Reseller liability: resellers still not exempt from 1681e(b)

Last month, as part of our ongoing series about cases in which a plaintiff seeks to hold a reseller liable for inconsistent information in a tri-merge credit report, we discussed Waterman v. Experian Info. Solutions, Inc., No. 12-1400, 2013 U.S. Dist. LEXIS 35455 (C.D. Cal. Feb. 25, 2013).  In that case, a reseller named DataQuick argued that it was not bound to the duty of maximum possible accuracy at 15 USC 1681e(b); it was rather only required to meet the much more limited duties at 1681e(e)(2) (which essentially require resellers not to sell tri-merge reports to just anyone).

The Waterman court rejected that argument, but that didn’t stop another reseller – Credit Tech – from trying the same argument in a different court.  It met with the same result, however:  in Willoughby v. Equifax Info. Servs. LLC, No. 2:13-cv-788, 2013 U.S. Dist. LEXIS 187279 (N.D. Ala. Aug. 12, 2013), the court denied Credit Tech’s motion to dismiss.

Credit Tech had argued, in its brief, that:

Plaintiff’s claim is fatally flawed for two reasons: (1) Credit Tech did not “prepare” the credit report at issue; and therefore (2) section 1681e(b) is inapplicable to Credit Tech.
Chapter 15 U.S.C. §1681e(b) provides that “[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” (Emphasis added).
In comparison, a Reseller under the FCRA:
(1) assembles and merges information contained in
the database of another consumer reporting agency
or multiple consumer reporting agencies concerning
any consumer for purposes of furnishing such
information to any third party, to the extent of such
activities; and (2) does not maintain a database of
the assembled or merged information from which new
consumer reports are produced.
15 U.S.C. §1681a(u) (emphasis added).

The problem with this passage is that Credit Tech simply omitted an important sentence in 1681a(u) which completely undercuts this argument.  Credit Tech is arguing that “consumer reporting agencies” are bound by 1681e(b), but that “resellers” are different from “consumer reporting agencies,” so resellers are not bound by 1681e(b).  The problem with this argument is the sentence which Credit Tech does not mention.  The statute at 1681a(u) begins by saying:  “The term “reseller” means a consumer reporting agency….”  If a reseller is a consumer reporting agency, and if 1681e(b) applies to all consumer reporting agencies, than 1681e(b) applies to resellers, and Credit Tech’s argument collapses.

The court quickly picked up on this.  It held that Credit Tech’s argument might have made sense before a series of amendments to the FCRA, in 2003, included the statute at 1681a(u) and its clear statement that resellers are consumer reporting agencies.  However, after the amendment, it became impossible for a reseller to credibly argue that it wasn’t a consumer reporting agency and wasn’t bound by 1681e(b) (which applies to all CRAs).  The court stated that:  “The cases decided after the 2003 amendments to the Act have held that resellers are CRAs for purposes of liability under Section 1681e(b). Waterman, 2013 U.S. Dist. LEXIS 35455, 2013 WL 675764 at * 3; Dively, 2012 U.S. Dist. LEXIS 9314, 2012 WL 246095 at * 5; Poore, 410 F.Supp.2d at 567. The court concludes those cases are well-reasoned, and correctly state the law.”

As I’ve said in past months, I think that there is a valid distinction between credit bureaus and resellers:  they are both different types of consumer reporting agency that each have a separate definition in the FCRA.  Credit bureaus are defined at 1681a(p); resellers are defined at 1681a(u).  That difference, along with the different duties imposed on each at 1681i, does indeed suggest, to my mind, that courts should apply 1681e(b) to resellers in a different way than courts apply it to credit bureaus.

But rather than arguing that nuance, Credit Tech’s motion in Willoughby simply argued that resellers were not bound by 1681e(b) at all.  That is obviously not correct, and the court in Willoughby dismissed Credit Tech’s motion to dismiss accordingly.