Hotly contested facts in a recent case from New Jersey gave rise to some new questions about whether a company could have had a permissible purpose under the FCRA for a credit report pull if the consumer’s written consent for the pull was (allegedly) forged. While the court ultimately sent those questions to the jury, the decision challenged the notion of a reasonable belief standard in permissible purpose inquiries and left the door open as to whether the company had been negligent or willful under the FCRA.
In Littlejohn v. Solar, 2020 U.S. Dist. LEXIS 86543, the District of New Jersey denied a motion for summary judgment invoking sections 1681b(a)(3)(A) and 1681b(a)(3)(F) of the FCRA for a company selling solar panels. According to the plaintiff, he had spoken briefly at his door with the company’s salesman, explained that he was busy, and informed the salesman that he could come back. The company’s version of the discussion was more robust – the salesman claimed they spoke in detail about the company’s solar program, plaintiff expressed interest in credit pre-approval for a solar panel system, and plaintiff signed a form authorizing the company to obtain his credit report to determine if he qualified for financing to make a purchase. The salesman then uploaded the form to the company’s system, and the company pulled his credit report; plaintiff learned of the pull from a credit monitoring service he maintained. He contacted the company saying that he never consented, and never signed any consent form at all.
In its decision, the court questioned whether there is a “reasonable belief” standard for permissible purpose inquiries. It noted that, to prevail under the FCRA, a plaintiff must prove both that the defendant used the report for an impermissible purpose and that the violation was willful or negligent. Under the second part of this test, some courts have found that a defendant may have a valid defense if it had a reasonable belief that it was using the report for a permissible purpose, although other courts have questioned how far this standard goes – or if it exists at all.
The court seemed to agree that the reasonable belief standard should apply, but challenged whether the company actually had a reasonable belief in this case. While the company claimed that the plaintiff’s consent form gave it a permissible purpose under section 1681b(a)(3)(A), or at least a reasonable belief of one, the plaintiff suggested that the consent form had actually been forged by the salesman, and the company lacked his consent entirely. The court ultimately left it to the jury to determine whether the form had been forged, which would constitute negligence and willfulness by the defendant, in violation of the FCRA.
Ultimately, the court denied summary judgment under section 1681b(a)(3)(F), which allows a consumer’s credit report to be used if the user “otherwise has a legitimate business need for the information,” which in turn is based on whether the consumer initiated a business transaction with the user. On the much-disputed facts, the court determined that a jury could find that it was inappropriate for the company to pull the consumer report if the plaintiff had not in fact initiated a purchase when he spoke with the salesman. Looking to prior New Jersey precedent, the court found that a jury could conclude that it was not clear to the plaintiff that he was initiating a purchase, which would mean that the company would have required written consent from the consumer to run a credit inquiry under the FCRA. If the consent form was forged – again, a question for the jury – the company never had that written consent.
What can we learn from Littlejohn? The point at which a consumer report is accessed can be critical for the permissible purpose inquiry – part of the court’s decision hinged on the company potentially accessing the information too early. “Reasonable belief” may not be reasonable at all if fraud has occurred. And, most importantly, make sure your sales force isn’t (allegedly) committing forgeries.
We’ll continue to keep an eye on this case for you.