FCRA Applies to Consumer Credit, Not Commercial Matters

David A. Szwak

FCRA Applies to Consumer Credit, Not Commercial Matters

Postby David A. Szwak » Sun Oct 30, 2005 9:43 pm

Frost v. Experian and TRW, Inc.
Not Reported in F.Supp.2d, 1999 WL 287373
S.D.N.Y.,1999.

The defendants seek summary judgment on Mr. Frost's claims under the FCRA, arguing that the plaintiff's claims are based on commercial credit transactions which are not actionable under the FCRA. The FCRA applies only to reports that relate to the consumer's applications for personal credit, not to his business transactions. See Mathews v. Worthern Bank & Trust Co., 741 F.2d 217, 219 (8th Cir.1984); Podell v. Citicorp Diners Club, Inc., 914 F.Supp. 1025, 1036 (S.D.N.Y.1996), aff'd, 112 F.3d 98 (2d Cir1997); Boothe v. TRW Credit Data, 523 F.Supp. 631, 633 (S.D.N.Y.1981).
1. Commercial Credit
The plaintiff alleges that his application to Chase Manhattan Bank in April of 1998 for revolving business credit in the amount of $75,000 was denied. Because the FCRA is not applicable to applications for commercial credit, the defendants' motion for summary judgment on the plaintiff's FCRA claim is granted with respect to this credit application.
2. Personal Credit
The plaintiff alleges that the defendants' erroneous report also resulted in potential creditors denying his applications for personal credit. In January of 1994 the plaintiff's application for a $150,000 loan from Citibank was denied. He intended to use $75,000 to purchase real property, $50,000 to open a business, and $25,000 as a checking account deposit. (Frost Aff., Exh. A). Although it is clear that the portion to be used to open a business is commercial credit, it is unclear whether the real property involved was personal or commercial real estate and whether the checking account deposit was for personal or business purposes. Therefore, disputed issues of fact concerning the Citibank loan preclude summary judgment.
*6 Similarly, in approximately June 1995, Mr. Frost was denied a mortgage of $260,000 by Independence Savings Bank. (Amended Complaint ¶ 13; Frost Dep. at 108-10). According to the plaintiff's deposition testimony, he intended to use $150,000 to purchase his partner's interest in the property and he was undecided about how to use the balance. (Frost Dep. at 109-10). Again, uncertainty about whether a portion of the credit was for personal purposes precludes summary judgment on the FCRA claim.
The plaintiff also alleges that he was denied an application for a mortgage for an apartment in Las Vegas, Nevada, at an unspecified time prior to June of 1995, and that his daughter's application for an automobile lease was denied sometime prior to December of 1995 because he was not approved as a guarantor. He further claims that his application for an American Express credit card was denied sometime prior to February 1996. These claims involve personal credit applications actionable under the FCRA, and the defendants' motion for summary judgment on the FCRA claims is therefore denied with respect to these transactions as well.
E. State Law Claims
The defendants assert that they are entitled to summary judgment on the state law causes of action on the ground that negligence claims are barred by the FCRA. The FCRA provides qualified immunity to credit reporting agencies protecting them from common law negligence claims.
Except as provided in sections 1681n and 1681o of this title, no consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence with respect to the reporting of information against any consumer reporting agency, any user of information, or any person who furnishes information to a consumer reporting agency, based on information disclosed pursuant to section 1681g, 1681h, or 1681m of this title, or based on information disclosed by a user of a consumer report to or for a consumer against whom the user has taken adverse action, based in whole or in part on the report except as to false information furnished with malice or willful intent to injure such consumer.
15 U.S.C. § 1681h(e).
Although the FCRA applies only to reports that relate to the consumer's applications for personal credit, not to his applications for commercial credit, the qualified immunity provided in § 1681h(e) extends as well to claims involving business credit. See Thornton v. Equifax, Inc., 619 F.2d 700, 703 (8th Cir.1980) ("It is clear that the qualified immunity provided for by the FCRA is meant by Congress to be the 'quid pro quo for full disclosure." ') (quoting Retail Credit Company v. Dade County, Florida, 393 F.Supp. 577, 584 (S.D.Fla.1975)); see also Bloom v. I.C. System, Inc., 753 F.Supp. 314 (D.Or.1990), aff'd, 972 F.2d 1067 (9th Cir.1992); Yeager v. TRW Inc., 984 F.Supp. 517, 522 (E.D.Tex.1997).

David A. Szwak

Postby David A. Szwak » Sun Oct 30, 2005 9:59 pm

Fernandez v. Retail Credit Co. [1972, U.S.D.C. La.] 349 F.Supp. 652,

It was held that a report on a key-man insurance policy issued in connection with a corporation's application for insurance on its president was not within the scope of the Act. The court based its ultimate decision upon its finding that a report used to establish eligibility for insurance to be used primarily for business purposes, and not for personal, family, or household purposes, was not a "consumer report," and that, therefore, such a report was not covered by the FCRA.

David A. Szwak

Postby David A. Szwak » Sat Dec 10, 2005 2:34 pm

Matthews v. Worthen Bank & Trust Co.
741 F.2d 217
C.A.Ark.,1984.

We find that this particular transaction was exempt from the FCRA because the credit report was used solely for a commercial transaction. As explained by the court in Boothe v. TRW Credit Data, 523 F.Supp. 631 (S.D.N.Y.1981):
It is clear from its legislative history that [FCRA] was intended to apply only to reports which relate to the consumer's eligibility for personal credit or other commercial benefits as a consumer, and not to the consumer's business transactions. The statement of the Fair Credit Reporting Bill's House sponsor, Representative Sullivan, sets forth the concern of Congress in passing the statute.
The purpose of the Fair Credit Reporting Bill is to protect consumers from inaccurate or arbitrary information in a consumer report which is used as a factor in determining an individual's eligibility for credit, insurance or employment. It does not apply to reports used for business, commercial or professional purposes.
Id. at 633 (citation omitted).


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