Rice v. Montgomery Ward & Co., Inc., C-77-155-G.
| Decision Date | 18 May 1978 |
| Docket Number | No. C-77-155-G.,C-77-155-G. |
| Citation | 450 F. Supp. 668 |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | Eunice T. RICE, Plaintiff, v. MONTGOMERY WARD AND CO., INC., Defendant. |
Michael M. Conway, Chicago, Ill., and Lewis A. Cheek, Durham, N. C., for defendant.
This matter is before the Court on the plaintiff's motion for leave to file a supplemental complaint alleging violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq. The defendant opposes granting the motion on the ground that the supplemental complaint fails to state a claim upon which relief can be granted and that therefore, granting the plaintiff's motion would be a futile act. For the reasons set out below, the Court concludes that the supplemental complaint does state a claim for relief under the FCRA and that the motion for leave to file a supplemental complaint should be granted.
The underlying cause of action in this case arises under the Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691-1691e, out of a refusal by defendant, Montgomery Ward and Co., Inc. (Wards) to grant credit to the plaintiff. On June 25, 1976, the plaintiff applied for a credit card by filling out an application in Wards' department store in Greensboro, North Carolina. The application was processed in accordance with Wards' normal business practice and evaluated using a credit scoring system. In July, 1976, Wards informed the plaintiff that it was refusing to open a credit account in the plaintiff's name. The plaintiff thereafter wrote Wards and requested information on the specific factors Wards used to deny her credit. Wards responded by a letter which informed the plaintiff that it had a credit scoring system and that her score on the system had fallen below the minimum required score. Upon receipt of this letter, the plaintiff wrote Wards again requesting a more specific explanation of the reasons why her credit application was denied. Wards responded with a letter which stated at greater length that Wards used a credit scoring system, that no single factor determines whether a person receives an adequate score, and that the plaintiff had not received the minimum score. Subsequently, the plaintiff filed suit in April, 1977, alleging that Wards' actions violated the disclosure provisions of the Equal Credit Opportunity Act, and regulations issued pursuant thereto, 12 C.F.R. § 202 et seq. (Regulation B). The plaintiff further alleged that the actual reason for the denial of credit was her status as a divorced woman.
The plaintiff's supplemental complaint, if filed, would allege that the defendant has violated the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. by obtaining credit reports on the plaintiff under false pretenses for use in this litigation. The defendant has admitted, by answers to interrogatories filed in this case, that it twice obtained credit reports on the defendant from the Eden Merchants Association after the present litigation was filed. The plaintiff supports her position with an informal staff opinion from the Federal Trade Commission which concludes that a person who willfully and knowingly obtains information on a consumer from a consumer reporting agency under false pretenses is subject to civil liability under 15 U.S.C. § 1681n.
Since Wards opposes the plaintiff's motion on the ground that it fails to state a claim upon which relief can be granted, the Court will initially determine whether the proposed supplemental complaint states a claim.
Sections 1681n and 1681o of the FCRA create civil causes of actions against those who violate the provisions of the Act. Section 1681n provides:
Section 1681o provides:
Therefore, whether the proposed supplemental complaint states a claim depends on whether Wards' alleged conduct constitutes a willful or negligent failure to comply with any requirement imposed by the FCRA.
Although the FCRA's detailed and complex requirements have often forced courts to engage in protracted examination of the Act to determine its coverage of alleged violations, the facts of this case present this Court with an easier task. The main bulk of FCRA requirements are imposed only on consumer reporting agencies and thus are irrelevant in the present case since Wards is not a consumer reporting agency in the context of this litigation. Only four sections of the FCRA place requirements on persons who are not consumer reporting agencies: §§ 1681d, 1681m, 1681q and 1681r.1 Of these, only § 1681q seems applicable to the facts of this case. Section 1681q provides that:
"Any person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses shall be fined not more than $5,000 or imprisoned not more than one year, or both."
While § 1681q is a criminal provision, it unmistakably imposes on all persons the obligation to refrain from obtaining information on a consumer from a consumer reporting agency under false pretenses. The Court notes that since § 1681q requires the information to have been knowingly and willfully obtained under false pretenses, a person may be held civilly liable pursuant only to § 1681n which covers willful failure to comply with the FCRA and not under § 1681o which pertains to negligent noncompliance with the FCRA.2
Wards contends that no liability can attach under § 1681n because the credit report it received from the Eden Merchants Association was not a "consumer report" within the meaning of § 1681a(d). Wards' argument, however, contains two fallacies. The first is that for civil liability to attach under § 1681n, a consumer report must be involved. Section 1681n creates liability for the willful noncompliance with any requirement of the FCRA. It is true that certain FCRA requirements are imposed only in connection with the use of "consumer reports" or "investigative consumer reports." Logically, civil liability for noncompliance with these requirements can exist only when the noncompliance involves a "consumer report" or an "investigative consumer report." The FCRA imposes other requirements without regard to whether "consumer reports" are involved. For liability to attach under § 1681n for noncompliance with this second group of requirements, it is unnecessary that a "consumer report" be involved. In this case where liability is premised on a violation of § 1681q, it is immaterial whether the information that passed from the Eden Merchants Association to Wards was a "consumer report", since § 1681q pertains to all information on a consumer which is obtained from a consumer reporting agency and not just to consumer reports.
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