A new decision of the U.S. Court of Appeals for the Third Circuit serves as a forceful reminder that, to establish a claim for statutory damages based on a willful violation of the Fair Credit Reporting Act, a consumer must strictly satisfy the standard established by the U.S. Supreme Court in Safeco Ins. Co. of Am. v. Burr.

In its January 24, 2012, opinion in Long v. Hilfiger, the Third Circuit held that the plaintiff failed to show that the defendant’s interpretation of the FCRA was “objectively unreasonable” as required by Safeco. At issue was the provision of the Fair and Accurate Credit Transactions Act that amended the FCRA to prohibit a merchant from printing a credit card’s expiration date on the cardholder’s receipt. The plaintiff claimed that his receipt violated that prohibition even though it showed only the month, but not the year, his card expired.

The Third Circuit disagreed with the lower court’s conclusion that printing only the month of expiration was not the printing of an “expiration date.”  But the appellate court agreed with the district court’s alternate conclusion that, even if an FCRA violation had occurred, the plaintiff could not recover statutory damages because he had not met the Supreme Court’s Safeco standard for a “willful” violation. Under that standard, even if a company’s FCRA interpretation is incorrect, it must also be “objectively unreasonable” for the violation to be deemed willful.

According to the Third Circuit, the defendant’s “expiration date” interpretation was not “objectively unreasonable” for several reasons—there was no FCRA definition contradicting the phrase’s plain meaning; it had some foundation in the text of the statute; the defendant’s reading was “at least sufficiently persuasive to convince the District Court to adopt it;” and there was no federal appellate court guidance on the issue.

The Third Circuit also rejected the plaintiff’s attempt to show that the defendant did not actually rely on any interpretation before it acted and instead, after the fact, was using its “objectively reasonable” interpretation to avoid liability. The court found those allegations to be immaterial because, under Safeco, evidence of subjective bad faith or intent is irrelevant if an objectively reasonable interpretation would permit the challenged conduct.

It is also significant that Long does not mention the Third Circuit’s 2010 decision in Cortez v. Trans Union, LLC, in which the court also addressed the Safeco standard. In that case, which involved a claim for punitive rather than statutory damages, the question of whether the defendant had acted willfully was presented to a jury.  By affirming the district court’s dismissal of the plaintiff’s complaint in Long, the Third Circuit has confirmed that whether a defendant has acted willfully under Safeco may be determined as a matter of law by the court when the defendant’s FCRA interpretation is found to be “objectively reasonable.”

Ballard Spahr’s Consumer Financial Services Group regularly provides advice to clients on FCRA compliance and defends clients in FCRA lawsuits. As more fully described in a prior legal alert, Ballard attorneys recently obtained summary judgment on behalf of a client in a case seeking statutory damages based on alleged FCRA violations.

Ballard Spahr’s CFS Group produces the CFPB Monitor, a blog that focuses exclusively on important Consumer Financial Protection Bureau 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; John L. Culhane, Jr., 215.864.8535 or culhane@ballardspahr.com; Barbara S. Mishkin, 215.864.8528 or mishkinb@ballardspahr.com; or Mark J. Furletti, 215.864.8138 or furlettim@ballardspahr.com.


Copyright © 2012 by Ballard Spahr LLP.
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