On November 22, 2011, U.S. District Judge Legrome D. Davis of the Eastern District of Pennsylvania dismissed Fuges v. Southwest Financial Services Ltd. , a putative Fair Credit Reporting Act (FCRA) class action filed against a company that sells so-called “current owner” or “limited title” reports. Such reports provide information about outstanding liens, unpaid taxes and other encumbrances on a property and are typically used by lenders in connection with applications for home-equity loans and lines of credit where a full title report and title insurance are not required.

 

The plaintiff, represented by Francis & Mailman, alleged that Southwest’s current owner reports were “credit reports” under the FCRA and, as such, Southwest was obligated, among other things, to obtain certificates of permissible purpose from its lender customers and to provide notices to its customers about their purported responsibilities under the FCRA. The case represented the first attempt by the plaintiffs’ bar to extend the FCRA to property reports.

 

Ballard Spahr attorneys Darryl J. May and Mark J. Furletti moved for summary judgment, arguing that (1) current owner reports are reports on properties, not consumers, and, as such, are not subject to the FCRA; (2) the Dodd-Frank Act expressly provides that reports such as these current owner reports are not subject to the FCRA; (3) Southwest is not subject to the FCRA because it does not maintain “files” as that term is defined in the statute; and (4) even if current owner reports were subject to the FCRA, Southwest could not be liable for statutory damages because such damages require willfulness, and neither the statute nor any authoritative guidance put Southwest on notice about coverage, without which willfulness cannot be found, as the Supreme Court held in Safeco Ins. Co. of Am. v. Burr .

 

Because the plaintiff withdrew her negligence claim, which would have required actual damages but which would not have required the notice specified in Safeco, the district court was not required to, and did not, decide whether Southwest’s current owner reports are subject to the FCRA. The court limited its ruling to the willfulness inquiry, and, in ruling in Southwest’s favor, it faithfully applied the Safeco decision, holding that, even if current owner reports were subject to the FCRA, there could be no willful violation because the statute is not “pellucidly clear” about the coverage of property reports such as the current owner reports at issue, and there is no authoritative guidance from any appellate court or the Federal Trade Commission hinting at such coverage. Summary judgment was therefore granted to Southwest.

 

Ballard Spahr’s Consumer Financial Services Group produces the CFPB Monitor , a blog that focuses exclusively on important CFPB developments. To subscribe, use the link provided to the right. The group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).

 

For more information, please contact Practice Leader Alan S. Kaplinsky , 215.864.8544 or kaplinsky@ballardspahr.com ; Practice Leader Jeremy T. Rosenblum , 215.864.8505 or rosenblum@ballardspahr.com ; or Mark J. Furletti , 215.864.8138 or furlettim@ballardspahr.com .

 


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