The U.S. District Court for the Western District of Wisconsin has recently ruled that a bank had not violated the Fair Credit Reporting Act (FCRA) by requesting a consumer report in error. This court’s ruling found that a mistaken request for a credit report may not violate the FCRA if the entity requesting acted under a good faith belief that there was a “legitimate business need.”

This case began when the defending bank requested a credit report for the plaintiff when a third party provided their Social Security number mistakenly as part of an application for credit. Once the plaintiff learned of the account, he informed the bank that he had not opened the account. In response, the bank told the CRAs that the account should be removed from the plaintiff’s credit file. However, the hard inquiry remained on file.

The plaintiff filed a lawsuit against the bank alleging violation of Title 15 U.S. Code § 1681b (a)(3)(F)(i). 

The FCRA limits the purposes for which a CRA may provide a credit report, and relevantly to this case, the FCRA provides that it may be furnished if the recipient “otherwise has a legitimate business need for the information— (i) in connection with a business transaction that is initiated by the consumer.” Because the plaintiff had not initiated a business transaction, he alleged that the defendant had no permissible reason to request a credit report.

In its analysis, the court noted that the Seventh Circuit had never addressed this issue and turned to a similar decision by the Sixth Circuit. In the Sixth Circuit’s decision, it found that when an identity thief used the stolen information to open an account leading the defendant to request a credit report, it had acted in good faith and had a “legitimate business need” for requesting it. As a result, it had not violated the FCRA.

Following this logic, the Seventh Circuit court rejected the argument that the defendant had no legitimate business need when it requested the credit report due to the actions of a third party. The court found that the defendant acted under a good faith belief that the report was connected to the applicant for credit and, therefore, it had a legitimate business need.

The plaintiff further argued that the standard of “reasonable belief, would only apply to CRAs and not a business requesting a credit report. The court acknowledged that though the language in § 1681b(a)(3) appears only to apply to CRAs, language later in the Act indicates that a business may request a credit report in response to a legitimate business need initiated by a consumer.

The court additionally looked to previous rulings by the Fourth Circuit and other courts, which found that a reasonable reason to believe that the individual initiated the transaction is enough. Because the court found that there was no evidence to show that the defendant should have known the Social Security number was provided in error, it granted a summary judgment to the defendant.

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