of themselves and others similarly situated, Plaintiffs, v. INFORMATION DYNAMICS, LTD., a California Corporation, Defendant.

No. Civ. 74-313 Phx. WPC.

United States District Court, D. Arizona.

September 16, 1974.

Lawrence C. Wright, Daniel J. McAuliffe, Snell & Wilmer, Phoenix, Ariz., for plaintiffs.

Jordan L. Green and Jack M. Anderson, Phoenix, Ariz., for defendant.

MEMORANDUM AND ORDER GRANTING PRELIMINARY INJUNCTION

COPPLE, District Judge.

Plaintiffs, alleging violations of the provisions of the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., seek a preliminary injunction (Count 1 of the complaint) on behalf of themselves and all other persons similarly situated. Jurisdiction is conferred by 15 U.S.C. § 1681p.

The defendant, Information Dynamics, Ltd. (hereinafter "IDL") is a California corporation that conducts its business operations in California, Arizona, New Mexico, Colorado, Utah and Wyoming. IDL's business consists in large part of providing merchants who subscribe to its services with information on the check cashing histories of potential customers. It is the manner in which IDL conducts this business that gives rise to the instant controversy.

The IDL "data base" is gathered through reports from merchants who subscribe to IDL's services. These merchants report to IDL the names of those individuals from whom they have received checks which have, for whatever reason, not been honored by the bank upon which they were drawn. Other information, such as the individual's checking account number, his or her driver's license number, and the reason for return of the check is also furnished to IDL. IDL then compiles all the information garnered from each individual subscribing merchant, and regularly disseminates it to all its subscribing merchants.

This dissemination is accomplished by distributing to subscribing merchants microfilm or microfiche lists, and Holoscan Film and bulletins. Each subscribing merchant is given a machine which permits him to "read" the information set forth on these lists. Once in possession of these lists, each IDL subscriber can ascertain the name, driver's license number and checking account number of every individual who has had a check returned to any of IDL's subscribers during the period covered by the report. The merchant can also ascertain the number of checks thus returned, and, in many cases, the reasons for their return.

The ostensible purpose of this service is to enable a merchant who is presented with a check from a customer to ascertain whether that particular customer has had check cashing difficulties with any of IDL's subscribing merchants in the past. However, as should be apparent, each merchant is provided with the names and check cashing histories of thousands of individuals with whom they will never transact business. It is this systematic over-dissemination of credit information that lies at the heart of this controversy.

The information is secured and disseminated by use both of the U. S. mail and telephone service.

The FRCA was enacted by Congress in 1970 to inject a much-needed degree of responsibility into the burgeoning consumer credit reporting industry. In passing the Act, Congress specifically found, in 15 U.S.C. § 1681(a)(4),

There is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer's right to privacy. (emphasis added)

To assure that this need was served, Congress imposed various requirements upon "consumer reporting agencies" in their compilation and dissemination of "consumer reports." The primary question presented is whether the activities of IDL fall within the scope of the FCRA.

The Act defines a "consumer reporting agency" to be any person or institution which "regularly engages in whole or in part in the practice of assembling or evaluating consumer-credit information or other information on consumers for the purpose of furnishing consumer reports to third parties. . . ." 15 U.S.C. § 1681a(f). A "consumer report" is defined in 15 U.S.C. § 1681a(d):

. . . any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for (1) credit or insurance to be used primarily for personal, family or household purposes, or (2) employment purposes, or (3) other purposes authorized under section 1681b of this title. . . . (emphasis added)

As stated by this latter section, § 1681b, one of the purposes for which disclosure of consumer information is authorized is to a person whom the disseminator has reason to believe:

(E) otherwise has a legitimate need for the information in connection with a business transaction involving the consumer. (emphasis added)

Certain types of reports, not pertinent here, are excepted from this definition.¹

When these two sections of the Act, § 1681a(d) and § 1681b(3) (E), are read together, as the Act indicates they must be, the result is clear: When an agency disseminates information bearing on any of the seven characteristics of a consumer listed in § 1681a(d) to a third party, and the agency knows or expects that it will be used "in connection with a business transaction involving the consumer," then that information is a `consumer report" and its originator is a "consumer reporting agency." The information disseminated by defendant clearly bears on some if not all of the factors listed in the definition of a "consumer report" above.

Recent judicial determinations are in accord with this interpretation of the FCRA. Thus, in Beresh v. Retail Credit Co., Inc., 358 F.Supp. 260 (C.D.Cal. 1973), the court held that investigative reports, ordered by an insurance carrier, on the extent of its insured's disability, which were used to terminate disability payments, were "consumer reports" under FCRA because they were ordered and prepared "in connection with a business transaction." See also administrative interpretations by the Federal Trade Commission, 4 CCH Consumer Credit Guide paragraphs 11,304-5, 99,525 and 99,531.

The Court concludes that the microfiche lists as disseminated by IDL fall within the purview of this section of the Act. Their conceded purpose is to furnish subscribing merchants with information on consumers who...