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Sullivan v. Wells Fargo Bank, N.A.

United States District Court, S.D. Alabama, Southern Division

November 12, 2019

WELLS FARGO BANK, N.A., Defendant.



         This matter is before the Court on the defendant's motion to dismiss. (Doc. 10). The plaintiff filed a response, (Doc. 20), along with a motion to amend the complaint. (Doc. 19). The defendant filed a reply, which addressed the proposed amended complaint but also opposed amendment on the grounds of futility. (Doc. 24). Because ruling on the defendant's futility argument would have required resolution of the underlying motion to dismiss, the Court granted leave to amend and allowed the plaintiff to file a sur-reply brief, limited to new or altered material in the amended complaint. (Doc. 25). The plaintiff did so, (Doc. 27), and the motion to dismiss is now ripe for resolution. After careful consideration, the Court concludes the motion is due to be granted in part and denied in part.


         According to the amended complaint, (Doc. 26), the plaintiff visited a local Wells Fargo branch to open a personal money market account, where the branch manager (“Bolton”) aggressively tried to persuade the plaintiff to take out a mortgage loan on his rental properties. The plaintiff told Bolton that, before deciding whether to seek loan options from the defendant, he would first have to consider the estimated general terms the defendant might offer - but only if those estimated terms could be provided without pulling his credit. Bolton assured the plaintiff that the defendant could provide estimated terms without pulling his credit and that, pursuant to the defendant's policy and procedures, no credit report would be pulled until and unless the plaintiff (1) elected to complete a loan application and (2) signed a written authorization for a credit pull.

         Based on these assurances, the plaintiff provided the financial information requested by Bolton (his most recent personal federal income tax returns, certain information regarding the rental property and rental income, and an estimated credit score). Rather than provide estimated terms, the defendant pulled the plaintiff's credit report from TransUnion, a consumer reporting agency (“CRA”), and processed and mailed the plaintiff two signature-ready loan packages.

         The plaintiff promptly sought to have the unauthorized credit pull rectified, but the defendant repeatedly refused to do so, on the grounds that the plaintiff's provision of his social security number (in connection with opening his money market account and/or on his income tax returns) authorized the defendant to pull his credit report.

         Count One alleges violations of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681 et seq. In particular, it alleges violations of Sections 1681b(f)(1), [1]1681n(b), 1681q and 1681g(g), and it invokes the civil remedies provided for willful and negligent noncompliance with FCRA's requirements under Sections 1681n and 1681o, respectively. Count Two alleges fraudulent misrepresentation. The defendant seeks dismissal of all claims.


         To survive dismissal under Rule 12(b)(6), a complaint must first satisfy the pleading requirements of Rule 8(a)(2). Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “A pleading that states a claim for relief must contain … a short and plain statement of the claim showing that the pleader is entitled to relief ….” Fed.R.Civ.P. 8(a)(2). Pleading elements is necessary, but it is not enough to satisfy Rule 8(a)(2). The rule “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not” satisfy that rule. Twombly, 550 U.S. at 555. There must in addition be a pleading of facts. Though they need not be detailed, “[f]actual allegations must be enough to raise a right to relief above the speculative level ....” Id. That is, the complaint must allege “enough facts to state a claim for relief that is plausible on its face.” Id. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard … asks for more than a sheer possibility that the defendant has acted unlawfully, ” and “[w]here a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Id. (internal quotes omitted). A complaint lacking “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face” will not “survive a motion to dismiss.” Id. But so long as the plausibility standard is met, the complaint “may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” Twombly, 550 U.S. at 556 (internal quotes omitted).

         I. FCRA.

         In opposition to the plaintiff's FCRA claim, the defendant argues: (1) the pulled credit report does not constitute a “consumer report”; (2) FCRA liability cannot rest on the pulling of a consumer report for the purpose of extending credit to the consumer's business; (3) the amended complaint fails adequately to allege willfulness; and (4) Sections 1681q and 1681n(b) provide the plaintiff no cause of action. (Doc. 10 at 7-14).

         A. Consumer Report.

         “A person shall not use or obtain a consumer report for any purpose unless … the consumer report is obtained for a purpose for which the consumer report is authorized to be furnished under this section ….” 15 U.S.C. § 1681b(f)(1). The parties agree that FCRA regulates “consumer reports” and “investigative consumer reports” and that “[r]eports that do not fall within either of these definitional categories are outside the coverage of the Act.” Hovater v. Equifax, Inc., 823 F.2d 413, 417 (11th Cir. 1987).

         To be a “consumer report, ” the communication must include information about certain aspects of a “consumer” and must be made by a “consumer reporting agency.” 15 U.S.C. § 1681a(d)(1). For purposes of this motion, the defendant does not seriously dispute that the plaintiff is a consumer, [2] that TransUnion is a CRA, and that the information TransUnion released bears on relevant aspects of the plaintiff.

         To be a “consumer report, ” the communication also must be of information “which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for … (A) credit or insurance to be used primarily for personal, family, or household purposes; (B) employment purposes; or (C) any other purpose authorized under section 1681b of this title.” 15 U.S.C. § 1681a(d)(1). The Eleventh Circuit in Yang v. Government Employees Insurance Co., 146 F.3d 1320 (11th Cir. 1998), referred to this as “the Purpose clause.” Id. at 1324. The defendant, without acknowledging Yang, argues the amended complaint fails to satisfy the Purpose clause because it does not allege that the defendant pulled the plaintiff's credit for a statutorily listed purpose. (Doc. 10 at 8).

         As here, the defendant in Yang argued the information it received from a CRA was not a “consumer report” because the purpose for which the defendant received it (investigation of an insurance claim) was not a purpose listed in Section 1681a(d)(1). The Yang panel noted that communicated information is a “consumer report” if it is “used or expected to be used or collected” for a specified purpose. 146 F.3d at 1324 (emphasis added). Because the disjunctive “or” joins the quoted verbs, “[u]nder the plain language of the FCRA, a ‘communication of information' is a ‘consumer report' if any one of the three components in the Purpose clause is met.” Id. at 1324-25 (emphasis in original).

         Within the Purpose clause, “used” corresponds to “ultimate use” by the recipient; this is the only verb relied on by the defendant here and in Yang. 146 F.3d at 1324. The other quoted verbs address the perspective of the communicator - specifically, whether the CRA collected the communicated information for a statutorily specified purpose (its “reason for compilation”) and whether the CRA expected the communicated information to be used for a statutorily specified purpose (its “expectation of use”). Id. Because the CRA in Yang “compiled it for credit-related purposes and expected it to be used for such purposes, ” the information communicated to the defendant “is a protected ‘consumer report.'” Id. at 1325.

         As in Yang, so here. Regardless of the purpose for which the defendant obtained the plaintiff's credit report, it satisfies the Purpose clause and is thus a “consumer report” if TransUnion either collected the communicated information for a statutory purpose or expected the information to be used for a statutory purpose. That is precisely what the amended complaint alleges. (Doc. 26 at 4).

         The defendant characterizes the amended complaint's allegations in this regard as “only conclusory.” (Doc. 24 at 5). Absent a heightened pleading requirement - and the defendant suggests none - a complaint's allegations need only be plausible, not detailed. There is nothing obviously implausible about a big three credit bureau[3] collecting the information in its reports on individuals, in whole or in part, for the purpose of serving as a factor in establishing the individual's eligibility for credit or insurance to be used primarily for personal, family, or household purposes (or for some other statutory purpose). See Hansen v. Morgan, 582 F.2d 1214, 1218 (9th Cir. 1978) (“[U]nless the [CRA] was generally collecting such information for purposes not permitted by the FCRA, it must have collected the information in the report [at issue] for use consistent with the purposes stated in the act.”). The defendant stresses that the plaintiff in Yang produced evidence of the purposes for which the CRA collected the information and for which it was expected to be used, (Doc. 24 at 5), but Yang was decided on motion for summary judgment and thus says nothing about the pleading threshold to survive a motion to dismiss.

         The defendant insists that Yang's disjunctive construction of the Purpose clause does not apply when the recipient uses the information it receives to evaluate a consumer for a loan in connection with the consumer's business; in that situation, the defendant argues, only the recipient's intended use matters, to the exclusion of the CRA's purpose in collecting the information and its expectation as to how the information would be used. Because the amended complaint alleges that the defendant pulled the plaintiff's credit in an effort to upsell the plaintiff a mortgage loan on his investment rental properties, the defendant concludes that the complaint negates the existence of a “consumer report.” (Doc. 10 at 7-9; Doc. 24 at 2-3, 6).

         According to an early statement from the Federal Trade Commission (“FTC”), “[a] report on a consumer for credit or insurance in connection with a business operated by the consumer is not a consumer report and the Act does not apply to it.” Statement of General Policy or Interpretation; Commentary on the Fair Credit Reporting Act, 55 Fed. Reg. 18, 804-01, 18, 811 (May 4, 1990) (“1990 Commentary”). Again, “[r]eports used to determine the eligibility of a business, rather than a consumer, for certain purposes, are not consumer reports and the FCRA does not apply to them, even if they contain information on individuals, because Congress did not intend for the FCRA to apply to reports used for commercial purposes ….” Id. at 18, 810. A number of sister courts have relied on the FTC's statement, [4] as does the defendant.

         The FTC in its 1990 Commentary did not parse the language of Section 1681a(d)(1) to support its conclusion; instead, it cited generally to a single page of the Congressional Record, which contains statements on the floor from Representative Sullivan, one of the bill's co-sponsors. The agency did not identify the language on which it relied, but it appears to be the following:

I think we always made clear that we were not interested in extending this law to credit reports for business credit or business insurance. The conference bill spells this out, furthermore in section 603(d), which defines a “consumer report” as a report, and so on, “which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for (1) credit or insurance to be used primarily for personal, family, or household purposes” and so forth.

Fernandez v. Retail Credit Co., 349 F.Supp. 652, 654 (E.D. La. 1972) (quoting Representative Sullivan's floor comments). While there may be good policy reasons to limit FCRA's scope, neither Representative Sullivan nor the FTC explained how the Purpose clause could be read to exclude a report from the definition of a “consumer report” based solely on the fact the recipient used the report in connection with a business loan or business insurance.

         On the contrary, such a reading flies in the face of the disjunctive phrase, “used or expected to be used or collected, ” effectively redacting that phrase to read simply, “used.” Under Yang, such a reading is impermissible, as “the plain language” of the Purpose clause compels the conclusion that a communication of information is a statutory consumer report “if any one of the three components in the Purpose clause is met.” 146 F.3d at 1324 (emphasis in original). Other appellate courts agree that the statutory language is too clear to leave room for a more restrictive construction.[5]

         “Legislative history is not the law, ” and “once [Congress] enacts a statute we do not inquire what the legislature meant; we ask only what the statute means.” Epic Systems Corp. v. Lewis, 138 S.Ct. 1612, 1631 (2018) (internal quotes omitted). “When confronted with a statute which is plain and unambiguous on its face, we ordinarily do not look to legislative history as a guide to its meaning.” Tennessee Valley Authority v. Hill, 437 U.S. 153, 184 n.29 (1978); see also United States v. Woods, 571 U.S. 31, 46 n.5 (2013) (“Whether or not legislative history is ever relevant, it need not be consulted when, as here, the statutory text is unambiguous.”). Yang and many other courts have recognized that the language of Section 1681a(d)(1) is unambiguous, which obviates any resort to the slim legislative history invoked here.

         Even were Representative Sullivan's comments to be considered, they could not introduce ambiguity into the clear language of Section 1681a(d)(1). Even at their most compelling, “floor statements by individual legislators rank among the least illuminating forms of legislative history.” National Labor Relations Board v. SW General, Inc., 137 S.Ct. 929, 943 (2017). Consequently, when “the text of the statute [is] unambiguous on the point at issue …, we give no weight to a single reference by a single Senator during floor debate in the Senate.” Bath Iron Works Corp. v. Director, Office of Workers' Compensation Programs, 506 U.S. 153, 166 (1993).

         Representative Sullivan identified no basis for reading the “used or expected to be used or collected” language other than as Yang and other courts routinely have done. It is clear from her statement that she understood the exclusion from the definition of “consumer report” of reports for business credit or insurance to flow from the list of purposes in subsections (A) - (C) of Section 1681a(d)(1), and she did not address how “or expected to be used or collected” could be read out of the statute, either in general or when business credit or insurance is involved. Without such an explanation, her statement may or may not reflect on “what the legislature meant, ” but it plainly does not reflect on “what the statute means.” Epic Systems, 138 S.Ct. at 1631.

         The 1990 Commentary, which rests exclusively on Representative Sullivan's comments, stands on no firmer ground. “[A] court must give effect to an agency's regulation containing a reasonable interpretation of an ambiguous statute.” Christensen v. Harris County, 529 U.S. 576, 586-87 (2000). For reasons stated above, Section 1681a(d)(1) is not ambiguous in this regard, and the FTC's interpretation is not reasonable. Moreover, the FTC's statement is contained in a policy statement, not a regulation. “[I]nterpretations contained in policy statements … do not warrant Chevron-style deference” and “are entitled to respect … only to the extent that those interpretations have the power to persuade ….” Id. (internal quotes omitted). For reasons stated above, the Court is unpersuaded by the FTC's unreasoned pronouncement.

         As is, apparently, the FTC itself. In 2012, the FTC issued a document in which it “withdr[ew] its 1990 Commentary” and offered fresh interpretations. Staff Report with Summary of Interpretations, 2012 WL 5879749 at *7 (Nov. 19, 2012) (“Staff Summary”). “[T]he interpretations in the Staff Summary differ from the 1990 Commentary in five significant areas, ” one of which concerns “commercial transactions.” Id. at *7-8. The Staff Summary “adopts” the view that, “when a creditor that is considering a credit application from a small business wants to procure a credit report on the sole proprietor or other principal in the business, … a report by a CRA is a ‘consumer report' even if it is used for commercial purposes ….” Id. at *8. Similarly, “a report from a CRA on the personal credit of a consumer to a business credit grantor is a ‘consumer report' regardless of the purpose for which the information may in fact be used, ” and “[r]eports obtained from CRA's on consumers retain their character as ‘consumer reports' even if they are subsequently furnished in connection with a commercial credit or insurance transaction.” Id. at *16. The FTC's most recent view on the subject directly contradicts the defendant's position - which rests on an FTC interpretation the agency itself has repudiated.

         Even if the defendant's construction of “consumer report” had merit in the abstract, the Court would be bound by Yang's opposite construction. The defendant suggests that Yang governs the meaning of Section 1681a(d)(1) only when the recipient has not used information from the CRA in connection with credit or insurance for a consumer's business. (Doc. 24 at 6). Yang expressed no such limitation on its holding, and the defendant does not explain how it is possible for the disjunctive nature of “used or expected to be used or collected” to magically vanish in such a situation.

         The defendant worries that, under Yang's “overly expansive” construction of Section 1681a(d)(1), “any report” issued by a major credit bureau will automatically be a “consumer report.” (Doc. 24 at 6). This is perhaps an exaggeration, as one can envision occasions when a CRA will collect and share information in response to a request known to be for a non-statutory purpose. In any event, a “consumer report” is necessary for FCRA liability but is not alone sufficient. To the extent the defendant nevertheless believes the definition of “consumer report” stretches too far, its recourse is to seek an overruling of Yang or amendment of FCRA, as the Court has no authority to alter existing law.

         B. Business Credit.

         Entangled with the defendant's argument that it did not pull a “consumer report” is the argument that “FCRA does not apply to credit reports pulled for business or commercial purposes.” (Doc. 10 at 7). The Court understands the defendant to assert that, even if the report it received is a “consumer report, ” the defendant has a blanket ...

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