Individual Reference Services Group, Inc. v. Federal Trade Commission, Civil Action No. 00-1828 (ESH)

CourtU.S. District Court — District of Columbia
Writing for the CourtEllen Segal Huvelle
Decision Date01 January 2000
Docket NumberCivil Action No. 00-2087 (ESH),Civil Action No. 00-1828 (ESH)

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Civil Action No. 00-1828 (ESH)
Civil Action No. 00-2087 (ESH)
United States District Court, District of Columbia.


ELLEN SEGAL HUVELLE, United States District Judge

Before the Court are plaintiffs' motions for summary judgment, defendants' cross-motion for summary judgment, plaintiffs' replies, defendants' memorandum in support, plaintiffs' supplemental memorandum, and defendants' response thereto. Plaintiffs bring this action pursuant to the Administrative Procedure Act ("APA"), 5 U.S.C. § 701, seeking judicial review of regulations (the "Regulations") that were promulgated by the defendant agencies to implement

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Title V, Subtitle A of the Gramm-Leach-Bliley Act, Pub. L. No. 106-102, 113 Stat. 1338 (1999) (codified as amended at 15 U.S.C.A. § 6801 et seq. (2000)) (the "GLB Act"), which addresses the responsibility of financial institutions to protect the privacy of the personal financial information of their customers. Plaintiffs ask this Court to invalidate these Regulations and enjoin their enforcement.

Plaintiffs contend that the Regulations are both unlawful and unconstitutional. They argue that the Regulations are invalid for five reasons: a) the definition of "nonpublic personal information" in the Regulations contravenes the statutory requirement that only financial information is subject to the GLB Act; b) the Regulations constitute an impermissible regulation of non-financial institutions by the agencies; c) the Regulations contradict a provision of the GLB Act that exempts consumer reporting agencies from the statute's prohibition of the use of account numbers for marketing purposes; d) the Regulations impose a restriction on the use of nonpublic personal information that is inconsistent with the statute; and e) the Regulations modify the operation of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. (the "FCRA"), in contravention of the savings clause of the GLB Act. In addition, plaintiffs allege that the Regulations are unconstitutional for three reasons: a) they are overbroad and improperly restrict plaintiffs' speech in violation of the First Amendment; b) they were enacted without the requisite adjudicative hearings, in violation of Trans Union's Fifth Amendment right to due process of law; and c) they impose restrictions on plaintiff Trans Union that are not imposed on entities that are not consumer reporting agencies, in violation of the Fifth Amendment. Upon consideration of the pleadings and the record herein, this Court concludes the Regulations are lawful and constitutional. Summary judgment is therefore granted for defendants as to all counts.

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I. The Parties and The Role of Consumer Reporting Agencies

A. Trans Union and Its Products

Plaintiff Trans Union ("Trans Union") is a Delaware limited liability company with its principal place of business in Chicago, Illinois. (Trans Union Statement of Material Facts ¶ 1.) Trans Union is a "consumer reporting agency" ("CRA"), as defined in the FCRA, and it provides "consumer reports,"1 as defined at 15 U.S.C. § 1681a(d). The foundation of Trans Union's business is its database, CRONUS, which contains information about consumers that is used to generate credit reports. (Trans Union Statement ¶ 16.) Although Trans Union gathers this data from over 85,000 entities, its main source of information is financial institutions,2 which generally provide this information in the form of accounts receivable tapes. (Trans Union Statement ¶¶ 17-19.) These tapes contain information — the name, address, zip code, and social security number, as well as information regarding the account itself — about each consumer that is reported by the financial institution. (Trans Union Statement ¶ 20.)

Trans Union maintains this information in CRONUS, from which it generates credit reports. These reports contain two types of information: identifying information for each individual, and tradeline information describing the consumer's account and payment history. (Trans Union Statement ¶ 22.) The identifying information includes the name, address, social

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security number, and telephone number of the consumers, and since this data is printed at the top of the report, it is typically referred to as "credit header" information. (Trans Union Statement ¶ 23.) Although financial institutions are the primary source of the identifying information, plaintiffs allege that the resulting credit header is the product of various sources, and that it therefore does not reveal the existence of a customer relationship with any specific financial institution.

Trans Union alleges that three of its product lines will be affected by the Regulations and are therefore at issue in this litigation. First are Trans Union's credit header products. In addition to including the header information in its credit reports, Trans Union sells this data separately to a number of business and governmental entities, which then use the information for both commercial and noncommercial purposes, including target marketing and fraud prevention. (See Trans Union Statement ¶¶ 27-44.) These products include "Trace," which allows a customer of Trans Union to input an individual's social security number and receive, in return, the name and address of that person (Trans Union Statement ¶ 29); "Retrace," which enables a customer who has an individual's name and address to obtain that person's social security and phone numbers (Trans Union Statement ¶ 31); and "ID Search," which permits a customer with a person's name and phone number to obtain that individual's social security number and current and former addresses from Trans Union. (Trans Union Statement ¶ 33.) Trans Union and other CRAs also sell credit header information to individual reference services, which typically work with government agencies to identify and locate individuals for a variety of purposes, including the prosecution of financial crimes and enforcement of child support orders. (Individual Reference

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Services Group ("IRSG") Statement of Material Facts ¶¶ 11-14.)3 Similarly, private companies hire individual reference services to help detect and prevent fraud, and health organizations use their products to identify blood and organ donors. Media and political campaign organizations may use individual references services to verify the identities of campaign donors. (IRSG Statement ¶ 15-16.)

Second, Trans Union offers a line of target marketing products that provide both credit header and tradeline information. These target marketing lists are designed to identify consumers who may be interested in purchasing the particular goods or services that are offered by customers of Trans Union. (Trans Union Statement ¶ 45.) Typically, a targeting marketing list provides a customer with the names and addresses of individuals who live in a household that meets particular criteria, such as having a bank card or a home mortgage. (Trans Union Statement ¶¶ 46-47.) One of these products is "TransLink," a program that allows a retailer to identify the names and addresses of customers who have made purchases from that retailer with a credit card. A retailer who has obtained the name and credit account number of a customer sends this information to Trans Union, which in response provides a corresponding name and address using the information stored in CRONUS. (Trans Union Statement ¶¶ 47, 55-56.)

Third, Trans Union uses information that it receives from financial institutions to prepare aggregate or average data on consumers. Trans Union's SUM-it product, for example, creates aggregate financial information, such as the average mortgage and bank card balance, for consumers who live within a particular zip code, zip code-plus-two digits, or zip code-plus-four

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digits. (Trans Union Statement ¶ 48.) The information in the SUM-it database is then used to create models that predict consumers' financial characteristics or their propensity to purchase certain goods or services. This aggregate information is then made available to marketing firms. (Trans Union Statement ¶ 49.) Individual information reported by financial institutions about particular customers is not disclosed in this material.

B. IRSG and Credit Header Information

Plaintiff Individual Reference Services Group, Inc. is a non-stock corporation organized exclusively as a nonprofit trade association under the laws of the state of Maryland. (IRSG Statement ¶ 1.) IRSG represents leading information industry companies, including major CRAs, that provide information to help identify, verify, or locate individuals. IRSG represents CRAs, which obtain credit header information directly from financial institutions, and other entities to whom the CRAs provide credit header data.4 Trans Union is a member of IRSG.

Plaintiff IRSG contests only the regulation of credit header information under the GLB Act; unlike Trans Union, it does not challenge the effects of the agencies' Final Rules on target marketing lists or aggregate data.

C. The Defendant Agencies

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The defendants in this action are the Federal Trade Commission ("FTC"), Board of Governors of the Federal Reserve System ("Board"), Federal Deposit Insurance Corporation ("FDIC"), Office of the Comptroller of the Currency ("OCC"), Office of Thrift Supervision ("OTS"), the National Credit Union Administration ("NCUA"), and their respective heads. These agencies are responsible for the administration and enforcement of Title V of the GLB Act, as well as other related statutes. The FTC and NCUA are independent agencies of the United States government; the Board administers the Federal Reserve System; the FDIC is a corporation organized under federal law; and OCC and OTS are...

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