Norman v. Trans Union, LLC

669 F.Supp.3d 351

Duane E. NORMAN, Sr. on Behalf of Himself and All Others Similarly Situated v. TRANS UNION, LLC.

CIVIL ACTION NO. 18-5225

United States District Court, E.D. Pennsylvania

Signed April 11, 2023

Andrew M. Milz, Cary L. Flitter, Flitter Milz, P.C., Narberth, PA, Jody T. Lopez-Jacobs, Narberth, PA, James A. Francis, Jordan M. Sartell, Lauren Kw Brennan, John Soumilas, Francis Mailman Soumilas, P.C., Philadelphia, PA, for Duane E. Norman, Sr.

Albert E. Hartmann, Kristen Degrande, Michael O'Neil, Reed Smith LLP, Chicago, IL, Joshua M. Peles, Thomas J. McGarrigle, Reed Smith LLP, Philadelphia, PA, for Trans Union, LLC.

MEMORANDUM

McHUGH, United States District Judge.

I. Relevant Background...359

A. Nature and Impact of Hard Inquiries...359

B. Trans Union's Procedures and Industry Practices as to Disputed Hard Inquiries...361

C. Time and Expense Consumers Spend on Disputing a Hard Inquiry...362

D. Credit Repair Industry and Its Presence in Class Letters...363

E. Class Letters Disputing an Inaccuracy...365

F. Prevalence of Fraudulent Disputes Submitted to Trans Union...366

II. Standard of Review...367

III. Discussion...367

A. Class Decertification...368

1. Plaintiffs Have Sufficiently Demonstrated Standing....369

2. Bibbs v. Trans Union Does Not Change My Conclusion that Plaintiffs Do Not Have to Prove the Element of Inaccuracy in the First Instance....375

3. Defendants Fail to Demonstrate that a Significant Portion of Class Disputes Were Sent Fraudulently by Credit Repair Clinics....377

4. Plaintiffs' Claims Are, in Part, Capable of Common Proof at Trial....381

B. Summary Judgment...385

1. Trans Union's Reading of the FCRA is Objectively Unreasonable Under Safeco...386

2. Trans Union's Industry Practice Defense Does Not Suffice to Prove a Lack of Willful or Reckless Conduct...393

IV. Conclusion...394

On August 14, 2020, I certified a class of plaintiffs suing Trans Union under § 1681i of the Federal Credit Reporting Act (FCRA). The Court of Appeals declined interlocutory review. Now, over two years later, Defendant seeks decertification of that class and summary judgment on Plaintiffs' claim that Trans Union willfully violated the reinvestigation provision of the FCRA. After scrutinizing the statute, new precedential case law, and the extensive record of expert reports and depositions submitted by both parties,¹ I find that decertification of this class is not warranted. Additionally, I find that, because Trans Union has not demonstrated that its reading of the FCRA is objectively reasonable, summary judgment must be denied.

I. Relevant Background

The relevant factual background surrounding Mr. Norman's dispute process is set forth in significant detail in my prior certification memorandum. ECF 47 at 2-7. The record has since been developed by the production of expert reports and the taking of expert depositions. It would be impractical to set forth all that information here. I therefore proceed by framing the central disputes and addressing the most relevant expert commentary.

A. Nature and Impact of Hard Inquiries

In his dispute letter, Mr. Norman alleged that an inaccurate hard inquiry was present on his credit report. A hard inquiry is a notation placed on a consumer's credit file when a subscriber or end-user of Trans Union accesses that consumer's credit report. McCawley Dep. 46:5-11, 69:18-71:24. When an end-user contacts Trans Union, it must provide identifying information for both it and the consumer, as well as a "permissible purpose" for accessing the consumer's report. Id. Once Trans Union provides the report, it makes a record of the inquiry on the consumer's credit file. Id. at 50:11-20; see Ulzheimer Report 33, Mar. 10, 2022, Ex. A to ECF 81 (describing a hard inquiry as "simply a factual record of credit file access"); see also Migalski Dep. 14:4-21 (confirming that a hard inquiry indicates that the "consumer applied for credit" and gave "permission to that lender to pull their credit report"). Inquiries, as well as the end-user's "certified permissible purpose" for accessing a consumer's reports, are typically retained on consumers' credit reports for two years. Compliance Policy Statement, ECF 84-3; see Turner Report ¶ 27, Ex. A to ECF 80 ("While hard inquiries can stay on a person's credit reports for up to two years ... FICO only considers them for one year.").

Experts from both parties debated the extent to which hard inquiries impact a consumer's credit score. Plaintiffs' expert Evan Hendricks² opines that an inaccurate hard inquiry can harm a consumer in two ways. First, "hard inquiries typically lower a consumer's credit score," as pursuit of new credit (i.e., hard inquiries) account for 10% of a consumer's FICO score.

Hendricks Report 2, July 1, 2019, ECF 95-5. Second, "the appearance in a consumer's credit file of an inquiry that should not be there causes harm because it distorts the consumer's credit history by making it look like he/she applied to an account that he/she in fact did not apply." Id. at 2-3. According to Hendricks, even if an inquiry is merely a factual record of file access, it remains inaccurate when the "fact" of the inquiry is misassigned to a consumer who never applied for or sought credit. Id.

On the other hand, Defense expert Laura Migalski³ testified that "the analysis of how (if at all) a single hard inquiry impacts a consumer's credit risk score is multivariate and complex, and requires an individualized consideration of a significant amount of information." Migalski Disc. ¶ 6, Ex. A to ECF 78; see Turner Report ¶¶ 71, 74, Ex. A to ECF 80 (opining that it is "impossible to determine without individualized fact finding" the impact of a single hard inquiry on a particular credit scoring model). Describing one scoring model — the VantageScore 3.0 model — Migalski explained that a single hard inquiry, depending on other information on the consumer's file, "in most instances ... will have no impact on the credit risk score at all." Migalski Disc. ¶¶ 8, 8(a)-(c), Ex. A to ECF 78. Defense expert Michael Turner⁴ agreed, stating that a single hard inquiry "is likely to have little to no credit score impact" or have "only a minor impact on an individual's credit score." Turner Report ¶¶ 24-26, Ex. A to ECF 80. But Turner acknowledged that a larger number of inquiries in a shorter period of time communicates that the consumer represents "a higher probability of default." Id. Further, he notes that a hard inquiry can often have some small negative affect on one's credit score, opining that, "[f]or most people, one additional credit inquiry will take less than five points off their FICO score." Id. at ¶¶ 71, 74. Turner goes on to assert that even when a hard inquiry causes diminution of a consumer's credit score, it is impossible to determine that diminution's "real-world, material impact," because such an impact does not typically vary point by point but by broad bands of credit risk categories like "prime" or "subprime." Id. at ¶ 75.

Defense expert John Ulzheimer⁵ elaborates by opining that while the pursuit of credit, as signified by the presence of hard inquiries on one's file, is one factor in credit scoring models, those models use multivariate and multi-scorecard systems to develop an individual's credit score. Ulzheimer Report 7-10, Ex. A to ECF 81. Thus, Ulzheimer asserts, although it is fair to say that any item on one's credit file that is predictive of risk, like a hard inquiry, "might have an impact on a consumer's credit score ... [i]t would be patently false to suggest everything that a credit score considers has a measurable impact on a consumer's credit scores." Id. at 11. Further, he opined that, based on his knowledge of the FICO and VantageScore scoring system, the impact of a hard inquiry on one's credit score is "generally immaterial relative to the consumer's score and credit prospects." Id. at 14. In disagreement with Hendricks, Ulzheimer contends that hard inquiries "may or may not" have a measurable impact on a consumer's FICO score, and that any impact of an inquiry on a credit score "is not uniform across consumers and certainly not uniform across the hundreds of different credit scoring systems."⁶Id. at 32.

B. Trans Union's Procedures and Industry Practices as to Disputed Hard Inquiries

Hendricks notes that Trans Union, as well as the other major credit bureaus, invite consumers to dispute items in their credit files like hard inquiries. See Hendricks Report 1, 9, ECF 95-5 (observing that Trans Union "advises consumers to review their credit reports for unauthorized inquiries and to dispute them," and that the major credit reporting agencies all send "a form for disputing errors" to consumers who have ordered their credit report). Then, when Trans Union receives a consumer dispute regarding a hard inquiry, the agency determines if the dispute alleges fraudulent activity, identity theft, a mixed file,⁷ or the inaccuracy of some other, non-inquiry account information in the consumer's credit file. Wagner Dep. 33:1-18, 36:9-37:5; Compliance Policy Statement, ECF 76-3.

There was conflicting testimony as to whether Trans Union screens letters upon receipt for indications of assistance from a credit repair organization.⁸ According to one Trans Union employee, the mailroom would so mark certain disputes in its system. Tilghman Dep. 119:1-5. According to another, it did not treat disputes it identified as credit repair any differently. See Wagner Dep. 88:12-16.⁹ But the record reflects that if the dispute submitted only alleged the inaccuracy of a hard inquiry, Trans Union would send the consumer a "502 Letter" — the form letter that Mr. Norman received and which I discussed at length in my original certification opinion. ECF 47 at 5; see Wagner Dep. 32:2-4, 33:1-7, 36:15-37:5. In cases like Mr. Norman's where the consumer only disputes a hard inquiry, Trans Union witnesses testified that it never conducts a reinvestigation, and only...