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Seventh Circuit Rules Class Action Objectors Cannot Collect Damages for Privacy Breach Under FCRA or State Consumer Protection Law

 

In a long-running consumer privacy violation case, the Seventh U.S. Circuit Court of Appeals has denied damages to a group of homeowners whose mortgage company sold their information to telemarketers. In Mirfasihi v. Fleet Mortgage , No. 07-3402 (7th Cir. Dec. 30, 2008), Fleet Mortgage Company sold information on 1.6 million clients to telemarketers, without those clients’ permission. Two nationwide classes were certified: a class of people who bought products from the telemarketers (who used deceptive practices in their sales) and a class of people who merely had their information shared. This appeal comes from the latter group, some of whose members objected to a proposed settlement that gave them no damages.

In its analysis, written by Judge Posner, the court started by agreeing with the appellants that their claims may have some value under state consumer protection laws, despite the trial court’s conclusion that they did not. Many state statutes allow statutory damages even when no actual harm is present. However, the majority wrote, the information-sharing class had no claim in a class action — only in individual actions. And no individual plaintiff has demonstrated a willingness to sue for the “modest statutory damages” available under state laws, despite eight years of litigation and two prior appeals to the Seventh Circuit, the judge wrote.

The court turned next to the objectors’ claims under the federal Fair Credit Reporting Act (FCRA), which allows statutory damages of $100 to $1,000 per willful violation, even if no actual harm resulted from the violations. This claim also failed, because class members had not brought it up until their second round in trial court. Furthermore, the majority wrote, the FCRA claim is frivolous because Fleet is not a consumer reporting agency, as the law requires; agencies that merely pass on information about debts owed to it are not covered by the law. And under the FCRA, a report on transactions only between the customer and the agency making the report is specifically excluded from the definition of a “consumer report.”

Thus, the court concluded, the claims of the information-sharing class actually are worthless, although defendants are still free to settle if they believe doing so is in their best interests. The opinion then goes on to strongly criticize the worth of the claim itself, the prolonged litigation, the objectors’ request for attorney fees and the class action system in general. The decision of the trial court to award nothing to the objectors was affirmed.

The Chicago and Wheaton, Ill., law firm of DiTommaso Lubin Austermuehle works often with the FCRA, as part of our privacy violations and consumer protection practice. We have handled FCRA “firm offer of credit” cases in our home state of Illinois and states around the country, in tandem with local counsel. If you think you may be a victim of improper and illegal credit reporting violations and you’d like to know more about your options, please contact us today to speak with an experienced consumer protection attorney.